"Simplification promised, Simplification delivered": Omnibus-1 and the New Era of European Financial Sustainability

By Pierre E. Berger, Joris Latui, Louise Van Marcke and Gráinne Ní Fhrighil of DLA Piper

1 Introduction

1.1 Promoting competitiveness and resilience are key EU priorities, reflected in the European

Commission’s introduction of an Omnibus simplification package focused on sustainable finance.

1.2 Directive (EU) 2026/470 (Omnibus-1) entered into force on 18 March 20262 as a coordinated legislative initiative, preserving the EU Green Deal objectives whilst amending sustainability reporting and due diligence obligations under the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). It streamlines obligations, reduces administrative burdens, harmonises legislation and enhances EU competitiveness, while supporting sustainability. The amendments also introduce material reductions in reporting and due-diligence burdens for financial institutions and narrows the due-diligence scope.

1.3 These reforms must be understood against the background of the European Green Deal, launched in 2019 as the EU’s overarching climate policy framework supporting the climate-neutrality objective and the basis for key sustainable finance measures including the CSRD and CSDDD, the Sustainable Finance Disclosure Regulation (SFDR)3 and the EU Taxonomy Regulation. While broadly supported, concerns raised by industry and financial-sector stakeholders regarding fragmentation and complexity prompted the Commission into action.

2. Omnibus-1 Directive

2.1 Omnibus-1 reforms the EU's sustainability framework, balancing sustainability objectives with business growth. Existing legislation, however, imposes complex implementation requirements and onerous administrative burdens which are thought to undermine EU competitiveness. While the broader Omnibus simplification package facilitates fundamental recalibration through targeted amendments and strengthened European Supervisory Authorities' (ESA) powers, the Omnibus-1 introduces specific scope reductions, extended timelines, and refined reporting and value-chain requirements, resulting in indirect but significant impacts on financial institutions in a harmonised

regulatory and supervisory environment.

3. CSRD

3.1 The CSRD is reformed via two distinct packages: the "Stop-the-Clock"5 and "Content" Directives or Omnibus-1 itself. While the "Stop-the-Clock" directive temporarily delays CSRD implementation timelines and obligations until as far as 2028, Omnibus-1 introduces substantive amendments. These include a substantially narrowed scope, limiting the number of in-scope companies that must comply with the due diligence and reporting obligations to:

(a) EU companies with cumulative net turnover exceeding EUR 450 million and minimum 1,000 employees; and

(b) Non-EU parent companies with cumulative net EU turnover exceeding EUR 450 million and operating under an EU subsidiary/ branch with net turnover exceeding EUR 200 million.

3.2 Impact for financial institutions – Alongside the CSRD's reduced scope, the reduced reporting burden eases financial institutions' data collection responsibilities as they now only receive data from in-scope, larger, more impactful companies. With the assistance of the revised, simplified European Sustainability Reporting Standards (ESRS)6, the data produced will be more relevant, concise and therefore of a general higher quality for financial institutions, for example by reducing the mandatory datapoints of consideration. Given Omnibus-1's delayed entry into force, the revised standards are adopted in time to be applied by entities for the financial year of 2027.

4. CSDDD

4.1 The scope of the CSDDD has similarly been amended to include:

(a) EU companies with EU turnover exceeding EUR 1.5 billion and minimum 5,000 employees; and

(b) Non-EU companies with equivalent net EU turnover.

Companies must meet these thresholds for two consecutive financial years to remain within scope.

4.2 The "Stop-the-Clock" Directive equally impacts the CSDDD timeline, requiring companies' compliance from July 2029 with subsequent CSDDD publishable disclosures required by 1 January 2030.

4.3 Impact for financial institutions – Omnibus-1 no longer requires companies to implement climate transition plans and only requests conduct due diligence every five years. Downstream due diligence for financial institutions is therefore significantly reduced. Conversely, this reduced reporting frequency risks limiting the availability of sustainability data, creating challenges for financial institutions' human rights and environmental due diligence and, in turn, risks misalignment with ECB and EBA supervisory expectations. In parallel, the removal of the EU civil liability regime leaves the determination of individual liability to Member States, with penalties capped at 3% of global turnover.

5. EU Taxonomy Regulation

5.1 Although less impacted by Omnibus-1, reporting obligations under the EU Taxonomy (EUT) are indirectly simplified as follows, largely owing to CSRD simplification:

(a) Introduction of financial materiality threshold to prioritise significant business areas for

reporting; and

(b) Postponed time frame of implementation e.g. concerning reporting of taxonomy key

performance indicators (KPIs), with reduction in taxonomy reporting templates. Impact for financial institutions, It is of commercial importance for financial institutions to note how

the EUT is indirectly impacted, albeit in limited ways; namely postponing EUT disclosures as required by the CSRD through the 'Stop-the-Clock' Directive. Omnibus I introduces amendments to the CSRD, which may indirectly impact EUT-related processes, without formally modifying those processes. By way of example, taxonomy reporting is still mandatory however how companies report taxonomy KPIs, is impacted.

6. Key Takeaway for Financial Institutions

6.1 Financial institutions remain in scope following the introduction of Omnibus-1. However, their operational load and data-collection obligations are reduced, providing meaningful regulatory relief for these institutions. In practice, the amendments may lower compliance costs and internal reporting challenges. Despite benefitting from regulatory reliefs, however, regulators continue to require effective risk-management and longevity planning. The revised reporting scope risks making data harder to obtain for internal compliance purposes, especially from exempted corporate clients, or those with limited reporting duties. As a result, financial institutions reliant on sustainability-related information for commercial decision-making, sustainability risk-management or to strengthen investor

confidence, may experience challenges. It could additionally create additional competitive pressures, with financial institutions that maintain higher, voluntary standards becoming more attractive for investors.

6.2 In practical terms, financial institutions should prepare by reviewing their internal governance and compliance functions to ESA standards to ensure their reporting, documentation and risk-management framework will respond to scrutiny. Institutions should consider recalibrating sustainability-linked financing and internal data-collection strategies. They should familiarise themselves with Omnibus-1 amendments including refined scope, timelines and reporting obligations, as the reduced scope and revised value-chain reporting requirements may result in Environmental, Social and Governance (ESG) related data gaps. These gaps not only affect internal commercial decisions including the provision of investment services or insurance coverage but may also hinder compliance with evolving ESA supervisory requirements, which continue to rely on comprehensive sustainability data.

6.3 Our DLA Piper LLP financial services teams closely monitor EU sustainability developments and are available to assist clients assessing the impact of Omnibus-1 on their business.

1 Cited from Ursula Von der Leyen.

2 Directive (EU) 2026/470 of the European Parliament and the Council of 26 February 2026 amending Directive 2013/34/EU as regards corporate sustainability reporting and amending Directive (EU) 2024/1760 as regards corporate sustainability due diligence.

3 Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector.

4 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088.

5 Directive (EU) 2025/794 of the European Parliament and of the Council of 14 April 2025 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements.

6 Commission Delegated Regulation (EU) 2023/2772