One regulation to unite three complex frameworks - can Europe finally make sustainable finance easier for everyone?

The Omnibus Regulation: Red Tape Meets Its Match

If you’ve ever felt overwhelmed by the maze of sustainability reporting, between CSRD, CSDDD, and the EU Taxonomy, you’re not alone. The new Omnibus Regulation, first unveiled in Budapest last November, promises to align and simplify these rules for banks, investors, and companies driving the transition to net zero. The final adoption for this is expected late 2025 or early 2026, applying reporting changes from FY2027.

But how exactly will this work? Let’s break it down.

For context, this level of consolidation goes further than the current U.S. SEC climate disclosure plan, which remains narrower in scope, and is more prescriptive than the UK’s emerging Sustainability Disclosure Requirements, which rely more on voluntary frameworks and phased guidance.

What Does the Omnibus Regulation Do?

• Merges key regulations: It pulls together CSRD, CSDDD, and EU Taxonomy, so companies report ESG data only once, instead of repeating similar disclosure requests for different authorities. It reduces duplication. For example, the ESRS framework will no longer force banks and companies to submit near-identical data sets over and over. Now, the same regulatory definitions and thresholds (balance sheet size, net turnover, employee counts) apply across CSRD, Taxonomy, and CRR, making compliance more straightforward.

• Enhances consistency: Reporting indicators are aligned directly to EU Taxonomy technical screening criteria (Pillar III), so disclosures are more relevant and comparable across borders.

• Makes disclosures more proportional: Smaller firms will have obligations scaled to their size and complexity, thanks to lobbying from the ABBL and others.

Why Does This Matter for ESG Risks?

Let’s get real: inconsistent reporting confuses regulators and muddles risk management. By harmonising data and reducing duplication, banks and investors can compare ESG risks across Europe with greater confidence. Did you know that, under older regimes, about 65% of companies faced at least two conflicting data requests every reporting cycle? That’s valuable time lost.

Process Changes

These shifts rewire how companies move from collecting data to producing one consistent, validated sustainability narrative.

1. Integrated Disclosure System: One report will cover all regulatory requirements each year, saving companies thousands of work hours annually.

2. Alignment with EU Taxonomy: Technical screening criteria under Pillar III ensure that all sustainability performance stats match up - which means fewer mistakes and clearer insights for investors.

3. De-duping ESRS: Repetitive data fields and overlapping audits are eliminated, with the amended ESRSExposure Drafts offering a 57% reduction in mandatory datapoints. While actual reporting effort varies by company, this streamlining is expected to significantly lighten the compliance burden for mid-sized banks

4. Simplified KPIs: The proposal removes confusing items like Trading Book, Fees and Commissions, and FinGuR KPIs, so banks no longer scramble to collect information with “limited usefulness”.

5. Streamlined CSRD Rollout: Sector-specific ESRS updates will be accelerated, but new, random disclosure requirements aren’t being added, ensuring financial sector firms aren’t left in limbo.

Questions for the Future

Could too much harmonisation hide the unique ESG risks faced by different sectors? Is the mandatory Green Asset Ratio (GAR) still the best metric for sustainable finance reporting? These questions drive ongoing debates as the regulation evolves.

At the same time, relying on unified definitions and a single reporting architecture may risk glossing over sector-specific challenges and could even open gaps that firms might exploit.

As the EU continues refining the Omnibus package, sustainable finance players must stay agile and keep learning.

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