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Green European obligations in light of the new global geopolitical order: the Omnibus Simplification Package and the CBAM

Green European obligations in light of the new global geopolitical order: the Omnibus Simplification Package and the CBAM

The European Union (EU) has been at the forefront of integrating sustainability into its regulatory framework, aiming at balancing economic growth with environmental and social responsibility.

Recent developments however, notably the introduction of an “Omnibus Simplification Package”, have led to significant amendments to key directives such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). In addition, the EU has implemented the Carbon Border Adjustment Mechanism (CBAM) to address carbon leakage and promote global emission reductions. The present analysis delves into the nuances of these legislative changes and their implications.

1. The Omnibus Simplification Package: streamlining sustainability regulations

In February 2025, the European Commission unveiled a comprehensive initiative known as the “Simplification Omnibus”.  This package aims to reduce regulatory and bureaucratic burdens for businesses by rolling back or modifying several EU sustainability and corporate reporting requirements and further enhancing the global competitiveness of European businesses. The initiative responds to concerns that extensive regulations may prevent the ability of EU companies to compete with counterparts in regions like the United States and China. Despite the new regulatory adjustments, the EU maintains its commitment to achieving net-zero emissions by 2050. The proposed measures are anticipated to save European companies approximately 40 billion euros, reflecting a strategic move to balance regulatory oversight with economic vitality.

2. Amendments to the Corporate Sustainability Reporting Directive (CSRD)

The CSRD, initially adopted to enhance and standardize sustainability reporting across the EU, mandates that companies disclose information on their environmental, social, and governance (ESG) practices. The directive’s primary goal is to increase corporate transparency and accountability, thereby fostering sustainable business practices.

Among the key amendments there are:

  • scope and applicability, the Omnibus Simplification Package proposes to refine the scope of the CSRD, potentially exempting smaller enterprises from certain reporting obligations. Said adjustment aims to mitigate the compliance burden on small and medium-sized enterprises (SMEs) while ensuring that larger corporations continue to provide all-inclusive sustainability disclosures;

  • reporting requirements, the amendments seek to streamline reporting obligations by focusing on material ESG factors, therefore reducing the complexity and volume of information that companies are required to report. This targeted approach is designed to enhance the relevance and comparability of sustainability data:

  • digitalization and standardization, to improve accessibility and usability of the reported data, the amendments encourage the adoption of digital reporting formats and the use of a standardized reporting framework. This change is expected to facilitate data analysis and benchmarking across industries.

    • Some implications:

    The amendments proposed are aimed at striking a balance between (i) ensuring transparency and (ii) reducing administrative burdens. By refining the scope and focusing on material issues, the EU seeks to maintain a solid sustainability reporting standard without stifling business innovation or competitiveness. However, there is the concern that easing said obligations could undermine accountability and reverse progress in corporate sustainability practices.

    3. Amendments to the Corporate Sustainability Due Diligence Directive (CSDDD)

    The CSDDD obliges companies to (a) identify, (b) prevent, and (c) mitigate adverse human rights and environmental impacts within their operations and supply chains. The directive represents a significant step toward embedding sustainability into corporate governance.

    Among the key amendments there are:

  • risk-based approach: the Omnibus Simplification Package introduces a more risk-based approach to due diligence, allowing companies to prioritize actions based on the severity and likelihood of potential adverse impacts. This approach seeks to make the due diligence processes more focused and efficient;

  • proportionality principle: the amendments emphasize the principle of proportionality, ensuring that due diligence obligations are comparable with the company’s size and resources. This adjustment aims at preventing disproportionate burdens on smaller companies while maintaining accountability for larger corporations;

  • stakeholder engagement: the revised directive encourages enhanced engagement with stakeholders, including affected communities and civil society organizations, to guarantee that due diligence processes are informed by both diverse perspectives and local insights.

    • Some implications:

    The amendments to the CSDDD are intended to make the due diligence obligations more practical and tailored to the individual company contexts. By adopting a risk-based and more proportionate approach, the EU seeks to enhance the effectiveness of the directive while mitigating potential negative impacts on business operations. However, some have argued that these changes could instead soften the directive’s effectiveness in holding companies accountable for their supply chain impacts.

    4. The Carbon Border Adjustment Mechanism (CBAM)

    The CBA, introduced by Regulation (EU) 2023/956, is an innovative policy tool designed to «to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries» (as expressly stated on the EU website). The mechanism aims to ensure that imported products are subject to the same carbon costs as products produced within the EU, thereby maintaining a level playing field and encouraging global emission reductions.

    Among the key features there are:

  • the scope, the CBAM applies to imports of specific carbon-intensive products, including cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The scope might also be expanded to include additional products in the future;

  • the implementation phases, the CBAM is being implemented in phases. A transitional phase began in October 2023, during which importers are required to report the embedded emissions of their products without financial obligations. The full implementation, which involves the purchase of CBAM certificates that correspond to the embedded emissions, is scheduled to start in 2026;

  • the calculation of embedded emissions, importers must calculate and report the greenhouse gas emissions embedded in their imported goods. The calculation methods are aligned with those used in the EU Emissions Trading System (ETS) to ensure consistency;

  • the price of CBAM certificates, the price of CBAM certificates is linked to the price of EU ETS allowances, ensuring that importers face equivalent carbon costs as domestic producers.

    • Some implications:

    The CBAM is expected to incentivize non-EU producers to adopt lower-carbon technologies in order to maintain access to the EU market. It further seeks to prevent carbon leakage by ensuring that EU producers are not disadvantaged by stringent domestic climate policies. However, the mechanism has faced criticism and trading partners have argued that it may be “protectionist” and could conflict with the rules set fort by the World Trade Organization (WTO).