The impact of the Omnibus on corporations and insurers

On Wednesday 26 February 2025, the European Commission announced a set of proposals aimed at simplifying certain EU regulations on the environment, social issues, and governance. These proposals are known as Omnibus 1 and Omnibus 2 (Omnibus package).

As a reminder, an 'omnibus', in the context of European legislation, is a piece of legislation that incorporates several amendments to existing laws into a single proposal. The Omnibus package focuses on three major sustainability texts: the Corporate Sustainability Reporting Directive (CSRD), the Green Taxonomy Regulation and the Corporate Sustainability Due Diligence Directive (CS3D). It also addresses the Carbon Border Adjustment Mechanism (CBAM) to promote fair trade and increase the InvestEU guarantee by €2.5 billion to support sustainable investment.

The main objective is to foster a more business-friendly environment and enhance the efficiency and competitiveness of European companies while maintaining the objectives set out in the EU Green Deal.

In essence, the Omnibus package includes:

• a 'stop the clock' proposal, which postpones the application of the CSRD reporting obligations for companies in phases two and three by two years and delays the transposition deadline and the implementation of the first phase of the CS3D by one year. This Directive entered into force on 17 April 2025. In France, the implementation of the reporting requirements has been postponed by two years for phases two and three under the French 'DDADUE' law (contains various provisions for adapting to European Union law in economic, financial, environmental, energy, transport and health, as well as the movement of persons, dated 30 April 2025)
• a substantial proposal directive amending the CSRD, CS3D and Green Taxonomy Regulation.

Proposed changes

CSRD

The applicability thresholds have been raised to 1,000 employees (rather than 250 in the original CSRD) and either €50 million in revenue or €25 million in total assets, meaning that 80% of companies will be excluded from the revised CSRD's scope. The latter are permitted to report only simplified data based on the VSME (Voluntary Standard for non-listed micro small- and medium-sized enterprises). The number of sustainability reporting standards (ESRS) is reduced by 70%, and the sector-specific ESRS and those for listed SMEs are abandoned. The audit of sustainability reports is limited to a 'limited' insurance level instead of a 'reasonable' one.

CS3D

Due diligence obligations are limited to direct business partners (Tier 1 suppliers), and information requests from large companies to SMEs in their value chains are simplified. Whilst the principle of double materiality remains central, environmental and social risk assessments are reduced to once every five years.

The Taxonomy Regulation

The reporting requirements are restricted to companies with over 1,000 employees and revenue exceeding €450 million.

A draft delegated act amends the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts. Among other things, it introduces a 10% financial materiality threshold to exclude non-material activities from analysis. Furthermore, simplified reporting templates are provided, and the DNSH (Do No Significant Harm) technical screening criteria are reduced.

Impacts on corporates

According to the European Commission, companies would undoubtedly benefit from the Omnibus package's simplifications. When the package was launched, Ursula von der Leyen stated: ‘This will make life easier for our businesses.’ This statement followed criticism from companies such as TotalEnergies and Siemens, who claimed that the CSRD would harm their competitiveness.

Consequently, 'postponement' and 'simplification' became the watchwords of the European Commission who stated that:

• regarding the CSRD, the Omnibus package revises and simplifies the European Sustainability Reporting Standards (ESRS) for companies that remain within its scope.
• the Omnibus package introduces protections against excessive sustainability reporting obligations for SMEs that are part of the value chains of larger companies falling under the scope of the CSRD. These protections are provided by the VSME, or the ‘Voluntary Standard for Non-listed Micro-, Small- and Medium-sized Enterprises’ .
• regarding the CS3D, the Omnibus package introduces simplified due diligence obligations, which will benefit large companies and their value chain partners.
• postponing and simplifying such regulations would enable European companies, particularly SMEs, to prepare more effectively for the transition to a sustainable economy.
• consequently, it would improve their access to investment and promote their competitiveness.
• It is also expected to bring European companies a total savings of an estimated 6.3 billion euros a year in administrative costs.

The Omnibus package has triggered a wave of reactions and uncertainty among corporates and insurers. As stated above, the prevailing view held by certain industrial groups and political decision-makers is that the directive would harm competitiveness and be overwhelmingly rejected by businesses. Indeed, the Omnibus package is undermined by a recent study led by the association #WeAreEurope and conducted in collaboration with HEC Paris. The study, involving an estimated 1,000 European companies with diverse profiles (size, geography, CSR maturity, sectors, etc.), revealed that the majority support current non-financial reporting requirements.

The study shows that companies are calling for adjustments, not transformation, because even if CSRD is criticised, this would not affect its fundamental principles. Companies are calling for targeted simplification and not a rethink. The findings of the study revealed that:

• 86% want reporting indicators to be automated
• 75% called for a ‘one-stop shop’ for ESG to centralise national and European obligations
• 69% called for better coordination with other frameworks such as SFDR and Taxonomy.

The respondents also called for sector-specific resources to facilitate dual materiality analysis.

Impact on insurers

Insurers are affected by the Omnibus package and the reduction of the scope of the CSRD in their capacity as both a European company and underwriter of corporate risks. Underwriters will suffer from fewer SMEs exercising their ESG disclosure obligations. This could restrict the data available to insurers when assessing sustainability-related risks.

In response, insurers may strengthen their ESG questionnaires, integrate sustainability criteria into risk selection and adjust coverage or exclusions based on their clients' ESG maturity levels.

Indeed, companies that have not yet implemented ESG practices, or that lack transparency regarding sustainability, could be excluded from certain insurance product offerings. Similarly, they could face higher premiums due to the increased risk associated with their ESG profile.

These changes could impact key product lines, such as directors' and officers' liability insurance, environmental liability insurance, and professional indemnity insurance.

Furthermore, the limited availability of ESG data could impact insurers' ability to play a pivotal role in the investment sector, jeopardising their investment strategies aimed at SMEs and hindering their capacity to develop and offer Articles 8 and 9 products under the SFDR.

Nevertheless, the proposed changes to the CSRD's threshold levels could have a limited impact on the insurance sector.

Indeed, it should be reminded that under the original CSRD, all large companies that exceeded two of the following three thresholds would have been affected from 1 January 2025:

• total assets of €25 million
• net turnover of €50 million
• an average number of employees during the financial year of 250.

It is argued that the Omnibus package would considerably reduce the number of companies affected. But this is not the case in the insurance sector, and particularly in France.

In France, the number of insurance organisations (including insurance and reinsurance companies, mutual insurance companies and provident institutions) stood at 660 in late 2023, with the number of insurance intermediaries (including brokers, general agents, agents and intermediaries' agents) around 70,000. Based on publicly available data, it is estimated that only around thirty companies exceed the new threshold of 1,000 employees, which means that less than 0.05% of the insurance sector would be affected by the revised CSRD.

Due to the size and concentration of insurance companies, the proposed changes to the CSRD's thresholds and deadlines would only affect a limited number of companies compared to the original version. Thanks to the postponement of the CSRD obligation, insurers in phases two and three will have more time to prepare their reports.

In any case, it should be noted that the Omnibus package paves the way for voluntary reporting. Indeed, companies which do not fall within the scope of the CSRD, can disclose their sustainability reports through the VSME (Voluntary Standard for Non-listed Micro-, Small- and Medium-sized Enterprises), which provides a structured framework for smaller businesses to voluntarily report on their ESG performance. Consequently, these companies can demonstrate their commitment to transparency and align with broader sustainability objectives.

However, it should be noted that companies (including insurers) that are business partners of large companies subject to these regulations may be required to demonstrate transparency, particularly through contractual clauses. This creates a 'ripple effect', encouraging smaller suppliers to adopt similar disclosure practices.

The spillover of obligations onto companies that do not fall within the scope of such European regulations is also evident in the context of the CS3D. Indeed, large companies subject to the CS3D will need to ensure their value chain – potentially limited to Tier 1 suppliers if the Omnibus package is adopted – complies with human rights and environmental standards. This will create a ripple effect where suppliers and business partners must align with these requirements to maintain their business relationships and avoid being excluded. As a result, even companies not directly targeted by the CS3D will be indirectly compelled to adopt more ethical practices regarding human rights and the environment.

Comment

Close attention should be paid to Emmanuel Macron’s recent statements at the ‘Choose France’ summit, where he expressed support for scrapping the CS3D. This stance overlooks France’s pioneering role in the ethics of economic life, as evidenced by the Sapin II Law (2016) and the Duty of Vigilance Law (2017). By supporting the withdrawal of the CS3D, France risks imposing a stricter framework on its own companies, even though the CS3D was designed to ensure harmonisation across Member States.