By: John Bamford, Head of Sustainability UK&I for EcoAct, a wholly owned subsidiary of Schneider Electric Sustainability Business

The European Commission’s recently unveiled Omnibus simplification package marks a significant evolution in the EU’s approach to sustainability reporting. As this proposal begins its journey through the European Parliament and Council, it brings adjustments to three key frameworks: the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy -recalibrating Europe’s sustainability reporting landscape.

The proposal seeks to address concerns about implementation complexity while preserving the foundational elements of the EU’s Green Deal. For businesses already embarking on their sustainability journey, this development offers an opportunity to reassess how they approach reporting requirements and extract maximum strategic value from their sustainability efforts rather than treating it as a compliance exercise.

Finding the balance: Streamlining for impact

The Omnibus proposal significantly narrows the scope of mandatory reporting. While previously all companies with more than 250 employees and either EUR 50 million turnover or a balance sheet above EUR 25 million were included, now only large undertakings with more than 1,000 employees would remain subject to the mandatory requirements. Companies below this threshold and listed SMEs would have voluntary rather than mandatory reporting obligations.

This substantial reduction risks creating gaps in sustainability data across value chains. Despite this potential change, it’s essential for businesses to continue developing robust sustainability strategies regardless of their new regulatory status. Investors continue to require comprehensive ESG data, and supply chain pressures for transparency are only increasing.

What we need is streamlined sustainable finance frameworks for all companies, which would stop the cascading effects that particularly impact smaller players. The objective should be for organisations – whatever their size – to focus on strategic transformation which leverages sustainability.

From reporting to strategic transformation

The CSRD framework provides an opportunity to integrate environmental, social, and governance considerations into corporate governance and business strategy. To derive the greatest value, most companies follow several key practices.

  1. Focus on material issues – Concentrate resources on the environmental and social issues most relevant to your business model and stakeholders.
  2. Integrate across functions – Embed sustainability considerations into governance structures, risk management processes, and strategic planning.
  3. Connect to value creation – Identify how sustainability initiatives can drive innovation, operational efficiency, and market differentiation.
  4. Build capacity systematically – Develop the data infrastructure, analytical capabilities, and cross-functional expertise needed for effective implementation.

Organisations that follow these practices will likely be better positioned to navigate upcoming challenges and identify emerging opportunities. As Winston Churchill noted: “It is better to take change by the hand before it takes us by the throat.” Two of the most compelling aspects of the CSRD framework is the long-term value creation possible from double materiality and risk mitigation through climate scenario analysis.

Unlocking value through double materiality

The principle of double materiality—understanding both how sustainability issues affect a company and how the company impacts society and the environment—remains central to the CSRD framework. This approach offers businesses a powerful lens for strategic transformation.

Double materiality analysis invites leaders to adopt a cross-functional, systemic approach to sustainability. It helps companies rethink their carbon, water, and biodiversity impacts, define transition pathways, and imagine new business models compatible with planetary boundaries. The process breaks down silos that have traditionally separated sustainability from core business functions. Finance teams gain deeper insights into climate-related financial risks, operations teams identify efficiency opportunities, and innovation departments discover new market possibilities.

For businesses focused on long-term value creation, this perspective enables genuine transformation that transcends compliance and connects sustainability to core business strategy. When implemented thoughtfully, the double materiality assessment becomes a catalyst for innovation and resilience rather than merely a reporting exercise.

Strategic risk management in a changing climate

The business case for addressing climate risks is increasingly clear. The World Economic Forum recently highlighted that insurers have paid out more than $3.6 trillion in compensation due to environmental hazards over the past four years[1]. These figures represent only insured climate-related losses, with the total economic impact significantly higher.

Frameworks like CSRD can guide companies to better anticipate these risks, potentially transforming threats into strategic opportunities. The reporting structure encourages businesses to expand their understanding of performance beyond traditional financial metrics – an increasingly critical lens as climate impacts reshape markets.

Forward-thinking companies are already using climate scenario analysis – a key component of CSRD – to stress-test their business models against different warming scenarios. This exercise reveals vulnerabilities in supply chains, infrastructure, and market positioning that might otherwise remain hidden until crisis strikes. By understanding these risks in advance, companies can develop targeted adaptation strategies and build resilience into their operations, giving them a competitive edge in an increasingly volatile business environment.

Looking ahead: Predictability in a complex landscape

For European businesses to thrive in a competitive global environment, predictability remains essential. The Omnibus package represents an effort to balance various considerations while providing a structured and viable framework for businesses to operate within.

As the proposal progresses, companies should maintain focus on strategic sustainability transformation—using reporting requirements as a catalyst for innovation rather than merely a regulatory exercise. Building these capabilities takes time, making a proactive approach beneficial regardless of regulatory timelines. What might seem like a compliance burden initially becomes a strategic advantage as organisations develop expertise, refine processes, and integrate sustainability intelligence into their decision-making.

Collaboration as the path forward

The evolving EU sustainability landscape calls for greater collaboration between policymakers, businesses, and sustainability experts. At EcoAct, we see a tremendous opportunity for companies to leverage their CSRD implementation efforts to drive genuine strategic value. This requires shifting perspective from viewing sustainability reporting as a compliance burden to seeing it as a strategic intelligence tool.

As we navigate this evolving landscape together, let’s focus on the ultimate goal: creating resilient, forward-looking businesses that contribute to both economic prosperity and environmental well-being. The companies that embrace this mindset—regardless of regulatory requirements—will be the ones best positioned to thrive in the rapidly changing markets of tomorrow.

[1] https://www.bcg.com/about/partner-ecosystem/world-economic-forum/ceo-guide-net-zero