First Omnibus Package proposed – what is the potential impact for Luxembourg entities

On 29 January 2025, the European Commission published the Competitiveness Compass for the EU, outlining the Commission’s priorities for the next five years.

This initiative, based on recommendations that build on the conclusions set out in the Draghi report, focuses on three pivotal areas:

• innovation
• decarbonisation
• security

The Competitiveness Compass aims to close the innovation gap, facilitate the transition to a low-carbon economy, and bolster the EU’s resilience against global uncertainties.

As announced on 26 February 2025, the EU Commission adopted the first two Omnibus packages, which include:

• A proposal for a directive amending the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD)
• A proposal which postpones the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027 (known as wave 2 and 3 companies, respectively) and which postpones the implementation deadline and the first wave of application of the CSDDD by one year to 2028
• A draft delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts subject to public consultation
• A proposal for a regulation amending the Carbon Border Adjustment Mechanism Regulation
• A proposal for a regulation amending the InvestEU Regulation

What are the main proposed changes and what are the key points for companies and groups in Luxembourg?

• Narrowed scope of reporting companies both at individual and group level (wave 1)  Reporting obligations would now apply only to:
  • large entities with over 1,000 employees, and either,
  • a turnover exceeding EUR 50 million,
  • or a balance sheet total greater than EUR 25 million.
• Postponement of reporting deadlines – The current proposal suggests postponing the implementation of reporting requirements for large companies that have not yet started applying the CSRD, as well as for listed SMEs (waves 2 and 3), by two years.
• Value chain cap – For companies that are no longer in scope of the CSRD anymore (up to 1,000 employees), the Commission would adopt by delegated act a voluntary reporting standard, based on the standard for SMEs (VSME) developed by EFRAG. That standard would act as a shield by limiting the information that companies or banks falling into the scope of the CSRD can request from companies in their value chains that have fewer than 1,000 employees.
• Revision of the European Sustainability Reporting Standards (ESRS) – The EU Commission plans to revise the delegated act that establishes the ESRS to significantly reduce the number of data points required and simplify reporting requirements.
• Removal of sector-specific standards requirement – The proposal eliminates the provision that allows the EU Commission to adopt sector-specific reporting standards.
• Elimination of the reasonable assurance standard – The proposal removes the Commission’s ability to shift from the limited assurance requirement to a reasonable assurance requirement.

• Extension of preparation time – Companies would be given an additional year to prepare for the implementation of the new framework, with the implementation deadline now set for 26 July 2027. The first phase of the sustainability due diligence requirements, affecting the largest companies, would be postponed to 26 July 2028.
• Simplification of due diligence requirements – Companies would no longer be required to systematically conduct in-depth assessments of adverse impacts in complex value chains involving indirect business partners. Full due diligence would only be necessary when companies have reasonable evidence that adverse impacts may arise.
• Deferral to national civil liability regimes – The harmonised EU conditions for civil liability would be removed and the obligation for Member States to implement representative actions by trade unions or NGOs would be revoked.
• Alignment with CSRD on climate transition plans – The requirements for adopting transition plans for climate mitigation would be aligned with those under the CSRD. The obligation to put the transition plan into effect has been removed.
• Extension of maximum harmonisation – More core due diligence obligations would be subject to maximum harmonisation to ensure a level playing field across the EU.
• Removal of review clause for financial services – The review clause regarding the inclusion of financial services within the scope of the due diligence directive would be deleted.
• Removal of review clause for financial services – The review clause regarding the inclusion of financial services within the scope of the due diligence directive would be deleted.

Main proposed changes with regard to the Taxonomy Regulation

• Limitation of EU Taxonomy reporting obligations – The EU Taxonomy reporting obligations would be limited to companies within the scope of the CSDDD (i.e. with more than 1,000 employees and a net turnover of more than EUR 450 million).
• Voluntary Taxonomy reporting – Other large companies within the scope of the CSRD (large companies that have more than 1,000 employees and with a net turnover up to EUR 450 million) would be able to report on a voluntary basis.
• Option to report on activities partially aligned with the EU Taxonomy – An option of reporting on activities that are partially aligned with the EU Taxonomy would be introduced.
• Financial materiality threshold – A financial materiality threshold would be introduced for the Taxonomy reporting, leading to an almost 70% reduction in data points.
• “Do no significant harm” criteria – Simplifications to the “Do no significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy would be introduced.
• Taxonomy-based key performance indicators – The main Taxonomy-based key performance indicator for banks, the Green Asset Ratio (GAR), would be among others adjusted.

Main proposed changes with regard to the carbon border adjustment mechanism (CBAM)

• Exemption of small importers from CBAM obligations – Small importers would be exempted from CBAM obligations, i.e. importers who import small quantities of CBAM goods, representing very small quantities of embedded emissions entering the EU from third countries (mostly SMEs and individuals).
• Simplified rules – The rules would be simplified for companies that remain in the CBAM scope.
• Stronger rules to avoid circumvention and abuse.

Timeline of potential adoption and next steps

It is important to note that the above are proposed amendments and that the acts proposed by the EU Commission have now been submitted to the Council of the EU and the EU Parliament under the relevant legislative procedures.

It should be noted that, with regard to the dates of application of the CSRD and the CSDDD, while the proposed directive mentions that Member States must implement this directive by 31 December 2025 (a deadline shorter than usual), the proposal for a directive amending CSRD and CSDDD mentions that Member States must implement this directive 12 months after the entry into force of the directive at the latest.

Based on the information available at this time, while the proposal for the postponement of CSRD and CSDDD is likely to be approved within a short time frame (three to six months), it has been announced that the timeline for the directive amending CSRD and CSDDD will be longer (with an approval by year end being a best-case scenario).

Furthermore, the draft delegated act modifying the current delegated acts under the Taxonomy Regulation will now be subject to a public consultation and will then undergo review and negotiation by the EU Parliament and the Council of the EU.

What are the impacts on Luxembourg companies?

Luxembourg’s situation differs from that of other jurisdictions that have already implemented the CSRD into their national legislation. In these jurisdictions, companies remain technically bound by their national laws implementing CSRD until those laws are repealed – something that would typically only happen after the Omnibus is approved. This has created uncertainty about whether companies should submit their 2024 reports in compliance with CSRD in 2025. In this respect, the CSSF has clarified its position to large issuers of listed securities included in the original wave 1 (NFRD companies), confirming that companies subject to the Transparency Law could achieve compliance by voluntarily applying the CSRD and the ESRS. This statement effectively reinforces that CSRD is not mandatory in Luxembourg for 2025, providing additional clarity for companies operating under its jurisdiction.

What should Luxembourg companies do now?

The proposals in relation to CSRD and CSDDD impact their scope and their application date. We remain available to assess the impacts of the changes for your company and discuss your sustainability strategy.