The Omnibus I Package represents a structural turning point in European sustainability reporting. While positioned politically as a simplification initiative, its deeper impact lies in a fundamental redesign of how relevance, scale and materiality are defined and operationalised across the CSRD framework, the EU Taxonomy and the European Sustainability Reporting Standards (ESRS). The reform replaces an expansive, coverage-driven logic with a more selective, management-oriented approach that prioritises economic substance, proportionality and decision usefulness.
At the CSRD level, this shift is most visible in the introduction of new thresholds for mandatory sustainability reporting. Going forward, only undertakings that exceed both more than 1,000 employees and more than EUR 450 million in net turnover fall within the scope of mandatory reporting. These criteria apply uniformly to standalone undertakings, credit institutions, insurance companies and parent undertakings at group level. Capital market orientation is no longer a trigger. As a result, the reporting population is reduced dramatically, underscoring the legislator’s intention to reserve mandatory sustainability reporting for undertakings of systemic economic relevance.
Beyond reducing the scope, Omnibus I also reshapes the internal logic of reporting. Sustainability reporting is no longer conceived as a comprehensive inventory of all activities, entities and topics. Instead, it is framed as a structured exercise in identifying what is truly material for understanding an undertaking’s impacts, risks and opportunities. This conceptual shift becomes particularly evident when looking at how consolidation, materiality and proportionality are treated under the ESRS and the EU Taxonomy.
Key Takeaways
- The Omnibus I Package redefines sustainability reporting in Europe by introducing new criteria for mandatory reporting based on materiality thresholds.
- Only undertakings with over 1,000 employees and EUR 450 million in net turnover are required to report, narrowing the focus to those of systemic economic relevance.
- The ESRS emphasize a group-level assessment of material impacts and risks, requiring disaggregation to highlight significant differences within subsidiaries.
- The EU Taxonomy incorporates a 10 percent de-minimis threshold to streamline materiality assessments, allowing tailored evaluations based on key performance indicators.
- Overall, the new framework shifts sustainability reporting from compliance to a management-focused discipline, enhancing the relevance and quality of materiality assessments.
ESRS: Materiality, Consolidation and the Logic of Significant Differences
The ESRS reinforce the move toward a group-level, substance-over-form understanding of materiality. Under ESRS 1, undertakings reporting at a consolidated level are required to assess material impacts, risks and opportunities for the consolidated group as a whole, regardless of the group’s legal structure. The assessment must ensure that the activities of subsidiaries are covered in a way that allows for the unbiased identification of material impacts, risks and opportunities at group level.
Crucially, ESRS 1 clarifies that consolidation does not imply uniformity. Where significant differences exist between material impacts, risks or opportunities at group level and those of one or more subsidiaries, the undertaking must disaggregate information to allow for an adequate understanding of those differences. Likewise, if a material impact, risk or opportunity identified at group level is not relevant for all subsidiaries or activities, information may—and should—be provided only for those subsidiaries or activities to which it is relevant.
This requirement introduces an explicit deviation-based reporting logic. The group perspective remains the anchor, but meaningful differences at subsidiary or activity level must be made visible. Materiality therefore operates not only vertically (topic selection), but also horizontally (entity and activity differentiation within the group). The ESRS thus formalise an expectation that undertakings actively manage and explain heterogeneity within their consolidated sustainability profile.
This logic is reinforced in ESRS 2, which governs general disclosures on strategy and business model. Undertakings must describe key elements of their business model, value chain and market positioning insofar as they relate to material impacts, risks and opportunities. Importantly, the amended Application Requirement AR 13 defines when sectors, markets or groups of products, services or consumers are considered significant. Significance exists either when such elements account for more than 10 percent of the undertaking’s revenue, or when they are connected to actual or potential material impacts.
The dual nature of this test is critical. The 10 percent revenue threshold provides a clear quantitative anchor, creating consistency and comparability. At the same time, the impact-based criterion ensures that activities with lower revenue shares cannot be excluded if they are sustainability-relevant. Quantitative thresholds therefore do not replace qualitative judgment; they structure it.
Taken together, ESRS 1 and ESRS 2 establish a coherent materiality architecture. Materiality is assessed at group level, informed by subsidiary activities, refined through the identification of significant differences, and operationalised through both quantitative benchmarks and impact-based reasoning. This framework aligns closely with the broader Omnibus I objective of focusing reporting on what truly matters for understanding sustainability performance and strategic exposure.
EU Taxonomy: The 10 Percent De-Minimis Threshold as a Materiality Filter
A similarly explicit materiality logic is introduced under the revised EU Taxonomy framework. For non-financial undertakings, the Taxonomy now incorporates a formal de-minimis concept for economic activities. Economic activities can be considered non-material if they cumulatively account for less than 10 percent of the denominator of the relevant key performance indicator—turnover, capital expenditure (CapEx) or operational expenditure (OpEx).
Materiality under the Taxonomy must be assessed separately for each KPI. An activity that is non-material for turnover purposes may still be material for CapEx or OpEx, for example where an undertaking plans significant future investments in an activity that currently generates limited revenue. The revised rules explicitly recognise such scenarios, allowing undertakings to tailor their assessments to the economic reality reflected by each KPI.
Where activities fall cumulatively below the 10 percent threshold for a given KPI, undertakings are exempt from assessing whether those activities are Taxonomy-eligible or Taxonomy-aligned for that KPI. This represents a substantial simplification compared to previous requirements, which often required detailed assessments for marginal activities. However, this exemption does not eliminate transparency. Undertakings must separately disclose, in the reporting templates, the proportion of turnover, CapEx or OpEx that was not assessed due to being considered non-material.
The Taxonomy de-minimis threshold therefore functions as a pragmatic materiality filter. It allows undertakings to concentrate analytical effort where it is most meaningful, while preserving transparency about the scope and limits of the assessment. Importantly, the repeated use of the 10 percent benchmark aligns the Taxonomy logic with the ESRS approach to significance and with emerging practice under the CSRD more broadly.
Convergence Toward a Deviation-Based Materiality Model
Across Omnibus I, the ESRS and the EU Taxonomy, a clear pattern emerges. Materiality is no longer primarily about exhaustive coverage, but about identifying and explaining meaningful deviations from the overall business and sustainability profile. The recurring reference to a 10 percent threshold—whether for revenue significance under ESRS 2 or de-minimis treatment under the Taxonomy—signals an emerging regulatory consensus on what constitutes a meaningful quantitative deviation.
At the same time, the framework consistently preserves space for qualitative judgment. Activities, subsidiaries or value-chain elements that fall below quantitative thresholds may still be material if they are linked to significant impacts, risks or opportunities. This ensures that sustainability reporting remains sensitive to impact intensity, not just economic scale.
From a governance perspective, this convergence raises expectations for management judgment. Undertakings must define internal materiality thresholds, apply them consistently across reporting regimes, and clearly document the rationale for inclusion or exclusion decisions. Consolidated reporting requires particular care, as group-level materiality assessments must be capable of identifying subsidiary-level differences that warrant disaggregation.
Implications for Strategy, Governance and Assurance
The combined effect of Omnibus I, the ESRS and the revised Taxonomy rules is a redefinition of sustainability reporting as a management discipline. Fewer undertakings are required to report, but those that remain in scope face higher expectations regarding the quality, coherence and explainability of their materiality assessments. Reporting becomes less about compliance mechanics and more about articulating how sustainability considerations intersect with business model, investment priorities and risk exposure.
For boards and executive management, this means that materiality assessments can no longer be delegated as a purely technical exercise. They must be embedded in strategic decision-making, capital allocation and group governance. For assurance providers, the focus shifts toward evaluating the consistency and plausibility of materiality judgments, rather than the completeness of data collection (see our guide about CSRD und ESRS.)
Conclusion
The Omnibus I Package does not simply simplify sustainability reporting; it redefines its purpose. By raising thresholds, formalising quantitative materiality benchmarks and strengthening the logic of consolidation and disaggregation, the EU framework moves decisively toward relevance-driven reporting. The recurring 10 percent logic across ESRS and Taxonomy is emblematic of this shift. It provides clarity without rigidity, enabling undertakings to focus on what truly matters—while holding them accountable for how they exercise that focus.
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