Why new EU Sustainability Rules Will Reshape Manufacturing
Simplification can present challenges, especially when sustainability regulations affecting around 50,000 manufacturing-related companies in Europe are involved.
This year has ushered in numerous changes, alongside some distinct challenges, in this arena.
In February 2025, the European Commission introduced the Omnibus Simplification Package to address concerns about the complexity of sustainability regulations.
Its first draft responds to calls from business and political leaders for a reduction in the regulatory and reporting burdens impacting manufacturing operations, particularly on small-to-medium enterprises (SMEs).
Saskia van Gendt, Chief Sustainability Officer at Blue Yonder, says: “Some view this as a step back from transparency, but I see it as a necessary recalibration.
“Sustainability teams are increasingly stretched, spending disproportionate time on compliance rather than impact. The omnibus gives companies, especially SMEs, breathing room to focus on initiatives that actually drive environmental and social progress.”
Impacts on manufacturing regulations
The omnibus primarily affects regulatory frameworks such as the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), EU Taxonomy Regulation and the Carbon Border Adjustment Mechanism (CBAM).
This has direct implications for manufacturing companies, which must adapt to these evolving compliance requirements.
Saskia says: “By shifting away from one-size-fits-all requirements, the Directive still maintains accountability where it matters most. Larger companies responsible for the bulk of emissions and equipped with greater resources remain within scope. In contrast, SMEs, which account for a smaller share of emissions, get space to innovate and adapt.”
“Amid the ongoing debate around the omnibus, a simple fact remains: good data is good for business.”
CSRD adjustments
The alterations to CSRD propose reducing the number of companies mandated to report by about 80%, impacting mainly large manufacturers employing over 1,000 personnel or companies reaching financial thresholds of €50m (US$58.4m) in turnover or a €25m (US$29.2m) balance sheet.
Additionally, non-EU parent companies will now need at least €450m (US$526m) in EU turnover to fall under CSRD requirements.
The implementation of a "stop-the-clock" mechanism also pushes reporting deadlines to 2028 for certain companies.
Consequences for the supply chain
CSDDD revisions
The timeline for CSDDD enactment has been extended, giving EU member states until July 2027 to apply the directive in national law, with compliance of the first large corporations set by July 2028.
The focus is now aimed at direct suppliers and contractors specifically, with broader value chain assessments replaced by a risk-based approach.
Applicability thresholds will rise, covering manufacturing entities with more than 1,000 workers or €450m turnover.
The revision scales back several requirements, including the frequency of reviews and liability conditions, influencing how manufacturers align with due diligence obligations.
Adjustments under EU Taxonomy
The omnibus changes are designed to streamline reporting duties under the EU Taxonomy, affecting manufacturers' sustainability reporting.
Adjustments permit manufacturing companies to exclude financially immaterial economic activities via a 10% de minimis threshold, reducing necessary data points by around 70%.
CBAM changes
The mechanism will replace its current rules with an annual threshold of 50 tonnes per importer for each type of covered goods, redefining obligations for approximately 90% of importers.
CBAM certification processes also recalibrate purchasing requirements, impacting manufacturers reliant on international imports.
“Some view this as a step back from transparency, but I see it as a necessary recalibration.”
Navigating the regulatory environment
The manufacturing sector is experiencing disruption and uncertainty amid these regulatory shifts.
In January 2025, global entities such as DP World, Mars and Nestlé appealed against diminishing sustainability standards in manufacturing, industry and production.
A broader coalition of over 200 organisations has also articulated concerns over potential dilution of the EU's sustainability frameworks, highlighting the need for maintaining robust value chain transparency and credible climate transition plans.
Sophie Graham, Chief Sustainability Officer at IFS, feels that businesses should “leave the debating to the politicians," adding that "amid the ongoing debate around the omnibus, a simple fact remains: good data is good for business,” she says.
“A better handle on data is what enables sustainability to be managed as a strategic corporate initiative, with a focus on delivering value, driving efficiencies, creating accountability and integrating into decision-making across functions.
“It’s worth noting that in the omnibus proposed changes, two factors that have held steady are the focus on the quality of the data and the relevance to business performance. Companies still need to perform a double materiality assessment to identify their most relevant sustainability topics to manage and disclose, as well as externally assure the data they report.”
“The organisations who stand out from the crowd will be those who already have agile foundations.”
To mitigate challenges from the rapidly evolving landscape manufacturers should focus their attentions on increased technology adoption and innovation as one avenue.
Mark Wilkinson OpenText's SVP for the Global Business Network the necessity for consistent data access and automation, key factors for successful sustainability adoption in manufacturing practices.
Both Sophie and Mark agree that technology integration not only simplifies compliance with regulations but also enhances strategic management of sustainability initiatives
Mark Wilkinson, OpenText's SVP for the Global Business Network, says technology adoption will play a critical role in helping manufacturers mitigate challenges: “Where ESG is concerned, proactivity is pivotal to business success. As we see an increase in sustainability-focused regulation, with expectations set by the EU’s CSRD, the organisations who stand out from the crowd will be those who already have agile foundations.
“For example, reporting solutions will need access to consistent company data, and automation will be crucial to a successful sustainability strategy. This has been highlighted by the widespread adoption of automation driven by sustainability initiatives in recent years.
“Through embracing AI’s capabilities, optimising agile data foundations and embracing automation, companies can ensure they remain prepared in the face of increasing regulations.”
Sophie feels similarly: “Despite the regulatory changes, investments in technology to improve sustainability data are delivering proven business value. Technological advancements, particularly in AI and machine learning, have significantly streamlined ESG data reporting for companies.
“By automating manual, challenging processes around sustainability data collation, businesses are able to repurpose sustainability teams away from data-gathering and reporting towards strategy, using insights from this data.”
