On 26 February, the European Commission released significant proposals for easing the European Union’s sustainability rules. Called the Omnibus Package, the proposals covers the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy regulations.
Omnibus also proposes changes in other aspects of European Union law. The proposals are to be presented to European Parliament in about four weeks.
What is the essence of Omnibus?
The general aim of Omnibus is to reduce the reporting burden, especially for small and medium-sized enterprises. The aim is to provide a stimulus for the EU economy.
If Omnibus is adopted in its planned form, it will have a noteworthy impact for several fields.
1. Corporate Sustainability Reporting Directive (CSRD)
Omnibus will mean significant changes for a number of key areas set forth in the CSRD. The main changes cover the following:
- Decrease in the number of entities in scope: the current CSRD applies to all large enterprises (i.e. entities that meet two of the following three criteria: 50 million euros turnover, 25 million euros balance sheet total, 250 employees), as well as to small and medium-sized enterprises (SMEs) whose securities are listed on an EU-regulated market. The proposal would limit scope to large enterprises with more than 1000 employees (i.e., companies with 1000 or more employees and either 50 million euros net turnover or balance sheet total over 25 million euros). That means that entities with less than 1000 employees would not be subject to the full reporting obligation, but may submit reports voluntarily on the basis of voluntary standards developed for SMEs (VSME). The European Commission (EC) believes this will reduce the number of entities subject to reporting obligation by approximately 80%.
- Limit on information requested within value chain: within a value chain, entities no longer in scope can limit the information that entities within scope can require of them. Information will be limited to voluntary standards, which are less comprehensive than the full European Sustainability Reporting Standard (ESRS) requirements. That will help to ensure that the sustainability reporting requirements for large enterprises do not burden smaller companies (such as cooperation partners and suppliers) in their value chain.
- Postponement of reporting requirements: the proposal calls for deferring by one year the reporting requirement for companies in the scope of CSRD (companies that were expected to file a report for 2025). That means that they should file a sustainability report for 2026 or 2027.
- Limits on additional requirements: the proposal is to eliminate sector-specific standards.
2. In addition, changes will take place in regard to EU Taxonomy and CSDDD. More details available here.
3. Other changes: Omnibus also provides for changes related to the carbon border adjustment mechanism (CBAM), and for simplifying and optimising use of certain investment programmes. Links to the full proposal and detailed summary can be found in the EC press release here.
What does this mean for companies?
The simplification of reporting and changes in requirements will reduce administrative burden significantly for many small and medium-sized enterprises. Moreover, all companies will derive benefits from the reduction in complexity, regardless of whether they are simply doing a simple impact assessment or must submit a report based on the full ESRS.
I believe the proposals will allow companies to take more time for analysing the CSRD requirements, allowing them to establish processes and control mechanisms needed to prepare high-quality sustainability reporting.
The European Commission’s goal is currently to conduct proceedings on amendment proposals at a pace that will allow each member state’s accounting legislation to be updated by December 2025. A risk for companies may be if the amendments do not pass in the present form or at the planned speed and the sustainability report falls due. In such a case, companies who have not started working on the CSRD will be very pressed for time.
We advise companies that are no longer likely to be in scope for CSRD to apply the voluntary standard requirements, which are significantly simpler and clearer than the ESRS and require less preparations. The existence of a sustainability report and disclosing substantive activities to clients, partners and financing sources is not going to drop off the agenda and it is a good opportunity to demonstrate yourself as an innovative company.
Grant Thornton Baltic can help your company compile sustainability reporting on the basis of either the ESRS or VSME standard.
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