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Insights Sustainability reporting: EU Commission publishes Omnibus draft to simplify reporting obligations

Sustainability reporting: EU Commission publishes Omnibus draft to simplify reporting obligations

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​​​​published on 26 february 2025 | Reading time approx. 7 minutes

 

­As announced, the EU Commission published the draft for the first Omnibus package on sustainability reporting on February 26, 2025. The draft was presented at the press conference following the Commission meeting in Brussels by the two Commissioners Maria Luís Albuquerque and Valdis Dombrovskis and provides for far-reaching adjust­ments to the regulatory requirements associated with the Corporate Sustaina­bi­lity Reporting Directive (CSRD), the EU Taxonomy and the Corporate Sustainability Due Diligence Directive (CSDDD). We summarize the core content and the most important planned changes for you. 

 

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Background of the initiative 

The Omnibus Initiative aims to significantly reduce reporting obligations and thus the bureaucratic burden in the European Union, thereby strengthening the competitiveness of European companies. In the “Budapest Declaration” of November 8, 2024, the European Council officially announced for the first time that it intended to present a proposal to reduce general reporting obligations by at least 25% in the first half of 2025. These plans were further substantiated by the “EU Competitive Compass” presented on January 29, 2025. The Compass envisaged a reduction in reporting obligations of at least 25% for all companies and at least 35% for SMEs and already set out explicit requirements for the first Omnibus package on sustainability reporting. These included the introduction of appropriate timetables and adjusting the scope of reporting obligations to the size of the company. 

With the publication of the draft of the first Omnibus package, the specific planned effects of the simplification initiative on reporting obligations in the area of sustainability reporting are now known. As announced, the changes are far-reaching and relevant for all companies that were previously subject to the regulations. It should be noted here that this is initially only a draft bill that must go through a proper legislative procedure before coming into force.
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What specific changes does the first Omnibus package provide for? 

  
 

1. Limitation of the user group of the CSRD  

While the CSRD in its current form successively obliges all large companies (from the 2025 financial year at the latest, and from the 2024 financial year if they are capital market-oriented and have more than 500 employees) and all capital market-oriented SMEs (from the 2026 financial year with the option of deferral until 2028) to publish a sustainability report in accordance with the European Sustainability Reporting Standards (ESRS), the Omnibus draft now provides for a significant restriction of the user group: In future, only companies with more than 1,000 employees and either a net annual turnover of at least 50 million euros or a balance sheet total of at least 25 million euros (regardless of whether they are capital market-oriented companies or not) will be subject to the reporting obligation. The user group of the CSRD ​is thus to be brought closer to the user group of the CSDDD. For companies below these thresholds (incl. capital market-oriented SMEs), many of which have already begun preparations to prepare a CSRD-compliant sustainability report for the first time, the reporting obligation would be waived accordingly. According to the EU Commission, this applies to around 80% of the companies originally affected. 
 

2. Postponement of the obligation to report for the first time 

With regard to the deadlines for first-time reporting under the CSRD, the Commission has presented a so-called “stop-the-clock” proposal. This provides for a postponement of the introduction of the reporting obligation by two years for companies required to report for the first time from the 2025 financial year (i.e. first-time reporting in 2028 for the 2027 financial year). The postponement would not apply to companies in so-called “wave 1” (capital market-oriented companies with more than 500 employees); they would also have to report for the 2025 financial year, as they already do for 2024. It is emphasized that the EU co-legislators (including the Council and Parliament) should give priority to the proposal to postpone the deadline so that companies receive legal certainty regarding the deadlines as quickly as possible. 
 

3. Restriction of the user group of the EU Taxonomy Regulation

The obligation to disclose in accordance with Article 8 of the EU Taxonomy Regulation previously went hand in hand with the obligation to prepare a sustainability report and therefore applied to the same user group. The planned reduction in the group of users of the CSRD would therefore also change the group of users of the EU Taxonomy Regulation. However, the Omnibus package goes one step further and proposes to make the application of the classification system voluntary for companies with fewer than 1,000 employees and less than 450 million euros in turnover. The proposal provides for the following: 
  • ​​Companies with fewer than 1,000 employees and less than 450 million euros in net turnover: Taxonomy reporting is carried out on a voluntary basis.
  • Companies with more than 1,000 employees but less than 450 million euros in net turnover: Taxonomy reporting is voluntary; if reporting takes place, the turnover and CapEx KPI must be submitted; reporting on the OpEx KPI is voluntary. 
  • Companies with more than 1,000 employees and more than 450 million euros in net revenue: Obligation to disclose all taxonomy key figures; exclusion of the OpEx KPI only possible if the proportion of taxonomy-eligible turnover is less than 25% of total revenue.  

The draft amendments to the Delegated Regulation on EU taxonomy reporting accompanying the Omnibus package also provide for more flexibility and simplification in the collection of taxonomy KPIs, including through the introduction of materiality thresholds. This means that companies will only have to evaluate those activities that are financially material to their business model. Activities that account for less than 10 % of the relevant key figures in total would be considered “not material” and would therefore not have to undergo a more detailed analysis with regard to their taxonomy eligibility and alignment. The overall aim is to make taxonomy reporting more pragmatic and to focus on the key business areas. As part of this, a public consultation on the planned changes to the EU taxonomy has been launched and will run until March 26, 2025. 
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4. Reduction of reporting obligations for SMEs 

According to the Omnibus draft, the reporting obligations for SMEs are to be reduced to a minimum. Capital market-oriented SMEs would no longer be part of the CSRD user group. In addition, large companies would no longer be allowed to request additional sustainability information from companies with fewer than 500 employees that goes beyond the special ESRS for SMEs (VSME standards), which are to be applied voluntarily, unless specific additional information is required for valid reasons. This is intended to mitigate the so-called trickle-down effect, which, under the current conditions, leads to smaller companies along the value chain being subject to ever-increasing reporting obligations that were not originally intended for them. 

The VSME standards already adopted and submitted by the European Financial Reporting Advisory Group (EFRAG) are to serve as a basis for the EU Commission to issue a corresponding proportionate standard for non-reporting companies as a delegated act.
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5. Restriction of due diligence obligations to direct business partners and limitation of civil liability 

The EU is also planning significant simplifications to the due diligence obligations, which are primarily imposed by the CSDDD, but which must already be reported on transparently in the sustainability report on the basis of the CSRD. Unlike previously planned, according to the draft, the analysis of sustainability risks should primarily be limited to direct business partners (so-called Tier 1 suppliers) and would no longer necessarily have to cover the entire value chain. An extended duty of care for indirect business partners should only apply if there are plausible indications of risks or negative effects (e.g. through reports from the media or NGOs). Companies should nevertheless enforce their Code of Conduct along the value chain and take appropriate measures in the event of risks or negative impacts identified with business partners. The frequency of the mandatory review of the appropriateness and effectiveness of due diligence measures is to be reduced from annually to every five years. 

Furthermore, the draft provides for the deletion of the EU-wide civil liability provided for in the CSDDD and the obligation to implement a climate transition plan (this would then only have to be drawn up, the obligation to take immediate measures would no longer apply). 

In order to limit the bureaucratic burden on companies, the date of first application of the CSDDD is to be postponed by one year to July 26, 2028.
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6. Removal of the obligation to introduce sector-specific standards and simplification of existing standards 

According to the CSRD, in addition to the first set of ESRS already published in 2023, sector-specific ESRS should be adopted and defined by delegated act by June 30, 2026 (originally June 30, 2024). The first drafts of sector-specific standards have already been prepared and published by EFRAG. According to the Omnibus draft, the obligation to introduce sector-specific standards is now to be removed from the CSRD so as not to further increase the number of prescribed data points for companies. 

The first set of ESRS, which came into force in 2023 and must be applied in full by companies already subject to CSRD reporting requirements, is to be comprehensively analyzed with regard to simplification options. To this end, a delegated act to revise the first set of ESRS is to be adopted as soon as possible, at the latest 6 months after the directive on the simplification of reporting obligations comes into force. 

The aim is to simplify and streamline the ESRS by significantly reducing the number of data points. This will be achieved by removing those mandatory ESRS data points that are considered least important for general sustainability reporting and prioritizing quantitative data points over narrative text. In addition, an even greater distinction should be made between mandatory and voluntary data points.
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7. Changes to the audit of sustainability reports 

According to the current version of the CSRD, sustainability reports are initially subject to a limited assurance engagement, which is to change to a reasonable assurance engagement in the medium term. Uniform auditing standards for limited assurance were originally to be adopted by the EU Commission by October 1, 2026.  

This obligation is now to be amended so that the Commission will instead issue specific guidelines for the audit by 2026. This approach will allow the Commission to deal more quickly with emerging issues that may represent an unnecessary burden for reporting companies. The option to switch from a limited assurance engagement to a reasonable assurance engagement in the future is to be removed. This change is justified in particular by the avoidance of future increases in audit costs and thus planning certainty for companies.
  
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8. Restriction of the user group for companies with parent companies in third countries 

According to the CSRD, parent companies with a turnover of more than 150 million euros in the EU or with a subsidiary in the EU that itself falls within the scope of the CSRD should also submit detailed sustainability reports in accordance with their own ESRS for third-country companies (“Non-EU ESRS”) from the 2028 financial year. The scope of application is to be adjusted and, according to the draft, now only includes companies with a turnover threshold of 450 million euros or more in the EU. 

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Outlook: What's next and what do the planned changes mean for companies? 

Many companies in the previous group of users of the directive have already begun preparations for reporting in accordance with CSRD and the EU taxonomy or have even already published an ESRS-compliant sustainability report (despite some pending national CSRD implementation). However, the restriction of the scope of application provided for in the Omnibus package would mean that many companies would no longer be obliged to report in accordance with CSRD and the EU taxonomy. 

Nevertheless, the companies concerned should be aware that the efforts made to date to fulfill the expected reporting obligations have not been in vain. The core of sustainability reporting, the double materiality assessment, nevertheless remains an important approach that is also anchored in the Omnibus package and can continue to offer potential for long-term corporate strategy. Although the regulatory framework is likely to change fundamentally with the Omnibus initiative, even companies that no longer fall within the scope of the revised CSRD should not underestimate the high relevance of the topic of sustainability. 

The EU Commission also emphasizes that sustainable management will continue to play a central role in the market as an important strategic element. This is particularly true in view of the fact that many of the companies that would no longer be subject to regulatory reporting obligations as a result of the new threshold values are nevertheless in the value chain of companies subject to reporting requirements and must therefore provide them with information on certain key ESG data points. Voluntary application of the VSME standard could ensure in future that companies both meet the requirements of stakeholders and benefit themselves in the long term from the advantages associated with a sustainability-oriented corporate strategy. Examples of this include increased competitiveness, higher employee loyalty, better access to financing opportunities or a more positive image among customers and business partners. 
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As the Omnibus package is still at the draft stage, it remains to be seen how quickly and to what extent the planned changes will be implemented by the EU Commission. As in the case of the current version of the CSRD, the regulation must first go through a legislative procedure at EU level and then be published in the Official Journal before it enters into force. It is not unusual for amendments to be made to the legislative text during the course of the procedure, meaning that the proposals now published to streamline the reporting obligations should by no means be understood as existing law. The draft also provides for the member states to be given 12 months after entry into force for national implementation. It is therefore advisable to wait and see how things develop and not to rush into the adjustments currently envisaged. We will keep you up to date on all further steps. 

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