The EU’s Corporate Sustainability Reporting Directive (CSRD) is now in full swing, with the first wave of CSRD reports publishing available for perusing. However, the future of ESG-reporting may be rapidly changing before our eyes.
At the start of 2025, the European Commission published the EU Competitiveness Compass which outlines the bloc’s economic doctrine for the next five years. A central element of this strategy is the proposed EU Omnibus Regulation, which at its core was anticipated to streamline, at the very least, the reporting requirements under the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy.
History behind the CSRD
The CSRD, first introduced by the European Commission in 2021, is a newer and improved version of its predecessor the Non-Financial Reporting Directive (NFRD) and was born from the realization that the previous requirements fell short of meeting the need to meet the aims of the EU Green Deal and a more just and sustainable future for all.
The CSRD was designed to improve and expand corporate sustainability reporting within the EU, aiming to increase transparency and standardisation on ESG reporting thus driving sustainability improvements and providing stakeholders with adequate information. This includes data required by investors to ensure finance is funneled to the most sustainable businesses.
With the CSRD being in its infancy, you may be wondering why the EU Omnibus and a change in the requirements so soon after its inception has entered into the conversation?
The primary motivation behind this new regulation is to reduce administrative burdens on companies whilst still maintaining the EU’s sustainability commitments. The European Commission observed that businesses – in particular small and medium-sized enterprises were struggling with overlapping and burdensome reporting requirements under multiple sustainability laws. Under the CSRD, CSDDD and EU Taxonomy, companies faced multiple layers of reporting obligations, deadlines and disclosure requirements. The Omnibus is meant to address this by streamlining these frameworks, and achieving at least 25% reduction in administrative burdens for businesses, and at least 35% for SMEs.
This proposal also has come in light of the recent Draghi report and political pressure within the EU around business competitiveness with the likes of Germany and France leading the charge as well as international tensions, particularly from the United States.
What are people saying about it?
Perhaps unexpectedly, a group of major global organisations including DP World, L’Occitane, and Unilever have written to the European Commission urging it not to weaken the existing sustainability reporting standards in the upcoming Omnibus. Investors have also weighed in and expressed their concerns and called for the EU Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework.
For many companies, the uncertainty surrounding the Omnibus has been concerning. Many have already invested significant resources to prepare for and implement the current requirements, and major rollbacks in the legislation could prove costly.
Investors have said the current policies have helped to increase transparency, and facilitate them to make informed decisions to “manage risks, identify opportunities and ultimately reorient capital towards a more competitive, equitable, and prosperous net-zero economy.” and changes to the legislation could put this at risk.
So what exactly is the EU Omnibus proposal?
There has been much speculation in recent weeks but the EU Commission has now released the full details of the Omnibus simplification.
The first Omnibus packages bring together and simplify legislation covering sustainable finance reporting, sustainability due diligence, EU Taxonomy, carbon border adjustment mechanism (CBAM) and European investment programmes.
So, how will the Omnibus change CSRD reporting and what are the key things for you to know?
The headlines
- Scope – the proposal would majorly reduce the scope of CSRD (~80%), with requirements only applying to large undertakings with >1000 employees.
- Sector standards – sector-specific standards will be scrapped
- Reduced datapoints – ESRS will substantially reduce the number of reported data points
- Timeline – the implementation deadline for wave 2 and 3 companies would be postponed for two years
- Assurance – assurance requirements will remain at a limited level
Our two cents
You may be asking following yesterday’s announcement what the next steps are and how you should amend your CSRD readiness plan.
Firstly, the Omnibus is just a proposal. The final version may take many more months before finally being agreed on.
Secondly, the CSRD has already been transposed into national laws in most EU member states, which means that until the Omnibus has completed the full round of procedures (negotiation, approval and transposal again), companies will still need to comply with the CSRD. It is likely that the EU will look to push through the Omnibus quickly, but exactly how long is unclear.
With all that said, we invite you to think back to why the CSRD was proposed in the first place and what the CSRD framework helps companies do. The CSRD, with double materiality at its core, should not be viewed as a burden to your company, and instead should be seen as a strategic tool to future-proof your business.
So our general advice, whether you’re in scope or not, is to:
- Consider aligning with CSRD anyway: it can still be used as a framework for your reporting. It is considered by many to be the gold standard of sustainability reporting and you may have large customers needing you to align with it anyway.
- Prioritise DMAs (Double Materiality Assessments): DMAs will remain crucial for business planning. Use the insights from the process to highlight risk and opportunity, create actions and targets, write policies and set metrics that improve the future resilience of the business.
- Make your data work for you: The basis of the CSRD and the ESRS is comprehensive and still provides a best practice bench mark to work towards. It is likely that investors and customers will continue to require comparable performance data, and the benefits of understanding impact, focusing on what matters and using data to find efficiencies and impact opportunities still stands. We urge you to continue on that journey and are happy to be supporting clients that are prioritising a structured approach that turns risk into opportunities for value creation and future proofs your business for long term success.
What next?
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