Omnibus proposes major changes to CSRD – what does this mean for you?
This week brings big news for the future of the Corporate Sustainability Reporting Directive (CSRD) as the European Commission moves to reduce and simplify ESG reporting requirements for companies operating in the European Union. PSC has guidance for you in navigating what comes next
By Anna Norman, Sustainability Consultant at PSC
Quick Highlights
Over the past decade, several regulatory requirements have emerged to reinforce the EU Green Deal, creating a hefty reporting burden for many companies operating in the EU
This week, major changes were proposed through the Omnibus Simplification Package, including to the Corporate Sustainability Reporting Directive (CSRD), resulting in a 2-year delay for companies previously slotted to report on their FY25 or FY26 ESG-related information
Proposed changes to the CSRD are far-reaching and significant:
~80% of companies previously required to report may no longer need to
A voluntary standard will be available to help smaller companies navigate ESG-related data requests from their larger supply chain partners
Requirements will be reduced, simplified and/or clarified
Sector-specific and reasonable assurance requirements will be removed
PSC recommends affected companies rely on official EU government sources and trusted partners to help navigate these proposed changes, and to maintain efforts that are in the spirit of what the CSRD aims to achieve as we wait for changes to become law
Understanding the Facts
Ten years ago, the European Union (EU) started considering legislation to expand corporate reporting beyond financial information. The past few years have brought a wave of proposals, legislation, and standards on the topic of corporate sustainability reporting, reinforcing the vision of the EU Green Deal. In 2022, following political agreement by the European Parliament, the Corporate Sustainability Reporting Directive (CSRD) was born. Since its inception, the CSRD has faced numerous headwinds, such as the most recent Omnibus Simplification Package, aimed at simplifying reporting rules and boosting EU competitiveness.
What is the Corporate Sustainability Reporting Directive (CSRD)?
The CSRD requires companies of a certain size operating in the EU to publicly disclose sustainability-related information. This information includes companies’ impacts on society and the environment, as well as financial risks and opportunities tied to environmental, social, and governance (ESG) issues. The intent of the Directive is to help stakeholders, such as investors and consumers, understand the sustainability performance of companies by requiring companies to report data for relevant (or material) ESG issues. To help guide companies in providing this information, several European Sustainability Reporting Standards (ESRS) were developed by EFRAG, the association assigned to support the development of standards for the CSRD.
The CSRD document itself outlines who will need to report, when to report, and how to report. Who will need to report and by when is informed by the company’s status in the EU. Large and publicly listed companies will need to report first (some as early as this year), followed by a second wave of reporting by large private companies, a third wave of small and midsize enterprises (SMEs), and a fourth wave of non-EU companies meeting a certain threshold of sales and footprint in the EU. Expectations of companies differ based on their designation, particularly regarding the depth (i.e., following complete or simplified standards) and consolidation level of reporting.
The accompanying ESRS documents provide the details of the reporting requirements and double materiality process for identifying areas of focus or material topics (ESRS 1), the general disclosures for all reporting companies (ESRS 2), and the specific ESG disclosures based on the company’s material topics (ESRS E1 – E5, S1 – S4, and G1). In addition to these core standards, several other standards have been in development to guide SME and non-EU companies on simplified ESRS reporting and to guide specific industries on potential supplemental sector-specific disclosures.
What is the Omnibus Simplification Package?
In January of 2025, the President of the European Commission, Ursula von der Leyen, laid out the Competitiveness Compass, a vision aimed at boosting EU market competitiveness and economic prosperity while still honoring the objectives of the EU Green Deal. Part of this initiative involved a series of proposals, collectively termed the Omnibus Simplification Package, focused on recalibrating some EU rules to be more growth- and business-friendly.
The sustainability-focused omnibus package released this week (i.e., Omnibus I and II) included the following components:
A proposal for a Directive amending the current CSRD;
A proposal which postpones the implementation of all reporting requirements in the CSRD for companies that are due to report in the second and third wave (2026 - 2027 timeframe) for two years;
Additional proposals that stretch beyond the CSRD into areas such as the CSDDD (Corporate Sustainability Due Diligence Directive), the EU Taxonomy, the CBAM (Carbon Border Adjustment Mechanism) regulation, and the InvestEU regulation.
By adopting this package on February 26, 2025, the European Commission has committed to kicking off new legislative activity to amend the CSRD and ESRS, with the support of EFRAG. The two-year postponement of the implementation of reporting requirements gives the European Commission and its partners the necessary time to revise the Directive and Standards for second and third wave companies. It is expected that revisions will include both reductions to the thresholds for reporting (i.e., smaller companies may no longer need to report to CSRD at all) and simplification and clarification of the requirements themselves (e.g., simplified ESRS requirements may be instated for smaller companies).
What does this mean…
While all the details of the CSRD and ESRS simplification are yet to be ironed out, a few details are already clear. Here’s what they mean for corporate sustainability reporting in Europe at large and possibly for your organization.
For corporate sustainability reporting in Europe?
The intended outcomes of the omnibus package are to make reporting requirements more proportionate – companies with greater impact have greater requirements – and simpler – requirements are more understandable and manageable. Several provisions of the package look to achieve those outcomes:
Reductions to the thresholds for reporting: The proposal adjusts reporting requirements to only apply to large companies (i.e., turnover above EUR 50 million or balance sheet total above EUR 25 million) with more than 1,000 employees. With this change the total number of companies required to report to CSRD is likely to be reduced by about 80%.
Protections for SMEs: A voluntary reporting standard will be available to companies no longer required to report so they can fulfill information requests from value chain partners who are still required to report to CSRD. This standard will help protect SMEs by limiting information requests from larger companies.
Revisions to the ESRS: The European Commission will revisit the ESRS documents to look for opportunities to reduce the number of data points required for companies to collect, clarify items that are confusing, and further improve the consistency and interoperability with other legislation.
Removing some requirements completely: sector-specific requirements and the future requirement for reasonable assurance, beyond current limited assurance requirements, will be removed from the CSRD.
To get final alignment on the details of these amendments to CSRD and ESRS, there will be a two-year postponement of the timeline for companies who were not required to already report in the first wave in 2025 (i.e., so-called second and third wave companies).
In short, corporate sustainability reporting in Europe is refocusing on big players. Requirements will likely be the most rigorous for companies with the most potential to impact society and the environment, whether positively or negatively. These companies are likely to have the resources to perform robust reporting, and the value chain breadth and influence to act on ESG topics. For smaller companies, by reducing reporting requirements, the hope is that this delay and simplification can help to focus more resources on action and implementation in addition to reporting.
This omnibus package demonstrates the challenging balancing act between the sense of urgency required on ESG topics like climate change, and the importance of not overburdening companies with reporting obligations.
For my organization?
If your organization was not subject to the first round of CSRD reporting, there are two potential scenarios that will become clearer in the coming months.
First, there is a possibility that your organization will be part of the anticipated 80% of companies no longer required to report to CSRD. Nevertheless, the megatrends surrounding CSRD are unlikely to fade. Your company may still experience pressure, whether from value chain partners or the public, to report and act on ESG issues. Through voluntary reporting frameworks or your own mechanisms, your organization can still be ready.
Second, if your organization is still required to report, the requirements themselves will likely be different from the original CSRD and ESRS. You may have fewer topical areas or data points to report on or requirements may be met through other, interoperable frameworks you already use.
Our Guidance
This proposed shift in regulation brings with it a lot of uncertainty. As we all wait for the dust to settle, below is the guidance we have share with our CSRD customers:
Rely on official sources for information: News articles and blogs, like this one, are helpful tools for getting a quick understanding of the topic. However, always confirm the credibility of sources. When possible, rely on information directly from official sources, such as the European Commission and EFRAG.
Find trusted partners: Regulatory directives and standards can be riddled with complex legal and ESG terminology. Find trusted partners who can help your organization interpret official documents and translate them into actionable next steps.
Focus on the big picture and spirit of the ESRS: While the specific disclosure requirements of the ESRS are likely to be amended for future reporting companies, the general spirit of the requirements are sound. Your organization still can (and should!) be working on meaningful ESG efforts. Whether for future CSRD reporting or the general sustainability and health of your business, the following efforts are valuable for your organization, and consistent with other emerging regulatory and voluntary frameworks:
Identifying and understanding the most material ESG-related impacts, risks, and opportunities of your organization throughout the value chain;
Building solid governance structures and business strategy around ESG;
Establishing policies and targets to both manage negative impacts and risks and to actualize positive impacts and opportunities;
Measuring key ESG metrics to understand your current state and track progress towards future desired outcomes.
Bottom line: ESG reporting is not going away, it’s just being refined.
About Us
About the Author
Anna Norman is a consultant at Positive Scenarios Consulting (PSC). At PSC, Anna specializes in impact accounting in the value chain, climate strategy, and ESG reporting, helping clients navigate the complexities of corporate sustainability.
About Positive Scenarios Consulting, LLC
PSC is a woman-owned sustainability consulting firm with a mission to combat climate change. Looking to expand your ESG efforts and not sure where to start? At PSC, we believe there are many paths to positive change and specialize in finding the right-sized solution to drive progress. Contact us to figure out the next right step for you.
Resources
[1] CSRD background and history: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
[2] CSRD full text: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464
[3] ESRS full text: https://xbrl.efrag.org/e-esrs/esrs-set1-2023.html#d1e134-3-1
[4] Omnibus I details: https://commission.europa.eu/publications/omnibus-i_en (see “proposal postponing the application of some reporting requirements in the CSRD […]”)
[5] European Commission press release on the adoption of the Omnibus Simplification Package: https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614
[6] FAQs on the Omnibus (I and II) Simplification Package: https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615
[7] EFRAG press release on their commitment to support the simplification process: https://www.efrag.org/en/news-and-calendar/news/efrag-srb-releases-statement-on-omnibus-proposals
[8] EFRAG’s voluntary reporting standard for SMEs (VSME): https://www.efrag.org/en/projects/voluntary-reporting-standard-for-smes-vsme/concluded