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European Commission proposes simplification of sustainability reporting rules

Feb 28, 2025

In its release of the eagerly awaited “Omnibus” proposals on 26 February, the European Commission (EC) has proposed some significant changes to its Sustainability Reporting Regulatory framework.

In recent years, many Irish and European companies have been getting to grips with EU Sustainability Directives and Regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy Regulation. These have introduced (or are due to introduce) compliance and reporting requirements for companies falling within their scope.

The proposed Omnibus legislation aims to simplify the administrative burden created by the CSRD, the CSDDD and the EU Taxonomy. In releasing the proposals, the EC noted that they will enable businesses “to grow and create quality jobs, attract investments and get the necessary funds for their transition towards a more sustainable economy and help the EU meet the Green Deal's ambitious objectives”.

The Omnibus package includes;

  • A proposal for a Directive amending the CSRD and the CSDDD.
  • A proposal which postpones the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027 (so-called wave 2 and 3 companies) and which postpones the transposition deadline and the first wave of application of the CSDDD by one year to 2028.
  • A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts (subject to public consultation).
  • A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation.
  • A proposal for a Regulation amending the InvestEu Regulation.

CSRD

While the proposed Omnibus legislation includes changes to several key pieces of EU legislation, arguably the most impacted area will be the CSRD. Some of the key changes proposed to this Directive include;

  • An increase in the thresholds limits which result in a large company being “in-scope”. This is expected to reduce the number of companies in-scope by approximately 80%. Under the proposed Omnibus legislation, the CSRD reporting requirements will only apply to large undertakings with more than 1,000 employees- ie. an undertaking with;
    • 1,000 employees and either
      • Turnover greater than €50m, or
      • Balance sheet total greater than €25m
  • Listed SMEs will no longer be required to mandatorily report under the CSRD.
  • The introduction of a “Value chain cap”. Companies who are not in-scope of the CSRD will be able to use a voluntary standard (based on the VSME standard developed by EFRAG). This standard will serve to limit the information that CSRD reporters can request from non-CSRD reporters in their value chain.
  • Companies who do not fall in-scope as a result of the revised thresholds may still voluntarily adopt the above-mentioned standard.
  • A commitment to simplify the European Sustainability Reporting Standards (ESRS), including, a reduction in the number of datapoints, clarification of provisions which were deemed unclear and an improvement in consistency with other pieces of legislation.
  • A reversal of the plan for sector-specific standards to be developed and adopted by the European Commission.
  • A change in proposed assurance requirements for Sustainability Reports prepared under the CSRD, with the plan to move to reasonable assurance at some point in the future removed.
  • A postponement of reporting requirements for “wave 2” and “wave 3” companies by 2 years. These waves will now enter into scope for financial years commencing on or after 1 January 2027 and 1 January 2028 respectively.

CSDDD

In relation to the CSDDD some of the key changes include proposals to;

  • Extend the transposition deadline by one year, to 26 July 2028, and advance the adoption of the guidelines by one year (to July 2026), thereby giving companies more time to prepare.
  • Simplify sustainability due diligence requirements, examples of this include focusing systematic due diligence requirements on direct business partners and reducing the frequency of periodic assessments and monitoring of their partners from annual to five years.
  • Limit the amount of information requested by large companies from their value chain, thereby reducing the burden on SMEs and small mid-caps (250 – 499 employees and either turnover < €100M or Balance Sheet < €86M).
  • Improve the harmonisation of due diligence requirements to ensure a level playing field across the EU.
  • Remove the harmonised EU civil liability conditions and instead, defer to the various national civil liability regimes.
  • Align the requirements on the adoption of transition plans for climate mitigation with the CSRD.

The expected benefits of the proposed modifications, as outlined by the European Commission, is a reduced due diligence framework that is less complex and more harmonised, ensuring burden reduction and having a level playing field.   

EU Taxonomy

The proposed Omnibus legislation also amends the requirements of the EU Taxonomy Regulation and includes an increase in the reporting thresholds for mandatory reporting. Under the proposals, EU Taxonomy reporting would only be mandatory for a smaller number of companies, specifically large companies with;

    • More than 1,000 employees, and
    • A net turnover of more than €450 million

    Companies within the scope of CSRD reporting, but who don’t have a net turnover figure of €450 million would be encouraged to voluntarily report.

    Additionally, companies may choose to voluntarily report on their partial Taxonomy alignment where they only meet certain Taxonomy criteria.

    The EC will consult on changes to the Taxonomy Disclosures Delegated Act and the Taxonomy Climate and Environmental Delegated Acts, with a view to simplifying these Acts. The Commission will also hold a public consultation asking for feedback on two alternative options to simplifying the “Do No Significant Harm” criteria.

    Benefits

    The European Commission have noted that there are several benefits which are expected to arise from the Omnibus Proposals, including;

    • A streamlining of, and better alignment of, the CSRD and CSDDD requirements.
    • Estimated total savings in administrative costs of approximately €6.3bn.
    • Estimated to mobilise additional public and private investment capacity of €50bn to support policy priorities.
    • Protection for SMEs from excessive sustainability information requests when they are in the value chain of companies reporting under the CSRD.
    • An option for companies who are not in the scope of the CSRD to voluntarily report on their sustainability activities.

    Next steps

    These proposals will now enter trialogue negotiations between the European Parliament and the European Council where amendments may be made prior to its introduction. The extension of two years has been proposed for wave 2 and wave 3 by the Council to facilitate this transition preventing a situation where companies begin reporting under CSRD only to be potentially excluded shortly afterward.

    There is an urgent requirement to give clarity to companies and therefore finalise the CSRD and CSDDD adjustments as a matter of priority. It is expected that discussions on the broader Omnibus Package could extend over several months.

    Chartered Accountants Ireland is reviewing the omnibus simplification package with stakeholders to assess how we best continue to support businesses whatever size and whatever stage of the process they are at, to meet the standards, and how we train the accountants of the future to meet ESG-related legal requirements.  

    For further information in relation to this please see the European Commission's Q&A page.

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