These are the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Taxonomy Regulations. Additionally, the Omnibus proposes amendments to other aspects of European Union (EU) regulation. These proposals will now be submitted to the European Parliament for adoption in approximately four weeks’ time.
The Omnibus
The overall goal of the Omnibus is to reduce reporting burdens, particularly for smaller and mid-sized entities, and increase efficiency in sustainability reporting. This comes as a result of pressure to foster a growth environment in the EU.
If the Omnibus is adopted as proposed, it will have a significant impact on multiple areas of EU regulation.
CSRD
The Omnibus significantly changes a number of key areas set out in the CSRD. The major changes include:
- Reduction in scope: The current CSRD applies to all large undertakings (that is, entities meeting two of the following three thresholds: €50 million net turnover, €25 million balance sheet total, 250 employees), as well as small and medium enterprises (SMEs) with securities listed on an EU regulated market. The Omnibus proposes to reduce the scope to include only large undertakings with more than 1,000 employees (that is, entities with 1,000 or more employees and either €50 million net turnover or more than a €25 million balance sheet total). This means that any entity with fewer than 1,000 employees will no longer be in scope but may choose to report voluntarily based on the voluntary standards for SMEs (VSME). The EC estimates that this will reduce the number of entities in scope by approximately 80%.
- Value chain cap: Entities no longer in the scope of the revised requirements will be able to limit the information that entities remaining in scope can request of them. This will be limited to the information required by the VSME, which is less comprehensive than the full European Sustainability Reporting Standards (ESRS) requirements. This will help to ensure that sustainability reporting requirements for large entities do not burden smaller entities in their value chains.
- Postponement of reporting requirements: The Omnibus proposes to postpone by two years the reporting requirements for entities currently in scope of the CSRD required to report as of 2026 or 2027 (ie Waves 2 and 3 entities).
- Limitations to additional requirements: The Omnibus proposes to remove the ability of the EC to adopt sector specific standards and remove the possibility of the EC requiring reasonable assurance rather than limited assurance.
EU Taxonomy
The Omnibus as proposed will also change the EU Taxonomy Regulations. The major changes include:
- Reduction in scope: The current scoping for EU Taxonomy reporting obligations is consistent with the CSRD as adopted. The Omnibus proposes to limit EU Taxonomy reporting obligations to only the largest entities (consistent with the CSDDD scope), with a voluntary reporting option for entities in scope of the revised CSRD requirements.
- Partial taxonomy alignment: The Omnibus proposes to create a new option for reporting on activities that are partially aligned with the EU Taxonomy. This is intended to provide an environment that encourages gradual transition to use of the EU Taxonomy over time.
- Materiality: The Omnibus proposes to introduce a financial materiality threshold for EU Taxonomy reporting.
- Disclosure templates: The Omnibus proposes to reduce the number of required reporting templates and also reduce the number of data points required for the templates that remain in place.
- Do no significant harm (DNSH) criteria: The Omnibus proposes to simplify certain complex DNSH criteria for pollution prevention and control with an aim to eventually simplify all DNSH criteria.
- Ratio adjustments: The Omnibus proposes to adjust certain ratios for financial institutions, including the calculation of Green Asset Ratio (GAR). These adjustments are intended to simplify the calculations that are currently required.
The EC has invited feedback on the proposed changes that are being made to the EU Taxonomy. The deadline for submissions is 26 March 2025. Currently this is the only aspect of the Omnibus that is open to public comment.
CSDDD
The Omnibus proposes to also change a number of key areas related to the CSDDD. The major changes include:
- Postponement of application of requirements: The Omnibus proposes to postpone the transition deadline (to 26 July 2027) and the first phase of application of the requirements (to 26 July 2028).
- Simplification of requirements: The Omnibus proposes to simplify CSDDD requirements by focusing systematic due diligence requirements on direct business partners, with requirements for indirect partners only when plausible information suggests adverse impacts may arise. Additionally, the Omnibus proposes to prolong the interval between regular periodic assessments from two to five years, with an ad hoc requirement to update the assessments if there is a basis to believe they are no longer adequate.
- Reduce trickle-down effect: Similar to the CSRD change, the Omnibus proposes to reduce reporting burden on small and medium entities (ie entities that have fewer than 500 employees) in the value chains of larger entities by limiting the amount of information that can be requested by larger entities to the information specified in the CSRD VSME.
- Other: Additionally, the Omnibus proposes to increase harmonisation of due diligence requirements, align requirements on the adoption of transition plans for climate mitigation with the CSRD, and remove the harmonised EU conditions for civil liability and review close on inclusion of financial services in scope of the CSDDD.
Other changes
The Omnibus also includes several other proposed amendments relating to the carbon border adjustment mechanism (CBAM) as well as amendments to simplify and optimise the use of certain investment programs. For links to the full proposal as well as a detailed summary, refer to the EC press release here.
Our thoughts
We support the release of this Omnibus package. These simplifications and changes to the scoping requirements will significantly reduce the reporting burden for many small and mid-sized entities. Additionally, the reductions in complexity will benefit all entities, whether they are just performing a scoping assessment or they are required to report under the full ESRS.
We believe these proposals will allow entities to now take more time to consider the requirements of the CSRD, enabling them to establish the process and controls needed to achieve robust sustainability reporting. We would encourage entities to continue with the process to be ready to address the requirements when they need to. For entities that are no longer in scope of the CSRD we encourage them to apply the requirements of the VSME. This will ensure they meet the requirements of the value chain, through the value chain cap rules that the Omnibus proposes.
