The Commission has today published legislative ‘Omnibus’ proposals

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The Commission has today published legislative ‘Omnibus’ proposals with the aim to simplify CSRD, EU Green Taxonomy (art.8), CSDDD and CBAM.

A little less conversion, a little more action – not so sure…

As the EFRAG Sustainability Reporting Board pointed out in this morning’s meeting, it is a proposal to consider, it needs to be assessed, it takes time, there is a due process, so we “should not jump to conclusions”.

The European Parliament and Council must agree on the final version, which likely means negotiations and trade-offs.

The CSRD has already been transposed into national laws by the majority EU Member States.

This means that until the Omnibus is fully negotiated, approved, and transposed again, companies in these Member States are still legally be required to comply with CSRD.

There is no suspension or pause in the obligations, and no signal that national authorities will not continue to enforce it.

So, our recommendation, at this point in time, is to continue to prepare to meet CSRD obligations. Many companies are already reporting accordingly and this will set expectations.

CSRD is as much a strategic tool as it is a gold standard for sustainability reporting.

Double Materiality Assessment remains crucial for long-term resilience and strategic planning.

Today’s proposals may not bring immediate changes, but it’s a good time to focus on the strategic elements of CSRD and use the insights gained to date to guide your gap assessment in terms of governance, policies, actions, targets, and metrics.

Let’s not forget what the Commission said on November 15 last year:

  • The ESRS is a necessary part of the EU’s green deal, which is expected to strengthen the EU’s resilience and competitiveness, as well as reduce the risk of financial instability.
  • The new rules will have far-reaching consequences. New systems, expertise and processes are now needed.
  • Prepare in a proportionate and pragmatic way, with common sense and a learning attitude.
  • Do not report more information than is required. Use the phase-in provisions. Avoid ”overkill” – report only on material information.

Today’s Omnibus proposals are (in short):

CSRD

  • Exclude companies with less than 1,000 employees and less than either €50 million in turnover or a balance sheet total below €25 million from the scope of the CSRD, including listed companies currently included in 1st wave reporting.
  • Postpone by two years the entry into application for large 2nd wave companies and for listed SMEs (3rd wave), that are due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively.
  • Remove the sector-specific ESRS (Set 2) requirement from CSRD.
  • Remove the requirement to go from a limited assurance to a reasonable assurance in 2028 from CSRD, to ensure no future increase in the cost of assurance.

EU Green Taxonomy

  • Make the reporting on the EU Green Taxonomy voluntary for companies with more than 1,000 employees and a turnover below €450 million.
  • Simplify the Green Taxonomy reporting templates and reduce data points by 70%.
  • Introduce a materiality threshold to make disclosure of alignment for companies with less 10% eligible activities not mandatory.
  • Introduce the option of reporting partial disclosure and Taxonomy-alignment.
  • Reduce the scope for mandatory reporting on operational expenditure and simplify certain ‘Do no significant harm’ (DNSH) criteria.
  • Adjust the Green Asset Ratio (GAR for banks).

CSDDD

  • Postpone by one year the 1st wave of application of CSDDD (to 26 July 2028), to give in-scope companies more time to prepare.
  • Require full due diligence with in-depth assessments of adverse impacts related to the value chain beyond direct business partner, only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.
  • Reduce the frequency of assessments and monitoring of partners from annual to 5 years (unless there are reasonable grounds to believe that the measures are no longer adequate or effective).
  • Remove the EU civil liability conditions from CSDDD while preserving victims’ right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States.

VSME

  • For companies not in the scope of the CSRD and CSDDD, the voluntary reporting standard (VSME) developed by EFRAG will act as a shield by limiting the information that in-scope companies or banks can request.

CBAM

  • Introduce a new CBAM cumulative annual threshold of 50 tonnes per importer.
  • Simplify the rules on authorisation of CBAM declarants, emissions calculations, reporting requirements and financial liability.

The legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.

—

Corporate Sustainability Reporting Directive (CSRD)

  • Exclude all companies with less than 1,000 employees and less than either €50 million in turnover or a balance sheet total below €25 million from the scope of the CSRD, including listed companies currently included in 1st wave reporting.
    • This removes around 80% of companies from the scope of CSRD while focusing on the largest companies which are more likely to have the biggest impacts on people and the environment, according to the Commission.
  • Postpone by two years the entry into application for large 2nd wave companies and for listed SMEs (3rd wave), that are due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively, in order to give time to the co-legislators to agree to the Commission’s proposed substantive changes.

European Sustainability Reporting Standards (ESRS)

  • Revise and simplify ESRS Set 1 with the aim of reducing the number of data points, clarifying provisions deemed unclear, improving consistency with other pieces of legislation.
  • Adopt the necessary delegated act at the latest six months after the entry into force of the proposed Omnibus Directive.
    • A review of ESRS Set 1 was already scheduled for 2029 in CSRD.
    • Taking into account the need for public consultation, in practice, this is likely to mean 3 financial years with the current standards: 2024, 2025 and 2026, as pointed out by French ANC.
  • Remove the sector-specific ESRS (Set 2) requirement from CSRD, to avoid an increase in the number of prescribed data points to report on, permanently putting sector-specific standards on hold.

Assurance / Auditing

  • Remove the requirement to go from a limited assurance to a reasonable assurance in 2028 from CSRD, to ensure no future increase in the cost of assurance.
  • Instead of an obligation for the Commission to adopt standards for sustainability assurance by 2026, the Commission will issue targeted assurance guidelines by 2026.

EU Green Taxonomy

  • CSRD in-scope companies are also automatically required to report certain indicators under article 8 of the EU Green Taxonomy Regulation.
    • By postponing the application of the CSRD reporting requirements for 2nd and 3rd wave companies, the proposal would therefore also automatically postpone the application date for the Taxonomy Regulation.
  • Create a derogation for companies with more than 1,000 employees and a turnover below €450 million by making the reporting of Taxonomy voluntary.
  • However, if these companies elect to claim economic activities aligned or partially aligned with the EU Taxonomy (meaning qualifying as environmentally sustainable under the Taxonomy Regulation), they would be required to disclose their turnover and CapEx KPIs. They could also choose, but would not be required to, disclose their OpEx KPI.
  • Simplify the reporting templates, leading to a reduction of data points by almost 70%.
  • Introduce a materiality threshold to make disclosure of alignment for companies with less 10% (meaning not exceeding 10% total turnover, CapEx, OpEx) eligible activities not mandatory.
  • Introduce the option of reporting partial disclosure and Taxonomy-alignment to foster transition finance.
  • Reduce the scope for mandatory reporting on operational expenditure and simplify certain ‘Do no significant harm’ (DNSH) criteria.
    • Introduce simplifications to the most complex “Do no Significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy – as a first step in revising and simplifying all such DNSH criteria.
  • Adjust the main Taxonomy-based key performance indicator for banks, the Green Asset Ratio (GAR).
    • Banks will be able to exclude from the denominator of the GAR exposures that relate to companies outside the future scope of the CSRD (i.e. companies with less than 1000 employees and €50m turnover).

Corporate Sustainability Due Diligence Directive (CSDDD)

  • Postpone by one year the transposition deadline for EU Member States (currently 26 July 2027) and the 1st wave of application by in-scope companies by one year (to 26 July 2028), to give them more time to prepare.
  • In the meantime, guidelines will be issued by the Commission in July 2026, allowing companies to build more on best practices and reduce their reliance on legal counselling and advisory services.
    • The current timeline is:
      • 2027: > 5 000 employees and > 1 500 M€ TO
      • 2028: > 3 000 employees and > 900 M€ TO
      • 2029: > 1 000 employees and > 450 M€ TO
    • The CSDDD is estimated to apply to approximately 6000 large EU companies, and some 900 non-EU companies.
    • Companies subject to both CSRD and CSDDD are not required by the CSDDD to report any information additional to what they are required to report under the CSRD.
  • Require full due diligence with in-depth assessments of adverse impacts related to the value chain beyond direct business partner, only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.
  • Require the in-scope company to seek contractual assurance from the direct business partner that it will ensure compliance with the company’s code of conduct (which is part of the due diligence  policy) through flow-down requirements.
  • Reduce the frequency of periodic assessments and monitoring of partners from annual to 5 years (unless there are reasonable grounds to believe that the measures are no longer adequate or effective).
  • Streamline the stakeholder engagement obligations to focus on stakeholders whose rights and interests are or could be directly affected by the products, services or operations of the company, its subsidiaries and its business partners, and that have a link to the specific stage of the due diligence process being carried out. The focus would also be specifically in the impact identification stage.
  • Remove the obligation to terminate the business relationship as a last resort measure. (However, under certain circumstances, suspension of the relationship still could be required.)
  • Remove the EU civil liability conditions while preserving victims’ right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States.
    • Leaving national law to define whether its civil liability provisions override otherwise applicable rules of the third country where the harm occurs.
  • Align the requirements on the adoption of transition plans for climate mitigation with the CSRD, by deleting the requirement to put into effect a climate transition plan.
  • Further increase the harmonisation of due diligence requirements in EU Member States to ensure a level playing field across the EU.
  • Delete the review clause on inclusion of financial services in the scope of the due diligence directive.

VSME as a ‘value chain cap’ for CSRD and CSDDD

  • The CSRD requires companies to report value-chain information to the extent necessary for understanding their sustainability-related impacts, risks and opportunities.
  • The current value-chain cap in CSRD would be extended and strengthened. It would apply directly to the reporting company instead of being only a limit on what ESRS can specify (currently information in the LSME standard).
  • For companies not in the scope of the CSRD, the voluntary reporting standard (VSME) developed by EFRAG, to be adopted by delegated act, will act as a shield by limiting the information that CSRD in-scope companies or banks can request from companies in their value chains with fewer than 1,000 employees.
  • It will also limit the information that CSDDD in-scope companies may request from their SME and small midcap business partners (i.e. companies with not more than 500 employees) to the information specified in VSME – unless additional information is needed to carry out the mapping (for instance on impacts not covered by the standards) and if it is not possible to obtain that information in any other reasonable way.
  • The VSME would be adopted by the Commission as a Delegated Act.
  • In the meantime, to address market demand, the Commission intends to issue a recommendation on voluntary sustainability reporting as soon as possible, based on the VSME standard developed by EFRAG.

Carbon border adjustment mechanism (CBAM) for a fairer trade

  • Introduce a new CBAM cumulative annual threshold of 50 tonnes per importer, thus eliminating CBAM obligations for approximately 182,000 or 90% of importers, mostly SMEs, while still covering over 99% emissions in scope across four CBAM sectors (iron and steel, aluminium, cement, fertilisers).
  • Simplify the rules on authorisation of CBAM declarants, emissions calculations, reporting requirements and financial liability.

According to the Commission, “if adopted and implemented as set out today, the proposals are conservatively estimated to bring total savings in annual administrative costs of around €6.3 billion.

Next steps

The legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.

The changes on the CSRD, CSDDD, and CBAM will enter into force once the co-legislators have reached an agreement on the proposals and after publication in the EU Official Journal.

The draft Delegated Act amending the current delegated acts under the Taxonomy Regulation will be adopted after public feedback and will apply at the end of the scrutiny period by the European Parliament and the Council.

Sources:

https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614

https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615

https://commission.europa.eu/publications/omnibus-i_en

Posted in CSDDD, CSRD, ESRS.