Omnibus ‘stop-the-clock’ proposal & ESRS simplification

Posted on 1 April 20253 April 2025 by Cleerit

⭕On April 3, the European Parliament voted – with 531 votes for, 69 against and 17 abstentions – voted to postpone:

🌿by two years the application of CSRD requirements for large 2nd wave companies and for listed SMEs (3rd wave), due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively,

🌿by one year the 1st wave of application of CSDDD (to 26 July 2028).

To enter into force, the draft law now requires formal approval by the Council, which endorsed the same text on 26 March 2025.

Source:

https://www.europarl.europa.eu/news/en/press-room/20250331IPR27557/sustainability-and-due-diligence-meps-agree-to-delay-application-of-new-rules

⭕On April 1, the European Parliament voted – with 427 votes for, 221 against and 14 abstentions – to fast-track its work on the ‘stop-the-clock’ proposal that is part of the ‘Omnibus I’ package.

The European Parliament will now decide on April 3 whether to postpone

🌿by two years the application of CSRD requirements for large 2nd wave companies and for listed SMEs (3rd wave), due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively.

🌿by one year the 1st wave of application of CSDDD (to 26 July 2028).

On March 26 the Council, which brings together member states’ ministers, already endorsed the Commission proposal on delayed application. If MEPs endorse that text on Thursday, the draft rules would only need formal approval by the Council to enter into force.

⭕In parallel, on March 28, EFRAG was officially tasked with providing technical advice, together with a cost-benefit analysis, to be considered by the Commission when proposing to adopt a delegated act to revise and simplify the existing European Sustainability Reporting Standards (ESRS).

The Commission aims to “alleviate unnecessary administrative burdens while still meeting the core policy objectives of the European Green Deal”.

🌿The objective is to simplify the structure and presentation of the standards, and to reduce the number of mandatory ESRS datapoints without undermining interoperability with global reporting standards and without prejudice to the materiality assessment of each undertaking.

🌿The revision will clarify provisions that are deemed unclear. It will improve consistency with other pieces of EU legislation.

🌿It will provide clearer instructions on how to apply the materiality principle, to ensure that undertakings only report material information, and to reduce the risk that assurance service providers inadvertently encourage undertakings to report information that is not necessary or dedicate excessive resources to the materiality assessment process.

🌿It will also be critically important to engage with companies that now have direct experience of implementing ESRS and with the users of sustainability statements to better understand which datapoints they consider most critical.

EFRAG has been asked to provide its technical advice by 31 October 2025. However, this date is subject to change depending on the pace and conclusion of negotiations between the co-legislators.

The aim is allow the Commission to adopt the corresponding delegated act in time for companies to apply the revised standards for reporting covering financial year 2027.

Sources:

https://www.europarl.europa.eu/news/en/press-room/20250331IPR27545/sustainability-and-due-diligence-meps-fast-track-vote-on-postponed-application

https://www.efrag.org/en/news-and-calendar/news/eu-commissioner-albuquerque-addresses-efrag-srb-on-esrs-simplification-mandate

#getCSRDready, #CSRD, #ESRS, #VSME

ESRS, VSME or nothing at all – that’s the question

Posted on 16 March 202516 March 2025 by Cleerit

Are you a 2nd wave CSRD in-scope company with less than 1000 employees, wondering what to do?

Some companies focus primarily on meeting reporting requirements, and now wonder where to concentrate their efforts, on ESRS or VSME? Or do nothing at all?

Other leading companies are already prepared and have discovered how structured sustainability reporting processes drive business value.

They use the ESRS standards as a tool to analyze their operations, identify risks and opportunities, and future-proof their business decisions and competitiveness.

The ESRS standards have been conceived to help you get future-ready.

That’s why they are based on your specific impacts, risks & business opportunities, and your plans to manage them.

VSME helps you share your sustainability information. It is an excellent choice for small companies to get started with a relevant and proportionate one-stop-shop report.

Your choice will be based on your specific circumstances, ambitions and possibilities.

⭕ Preparing with the ESRS standards – with a learning mind-set and based on your materiality assessment – is the best choice for you, if you

🌿 operate in a sector facing sustainability challenges (industry, real estate, transportation…) – chances are that demands from financial actors, business partners, customers and rating agencies will remain high for your company;

🌿 are more than 500 employees and up against listed 1st wave competitors – chances are that your competitors will come out on top if you are less prepared;

🌿 have already worked on your DMA – the difficult part is already done, and there are many phase-ins in ESRS, especially if you have less than 750 employees (no phase-ins exist in VSME – you will need to report on your own workforce from year one, for example).

⭕ If it’s your first time reporting on sustainability and you have not yet started your DMA,

🌿VSME is a good choice for 2025 – and a steppingstone to ESRS reporting should you choose to gear up in the future.

⭕ There is only one ‘wrong’ choice: to wait and do nothing at all.

The mega trend is a fact, and unless you choose to ignore the challenges of the future (already in motion), you need to get started – one way or the other.

If you wait, you will find yourself in the exact same position in two years, and chances are you will be way behind your competitors, and again struggling for time.

If you decide not to prepare, you are signaling to the market that you do not care about making sustainable business choices, or that you do not value transparency on these issues. Either way, it will not be good for business.

⭕ Read more

👇 You can read more about a leading group that use ESRS to X-Ray and future-proof their business here >>>

And if you want to use our digital ESRS and VSME templates with built-in guidance 👉 you are welcome to contact us

#getCSRDready, #CSRD, #ESRS, #VSME

EUDR compliance – a guide to understanding deforestation due diligence obligations

Posted on 6 March 20256 March 2025 by Cleerit

ESRS E4, datapoints 24.d and 38.a, require companies to disclose adopted policies to address deforestation and relevant metrics.

EUDR, the EU Regulation on Deforestation-free Products (EU 2023/1115), introduces obligations relating to the placing or making available on the EU market, and exporting from the EU, of deforestation-related commodities and associated products.

The EU Commission has published a guide to help companies understand the level of due diligence required depending on the type of company, its position in the supply chain (first placing/downstream) and its size.

The document provides an overview of how the obligations apply illustrated through 11 supply chain scenarios.

You will find the document enclosed, and you can also download “EUDR compliance – a guide to understanding your position in beef, cocoa, coffee, palm oil, rubber, soy, and wood supply chains” here: https://data.europa.eu/doi/10.2779/4084343

In December 2024 the EU granted a 12-month additional phasing-in period, making the EUDR law applicable on 30 December 2025 for large and medium companies and 30 June 2026 for micro and small enterprises.

Traceability and transparency are at the heart of the system, to make the sustainability of supply chains a new standard.

⭕ Deforestation

Is defined as the conversion of forest to agricultural use, whether human-induced or not, which includes situations caused by natural disasters.

The assessment of whether the commodity has contributed to deforestation is conducted by looking backwards in time to see if the crop land was a ‘Forest’ at any time since the date specified in the Regulation (31 December 2020).

A forest that has experienced a fire and is then subsequently converted into agricultural land (after the cut-off date) would be considered deforestation under the Regulation.

In this specific case, an operator would be prohibited from sourcing commodities within the scope of the Regulation from that area (but not because of the forest fire).

Conversely, if the affected forest is allowed to regenerate, it would not be deemed deforestation, and an operator could source wood from that forest once it has regrown.

⭕ Forest degradation

Means structural changes to forest cover, taking the form of the conversion of:

🌿 primary forests or naturally regenerating forests into plantation forests or into other wooded land, or

🌿 primary forests into planted forests.

Wood products coming from such converted land cannot be placed on the market or exported.

Sustainable forest management systems can be employed and encouraged, provided they do not lead to a conversion that meets the degradation definition.

⭕ Which products are covered?

Palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate)

See the full list of commodities in Annex I of the Regulation: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461#d1e32-243-1

Source: https://green-business.ec.europa.eu/deforestation-regulation-implementation_en

Stay tuned for more CSRD, ESRS and VSME insights on our LinkedIn page >>

The Commission has today published legislative ‘Omnibus’ proposals

Posted on 26 February 20251 March 2025 by Cleerit

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 1^st wave reporting.
Postpone by two years the entry into application for large 2^nd wave companies and for listed SMEs (3^rd 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 1^st 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 1^st 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 2^nd wave companies and for listed SMEs (3^rd 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 2^nd and 3^rd 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 1^st 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

Climate matters: what are the links between financial statements and the sustainability statement?

Posted on 20 February 202520 February 2025 by Cleerit

The French Accounting Standards Authority has released an educational publication on the subject: “Climate matters: what are the links between financial statements and the sustainability statement?”

Topic: What coherence and complementarity can be expected from the information presented in the sustainability statement (ESRS standards) and the financial statements (IFRS standards or French standards)?
Objective: Better understand the articulation between these two pillars of corporate information in order to support stakeholders in the appropriation of these complex and evolving subjects.

Summary:

Climate matters and sustainability statements

Climate disruption generates physical and transition risks affecting the assets, liabilities and activities of companies and their value chain(s).

Physical risks result from acute climatic hazards (e.g. storms, floods) and chronic (e.g. rising sea levels, prolonged droughts).

Transition risks, on the other hand, are linked to regulatory, technological, market or reputational developments as part of the transition to a low-carbon economy (e.g. stricter emissions standards, emergence of new technologies making existing technologies obsolete, change in the perception of companies based on their sustainability strategy).

These risks lead to current and future financial effects.

The commitments made and plans implemented by companies to mitigate climate change and adapt to its consequences require investments and financial resources today and tomorrow.

When they are material, climate risks (as well as opportunities), commitments, and their financial effects must be published in the sustainability statement.

These financial effects include the impacts on the financial position, financial performance and cash flows in the short, medium and long term (e.g. value of assets exposed to physical risk, turnover related to exposed activities).

The sustainability statement is established according to the European sustainability reporting standards, ‘ESRS’, for companies subject to the ‘CSRD’.

This sustainability statement is subject to mandatory verification.

Climate matters and financial statements

At the same time, these same climate risks and commitments are part of the contextual elements, assumptions, or input data considered in the preparation of financial statements established according to international financial reporting standards (‘IFRS’ or “International Financial Reporting Standards”) or French accounting standards (‘PCG’ or General Accounting Plan).

Depending on their nature, and depending on the applicable accounting principles, certain climate issues may have an impact on the financial statements in the form of recognized items or information in the appendix (e.g.: the revision of the useful life of certain assets), others do not generate any immediate effect or information presented in the financial statements.

The accounting (IFRS, PCG) and sustainability (ESRS) regulatory frameworks have differences

Although financial materiality is defined in the same way (information is material if its presentation or omission can influence the decisions of investors/lenders), its conditions of application may vary depending on the reporting scope, time horizons, and evaluation and reporting criteria and thresholds.

Furthermore, financial statements generally reflect rights and obligations existing at the closing date, while the sustainability statement also provides a large amount of prospective information (e.g. emissions targets, future financial effects, etc.).

What is presented in the ESRS sustainability statement is therefore not necessarily intended to be included in the financial statements, and vice versa.

Connectivity between the sustainability statement and the financial statement

According to EFRAG, connectivity refers to the ability to integrate and articulate information from the different sections of the annual report to create a set of coherent and complementary information that allows users of the reports to make informed decisions.

Connectivity is specifically required in the sustainability statement by the ESRS, in connection with the financial statements.

The analysis of standards and illustrative cases shows that, although the two pillars of information each respond to distinct rules, their connection, rather than their juxtaposition, highlights their coherence and complementarity.

This provides a holistic view of how the company addresses, and is affected by, climate matters.

Food for thought for companies

Some companies are implementing an integrated approach to facilitate the management of climate matters and inform strategic, financial or operational decisions (e.g.: definition of action priorities and financial plans).

This approach can be organized at several levels, including: governance (e.g.: awareness of the requirements, limits and interconnections of reporting frameworks), organization (e.g.: coordination of reporting and operational teams on climate issues), and internal control.

This integrated approach facilitates the alignment of the assumptions for developing the two reports (e.g.: concerning investments and financial resources allocated to climate mitigation and adaptation actions, global warming scenarios, regulatory developments).

The ESRS therefore require that any points of convergence or divergence be explained in the sustainability statement and that direct links (i.e. amounts coming directly from the financial statements) or indirect links (i.e. aggregation or decomposition of the amounts presented in the financial statements) be highlighted.

Food for thought for all stakeholders

To promote better connectivity, the following possibilities for improvement are proposed to the authorities, to the extent that this reflection goes beyond the operational framework of companies and involves broader considerations at the national and European level:

raise awareness and train stakeholders in the connectivity between financial statements and sustainability statements,
use the analyses of the first publications to contribute to reflections at the national, European and international levels,
integrate specific financial effects into future sectoral sustainability standards (e.g. research and development expenditure for low-carbon products),
continue reflection on the evolution of accounting standards in relation to climate issues, and promote the incorporation of climate risks into company valuation

The full document (in French) can be downloaded here >>>

#getCSRDready, #CSRD, #ESRS

EU Green Taxonomy – simplification proposals

Posted on 5 February 20258 February 2025 by Cleerit

To unlock the full potential of the EU Taxonomy – a novel tool for steering investments towards a climate resilient, net-zero and sustainable economy – ongoing refinements and simplifications are essential.

In response to the European Commission’s mandate, the Platform on Sustainable Finance, an advisory body to the Commission, published a report on 5/2 with evidence‑based recommendations aiming at simplifying taxonomy reporting while enhancing its effectiveness.

The Platform estimates that the following 4 proposals will together contribute to reducing the reporting of non-financial companies by over 1/3 compared to the current state:

⭕ 1. More than one-third reduction in corporate reporting burden with:

➡️ Adjusting the OpEx KPI as a voluntary disclosure, except for R&D.
➡️ Introducing a materiality threshold for reporting the Turnover, OpEx, CapEx KPIs and the combined KPIs of financial companies, in line with the Accounting Directive.
➡️ Enhancing the alignment with financial reporting.
➡️ Simplifying reporting templates, with a clear reduction of data points to limit the reporting to information that is relevant for making business decisions.

⭕ 2. A simplified GAR that encourages green and transition lending:

➡️ Ensuring a symmetrical GAR with similar numerator and denominator composition.
➡️ Simplifying retail exposure reporting, focusing on substantial contribution.
➡️ Allowing for estimates and proxies for reporting, in conjunction with safe harbours to protect against greenwashing allegations.
➡️ The materiality principle should apply to the combined KPI for financial undertakings, excluding immaterial business segments not consolidated under the Accounting Directive.

⭕ 3. A practical approach to DNSH criteria:

➡️ Introducing a lighter compliance assessment process (regarding evidence of compliance, documentation and/or on EU regulations).
➡️ All DNSH criteria should be reviewed as part of the scheduled reviews of various delegated acts, prioritising their usability and practicality for financial and non financial companies.
➡️ Introducing a “comply or explain” approach for DNSH assessment of the Turnover KPI, as a temporary measure.

⭕ 4. Helping SMEs access sustainable finance:

➡️ Adopting a streamlined and voluntary approach for banks and investors’ exposures to unlisted SMEs.
➡️ Adopting a simplified approach to the Taxonomy for listed SMEs.

The use of estimates and proxies, combined with a streamlined DNSH assessment process, is essential for rapidly and significantly reducing the reporting burden on financial companies.

Additionally, both financial and non-financial companies will benefit from the introduction of a materiality approach, further enhancing proportionality and efficiency in reporting.

Source: Simplifying the EU Taxonomy to Foster Sustainable Finance

German DRSC submitted five Omnibus proposals

Posted on 31 January 202531 January 2025 by Cleerit

On 31/1 the German DRSC submitted five proposals for the European Commission’s #Omnibus initiative on the evolution of CSRD and ESRS.

The Accounting Standards Committee of Germany (DRSC in German) is the national standard setter in the area of group financial reporting in Germany. As such, it’s the equivalent to the French ANC.

Here’s a recap of the key takeaways from the German DRSC proposal.

Introduce graduated requirements for “mid-cap” companies, harmonize the size thresholds with the scope of the CSDDD and postpone their reporting by at least one year.

Approx. 550 German 1st wave CSRD companies are currently in the final phase of the first preparation of ESRS sustainability reports on financial year 2025.

It is to be expected that, despite the lack of a German implementation law, many of these companies will voluntarily report fully or partially in accordance with the ESRS.

Approx. 14,000 German 2nd wave companies are required to report according to ESRS for the first time for on financial year 2025 financial. They have already begun preparations.

The vast majority of these companies have no experience with non-financial or sustainability-related reporting obligations, as there has not been a legal obligation to date.

They need clear and proportionally designed reporting requirements based on the capacities and capabilities of these companies, with special relief for “mid-caps”.

A definition of “mid-caps” could be based on companies with more than 250 and up to 3,000 employees, or on the CSDDD threshold (1,000 employees; EUR 450 million turnover). The EC should carry out “field tests” on the capabilities of these companies, in order to achieve an appropriate definition.

ESRS Set 1 should be simplified building on the LSME standard, and making sure that the necessary information is available to users (SFDR, CRR and CRD for financial institutions).

Sufficient preparation time is required for the implementation or adaptation of (implementation) projects. Therefore, the initial reporting for these companies should also be postponed by at least one year.

Relieve “smaller” large limited liability companies from mandatory reporting.

Allow them to apply the voluntary VSME standard given their limited resources.

Simplify ESRS Set 1 and adopt a “Climate first” approach closer to the climate reporting requirements set by IFRS S2 (ISSB).

ESRS Set 1 represent “disproportionately high report volumes, which is likely to make it more difficult for users to find information relevant to decision-making, due to the sometimes extremely granular requirements and the associated extensive interpretations and explanations”.
The European Commission should give EFRAG a priority audit mandate to analyse the initial reporting practice, as well as subsequent reporting cycles, with a view to possible simplifications and improvements.

The requirements of the ESRS E1 are much more granular than the information required in IFRS S2. This can result in immediate approaches to reducing the requirements in ESRS Set 1

Pause the development of sector standards until we know if they are really needed.

There are general doubts about the need for sector-specific ESRS. A short DRSC survey among the DAX 40 companies in summer 2024 showed that, in addition to the list of topics listed in ESRS 1.AR 16 or according to paragraph 11, hardly any other company-specific reporting topics were identified by application practice. This indicates that additional sector-specific topics and disclosure requirements are not expected to be covered to any significant extent.

Industry associations should be enabled to develop industry guidelines for their member companies as a starting point.
Delay the reporting for the 2nd wave of companies by at least one year to provide ‘planning security’.

Reporting companies need a stable legal framework in order to implement reporting requirements in a legally secure manner. Constant ‘trial and error’ in regulation should be avoided.

Clearly defined legal requirements from the Omnibus initiative are needed quickly, with sufficient lead time for implementation – meaning at least one more year for effective implementation.

Source: https://www.drsc.de/news/drsc-unterbreitet-fuenf-vorschlaege-zur-omnibus-initiative-der-europaeischen-kommission/

You can also read more about the French ANC’s proposal here: https://www.linkedin.com/posts/leilahellgren_omnibus-activity-7285536308968509440-5pko?utm_source=share&utm_medium=member_desktop

Sustainability and Omnibus in the Competitiveness Compass

Posted on 29 January 20258 February 2025 by Cleerit

Today 29/1, the European Commission presented the Competitiveness Compass, providing a strategic framework to steer the Commission’s work.

Key takeaways on the subject of sustainability reporting 🌿:

⭕ Simplify but stay the course

Europe has set out an ambitious framework to become a decarbonised economy by 2050. It will stay the course, including through the intermediate 2040 target of 90%.

Regulatory burden has become a brake on Europe’s competitiveness. The Commission will therefore aim to achieve the agreed policy objectives in the simplest, most targeted, most effective and least burdensome way.

⭕ Reduce the cost of administrative burdens

The set burden reduction targets refer to the costs of all administrative burdens, and not only reporting requirements.

The targets are to reduce recurrent costs by at least 25% for all companies, and at least 35% for SMEs through dedicated measures for SMEs.

This will start next month with the first of a series of Simplification Omnibus packages.

The first Omnibus will, among others, cover a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy.

The sustainable finance framework is aimed at mobilizing investment in the clean transition. The Commission will ensure better alignment of the requirements with the needs of investors, but also

✔️ proportionate timelines,
✔️ financial metrics that do not discourage investments in smaller companies in transition, and
✔️ obligations proportionate to the scale of activities of different companies.

⭕ Address trickle-down effects

The trickle-down effect will be addressed to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators.

⭕ Define a new category of company size: small mid-caps

To ensure proportionate regulation adapted to companies’ size, a new definition of small mid-caps will soon be proposed. By creating such a new category of company, bigger than SMEs but smaller than large companies, thousands of companies in the EU will benefit from tailored regulatory simplification in the same spirit as SMEs.

The Commission is also preparing a simplification of the Carbon Border Adjustment mechanism for smaller market players.

⭕ Digitize reporting

Digitalisation will go hand in hand with simplification to reduce the reporting burden.

Wherever possible, reporting must move to digital formats based on standardised data.

Companies and public authorities must be better accompanied when it comes to implementing EU legislation through stepped up support, capacity building and technical assistance.

Comparing French and German CSRD proposals

Posted on 16 January 202525 January 2025 by Cleerit

The French Authority of Accounting Standards (ANC) has published a document contributing to the debate on the evolution of the CSRD and the ESRSs in the perspective of the Omnibus currently in preparation.

ANC advances proposals aimed at alleviating the burden resulting from the CSRD, while strengthening its effectiveness in managing the transition.

In the this table we have summarized and compared two proposals, from the French ANC and the German government >>>

France was the first EU member state to transpose CSRD in Dec 2023 and the ANC has done a remarkable job of providing guidance to French companies on the ESRS.

ANC encourages us to “not lose sight of what’s essential: establishing robust standards applying to the communication of economic players means having the common language needed to understand each other and thus be able to make the right decisions”.

ANC proposes 4 measures. The first 2 can be summarized as follows:

⭕ Introduce more proportionality into the reporting requirements

➡️ Increase the size threshold, to take into account the specificities of “intermediate-sized” companies.

The European definition of a “large company” covers a large number of mid-sized companies, and the notion of “intermediate-sized”, does not exist in European law.

Adopting thresholds consistent with that of the CS3D (1,000 employees and €450m turnover) would therefore be a reasonable solution.

➡️ Reduce the scope by adapting and extending the LSME standards to these “intermediate-sized” companies (except if they are PIE companies with >500 and turnover >€50m).

Compared to the current ESRS, the LSME draft standards for listed SMEs simplify reporting by reducing the number of potential disclosures.

Given the broader scope of the companies concerned, they should then be subject to a new review and to a consultation.

➡️ Postpone the application by 2 years, to FY 2027 (publication 2028), for these “intermediate-sized” companies, (except if they are PIE companies with >500 and turnover >€50m).

However, such a revision should be finalized very quickly, so as not to put at odds the many member States that have faithfully transposed the CSRD.

⭕ Advance the review of the relevance of ESRS Set 1 for very large companies

The review is currently programmed for 2029 as stipulated in CSRD.

It should be advanced, but needs to be based on the lessons learned from the first sustainability statements that will have been produced and audited.

Taking into account the need for public consultation, in practice, this means 3 financial years with the current standards: 2024, 2025 and 2026.

To alleviate constraints, however, it is possible to extend the current transitional arrangements provided for in the ESRS by an additional year so that they do not end prematurely.

Source : ANC on LinkedIn >>

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Stay tuned for more CSRD and ESRS insights.

✅ Adopt a streamlined, digital and taxonomy-centric ESRS report preparation with Cleerit ESG.

The EU CSRD transposition pace is picking up

Posted on 16 December 202417 January 2025 by Cleerit

The EU CSRD transposition pace is picking up. 17 member states have now completely (15) or partially (2) implemented CSRD into national law, while another 7 have drafts in process, of which 4 are well advanced.

Only 3 member states – Austria, Malta and Portugal – have (to our knowledge) not started the implementation process.

Download the full document here >>>

EU CSRD Transposition 16 December 2024

	EU Member State	Number of preparers	Share of preparers	Information	Status
1	Austria	1 501	3%	The government has not released any draft legislation to transpose the CSRD into local law. The timeline for formal adoption is not set.	No
2	Belgium	1 918	4%	The Belgian Parliament adopted the act transposing the Corporate Sustainability Reporting Directive (CSRD) on 28 November 2024.https://www.lachambre.be/FLWB/PDF/56/0416/56K0416008.pdf https://www.dekamer.be/kvvcr/showpage.cfm?section=/flwb&language=fr&cfm=/site/wwwcfm/flwb/flwbn.cfm?lang=N&legislat=56&dossierID=0416	Yes
3	Bulgaria	374	1%	CSRD was transposed in Bulgaria through the amendments to the Accounting Act and the Independent Financial Audit Act, adopted on 14 August and 4 September 2024 respectively.	Yes
4	Croatia	233	0,5%	The CSRD requirements were adopted into national law on 12 July 2024 through amendments to a number of local laws, in particular to the Accounting Act (OG No. 85/2024), the Audit Act (OG No. 127/2017, 27/2024, 85/2024) and the Capital Markets Act (OG No. 65/18, 17/20, 83/21, 151/22, 85/24). Published in the Official Gazette on 19 July, the Capital Markets Act took effect immediately, while the others became effective on 27 July 2024.	Yes
5	Cyprus	474	1%	The Cypriot government introduced a draft bill in March 2024, which would introduce CSRD-related amendments to the Cypriot Companies Law.	Draft
6	Czechia	844	2%	CSRD is being transposed in two phases: 1st phase: Companies who were already subject to the Non-Financial Reporting Directive requirements (large PIE with more than 500 employees) must comply with the CSRD from 2025 (for financial year starting from 1 January 2024). These requirements were adopted under Act No 349/2023 in December 2023, and took effect from 1 January 2024. 2nd phase: Will extend the CSRD reporting requirements to all other remaining in-scope groups under the Directive, starting with “large undertakings” and “parents of large groups” who will need to comply from 2026 (for financial year commencing from 1 January 2025). On 1 January 2024, Amendments to Act on Accounting, Act on Auditors and Act on Capital Markets (with other acts) entered into force and are binding (published in the Official Journal on 12 December 2023).	Yes
7	Denmark	1 168	2%	The Danish Parliament implemented CSRD into national legislation on 2 May 2024, with changes to the Danish Financial Statements Act, the Danish Act on Approved Auditors and Audit Firms, as well as Danish corporate and financial legislation.	Yes
8	Estonia	141	0,3%	The draft law transposing the CSRD was published on 23 February 2024 and is currently waiting for approval from parliament.	Draft
9	Finland	835	2%	Finland became the second EU Member State to transposed the CSRD into national law. The provisions related to the CSRD entered into force on the 31st of December 2023 and introduced amendments to the Accounting Act, the Auditing Act, the Companies Act, the Securities Markets Act, and related regulations.	Yes
10	France	5 932	12%	France was the first EU Member State to adopt the CSRD. The Order no. 2023-1142 transposed the CSRD on 6 December 2023, and amended several existing provisions of the French Commercial Code relating to corporate social and environmental responsibility. The decree n° 2023-1394 was published on 30 December 2023.	Yes
11	Germany	11 454	24%	The Federal Cabinet adopted the Government Draft to transpose the CSRD into German law on 24 July 24 2024, but it is not yet legally effective. It is currently being debated in the German parliament.	Draft
12	Greece	470	1%	CSRD was transposed into Greek law on 10 December 2024 through Law 5164/2024 (Government Gazette A’ 202). https://search.et.gr/el/fek/?fekId=774755	Yes
13	Hungary	631	1%	Hungary’s CSRD transposition framework is provided by the ESG Act, adopted on 12 December 2023. The detailed regulations necessary for auditing and assurance, and also the amount of the fines in case of non-compliance, have not yet been adopted and will be laid down in a government decree.	Partially
14	Ireland	762	2%	CSRD was transpoed into Irish law on 5 July 2024 (S.I. No. 336/2024, Iris Oifigiúl Number 55).	Yes
15	Italy	5 683	12%	The Italian legislative decree No. 125/2024 was published in the Official Gazette in Italy on 10 September 2024 (“GURI” General Series No. 212), thereby officially transposing CSRD into Italian law. The law entered into force from 25 September 2024.	Yes
16	Latvia	125	0,3%	Latvia transposed CSRD by the adoption by the Saeima of the Sustainability Disclosure Act on 26 September 2024 (https://m.likumi.lv/ta/id/355381-ilgtspejas-informacijas-atklasanas-likums).	Yes
17	Lithuania	181	0,4%	On 25 June 2024, the parliament approved the package of laws transposing the CSRD, which entered into force on 1 July 2024. The package consists of twelve draft laws, of which the main ones are the new Law on the Accountability of Enterprises and Enterprise Groups of the Republic of Lithuania, and the revised Law on the Audit and other Assurance services of Financial Statements of the Republic of Lithuania.	Yes
18	Luxembourg	1 603	3%	CSRD is in the process of being transposed into Luxembourg law. A draft bill no. 8370 transposing the CSRD was introduced by the Minister of Justice before the Luxembourg parliament on 29 March 2024, amending the Accounting Directive, the Audit Directive, the Transparency Directive and the Audit Regulation. The State Council (Conseil d’Etat) did published their opinion at the beginning of July 2024 (which marks a mandatory step of the Luxembourg legislative process). The Statutory Auditors Institute (Institut des Réviseurs d’Entreprises) also published their opinion on the draft bill in July 2024.	Draft
19	Malta	204	0,4%	The government has not released any draft legislation to transpose the CSRD into local law. The timeline for formal adoption is not set.	No
20	Netherlands	4 087	9%	A draft implementation bill (Draft Dutch Decree) to transpose the CSRD was published by the Dutch government on 20 November 2023. The consultation period expired on 18 December 2023. A draft “Decree on implementation of sustainability reporting” was presented to the House of Representatives (Tweede Kamer) on 12 June 2024. It is ready for further formal legislation, but still in draft. After the parliamentary debate, the Implementation Decree will be sent to the Council of State and, upon completion, published in the Official Gazette. In anticipation of the CSRD coming into effect in domestic law, the Dutch AFM has published further guidance regarding its expectations on companies to comply.	Draft
21	Poland	1 497	3%	On 6 December 2024, after examining the amendments proposed by the Upper House, the Lower House of the Polish Parliament finalized work on the Act amending the Accounting Act, the Act on Statutory Auditors, Audit Companies, and Public Supervision, and certain other acts. The Act was signed by the President on 13 December 2024, implementing the CSRD into the Polish law.A Draft Act implementing the CSRD into Polish law was published on 19 April 2024 on the official legislative website (https://legislacja.gov.pl/projekt/12381804/katalog/13035986#13035986). All interested parties were invited to provide comments within 30 days from the date of its publication.	Yes
22	Portugal	701	1%	The government has not released any draft legislation to transpose the CSRD into local law. The timeline for formal adoption is not set.	No
23	Romania	535	1%	CSRD was transposed into Romanian law through Ministry of Finance Order no. 85/2024 (“OMF 85/2024”) on 26 January 2024. Additional rules for auditors’ activities related to sustainability reporting are anticipated, though no timeline has been set for their publication.	Partially
24	Slovakia	321	1%	Slovakia transposed the CSRD through Act No. 105/2024 Coll. amending the Slovak Accounting Act and other legislation (the Commercial Code, the Stock Exchange Act, the Commercial Register Act and the Statutory Audit Act), adopted on 24 April 2024 and effective as of 1 June 2024.	Yes
25	Slovenia	193	0,4%	A draft bill transposing the CSRD requirements was introduced and the first reading in parliament took place in June 2024. Two acts have been amended, ZTFI-1C and ZRev-2C.	Draft
26	Spain	3 136	7%	On 29 October 2024, the Spanish Council of Ministers approved the transposition of two European directives that standardize the framework for reporting and verifying sustainability information by companies (Corporate Sustainability Information Law), to be submitted to Parliament.The Draft of the Corporate Sustainability Reporting Law, amending the Commercial Code, Capital Companies Law and Audit Law and the size criteria for undertakings or groups for corporate information purposes, was published in the Official Parliamentary Gazette on 15 November 2024. In a meeting on 5 November 2024, the Council of Ministers authorized its urgent processing, which, among other aspects, halves the deadlines of the processing periods. https://portal.mineco.gob.es/es-es/comunicacion/Paginas/transposicion-directiva-europea-pacto-verde.aspx	Draft
27	Sweden	1 709	4%	The Swedish Parliament adopted the bill to transpose the CSRD into local law on 29 May 2024, which entered into force on 1 July 2024.Sweden’s current transposing measures delay the start of these requirements to 1 July 2024, creating an uneven playing field across the EU. To address this, the Commission has sent a reasoned opinion to Sweden (INFR(2024)2195), urging it to correct this misalignment.	Yes
	Unknown	964	2%
	TOTAL EU	47 676	100%
EEA	Norway	1 100		On 11 June, 2024, the Norwegian Parliament adopted new legislation on sustainability reporting through amendments to the Accounting Act, the Auditor Act and the Securities Trading Act, formally signed by the King in Council on 21 June 2024. On 11 October 2024, the King in Council decided that the Norwegian legislation implementing the CSRD will come into effect on 1 November 2024. On the same day, the Ministry of Finance also decided transitional rules that provide a gradual introduction of the new requirements on sustainability reporting the next years, in alignment with the approach of the EU.	Yes
EEA	Iceland				?
EEA	Liechtenstein				?

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Stay tuned for more CSRD and ESRS insights.

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