- Bayard Rezos
- Senior Sustainability Consultant
- News
- Opinion
- 03 March 2025
- 4 min
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The European Commission’s much-anticipated Omnibus proposal is out, and it is significantly affecting the CSRD. Where do companies go from here?
There has been another seismic shift in the sustainability reporting landscape. Following leaked documents and widespread speculation, the European Commission’s highly anticipated Omnibus proposal has now been published and submitted to the European Parliament and Council for their consideration and adoption.
The proposal’s aim is to simplify many of the EU’s sustainability reporting requirements, including the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy. The CSRD is the cornerstone reporting directive for the EU Green Deal, aimed at promoting credibility, transparency, and comparability in sustainability reporting, all of which are essential for stakeholders to make informed decisions. The CSRD achieves this by ensuring companies in scope report against the European Sustainability Reporting Standards (ESRS).
While the Omnibus proposal looks to reduce the burden of sustainability reporting, it also has the potential to undermine the goals of the EU Green Deal and make CSRD-aligned reports less useful for stakeholders. It was not surprising that in early February, a group of over 160 investors representing €6.6 trillion under management called on the Commission to maintain the reporting framework as previously proposed[1].
So, what do the changes mean for those impacted? Here are five key considerations:
Compliance threshold
The Commission has raised the compliance threshold for CSRD to over 1000 employees, and either a turnover above €50 million or a balance sheet above €25 million as well as provided a two-year delay for ‘wave two and three companies’ (those previously in scope for FY25 and FY26) to allow time for legislators to approve the proposal. This will prompt companies to reassess their exposure to the Directive, although this is too late for most companies that have prepared CSRD-aligned sustainability statements for publication this year (e.g. large public interest companies that have between 500 and 1000 employees). Those out of scope can report voluntarily against a simplified standard that is based on the voluntary standards for SMEs (VSME standard).
ESRS revision and sector standards
The Commission intends to revise the current ESRS and has removed sector-specific reporting standards. Companies that are yet to report should closely monitor developments to the proposal and revised ESRS. While the removal of sector specific standards provides additional relief, companies should still consider entity-specific disclosures in their reporting. This information may be expected by stakeholders and ratings agencies – properly executed entity-specific disclosures will enhance the credibility and authenticity of sustainability reports.
Value chain cap
Another significant change from the Commission is a strengthening of the ‘value chain cap’, which now ensures that in-scope companies do not request information beyond the scope of reporting from companies in the value chain. To achieve this, the new VSME standard will act as a buffer. While this adjustment reduces reporting burden, it may undermine the CSRD's intent to promote sustainable development across value chains. This information may also still be critical for key stakeholders, including investors and customers. Companies out of scope will need to be prepared to receive information requests aligned with the VSME standard and companies in scope will need to consider what disclosure requirements have been impacted and decide whether they still need to gather the relevant value chain information.
Double materiality
Contrary to recent speculation, the Commission has decided to maintain the CSRD’s double materiality principle. Double materiality is critical for companies to assess how sustainability issues affect their financial performance and how their activities impact the environment and society. Removing this principle would have raised significant concerns, as it is a crucial component for companies to understand and manage their sustainability issues effectively. Companies should continue to prepare and refresh their double materiality assessments as it is the foundation to a robust corporate sustainability strategy.
Assurance requirement
The CSRD’s assurance requirement has been a highly contentious issue – primarily due to a lack of clarity, the sheer increase in workload for audit firms, and the skills shortage in the industry. The Commission has removed the requirement for reasonable assurance in the future and plans to publish more targeted assurance guidelines, which companies should closely monitor. These guidelines will significantly influence reporting obligations and the overall credibility of sustainability reports.
In the post-Omnibus era, credible sustainability reporting remains critical
The sustainability reporting landscape is constantly evolving; the need for consistency and clarity across reporting regulations remains critical. The Omnibus is still a proposal and therefore subject to further change in the future. Despite the proposed substantial changes, the CSRD still represents an opportunity for companies to align their practices with the broader imperative of sustainable development. A recent global investor survey by PwC stated ‘71% of investors agree that companies should incorporate sustainability directly into their corporate strategy’[2]. This trend underscores the expectations from stakeholders – including investors, customers, and regulators – for companies to disclose their sustainability practices with transparency and authenticity.
Companies that proactively engage in meaningful reporting stand to benefit in the long term. Those that enhance their sustainability strategies, actions, policies, and disclosures will be able to better manage their material impacts and risks, better execute against potential opportunities, gain a more favourable perception amongst stakeholders, and enhance their differentiators against peers in a rapidly evolving market.