28 February 2025
Michael Verhoeven, Senior Policy Analyst and Agathe Kuhn, Head of Partnerships and Corporate Affairs
On February 26, the European Commission published its first draft Omnibus-package aimed at simplifying corporate sustainability reporting and due diligence requirements. It proposes major changes to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy Regulation.
The Commission proposes substantial adjustments to the current regulatory framework – we are highlighting below key aspects to be aware of:
Proposed changes to the CSRD
The European Commission has proposed significant updates to the Corporate Sustainability Reporting Directive (CSRD) to reduce the regulatory burden on businesses, particularly SMEs.
- Scope: One of the key changes is the narrowing of the reporting scope, suggesting that only companies with an annual average of 1,000 employees and a net turnover exceeding EUR 50 million, or a total balance sheet exceeding EUR 25 million would be obligated to report – thereby removing 80% of companies from the reporting scope. Currently, the CSRD applies to all large undertakings that exceed at least two of the following three thresholds: 250 employees, EUR 50 million in net turnover, or a EUR 25 million balance sheet total, as well as listed SMEs.
- Standards review: the European Sustainability Reporting Standards (ESRS) will undergo a significant revision to reduce the number of data points, enhance consistency with other legislative frameworks, and clarify ambiguous provisions. The Commission is also proposing a removal of sector-specific reporting standards, as well as the elimination of the reasonable assurance requirement.
- Timeline: the Commission has proposed a two-year postponement for reporting obligations, granting large companies that have not yet begun CSRD implementation additional time to adapt while allowing co-legislators to finalise these substantive revisions.
Proposed changes to the CSDDD
The European Commission has also proposed key revisions to the Corporate Sustainability Due Diligence Directive (CSDDD) to allow businesses more time to prepare for compliance while reducing administrative burdens.
- Timeline: One major change is the postponement of the transposition deadline by one year, pushing the date for Member States to implement the directive to 26 July 2027, with necessary Commission guidelines also delayed until 26 July 2026.
- Periodic assessments: A significant adjustment is the extension of periodic assessment intervals from every year to every five years, easing compliance burdens on companies.
- Climate transition plans: Another key revision concerns climate mitigation transition plans, which will now be aligned with CSRD transition plan principles, ensuring a more coherent and integrated sustainability framework.
Proposed changes to the EU Taxonomy Regulation
Finally, the Omnibus has proposed changes to the EU Taxonomy.
- Scope: The EU Taxonomy scope of application would be impacted by the scope reduction proposed for the CSRD (see above) with voluntary reporting possible for companies with more than 1,000 employees and a turnover below EUR 450 million. Moreover, companies that have made progress towards sustainability targets, but only meet certain EU Taxonomy requirements, may choose to report on their partial Taxonomy-alignment.
- Do No Significant Harm (DNSH) may be weakened.
While these changes may have far-reaching consequences for companies engaged in their sustainability reporting journey, there is no need to adjust their strategy just yet. The changes proposed by the Commission will now go through approval by the European Parliament and the Council before they can be formally adopted.
In a context of regulatory uncertainty, we strongly advise our clients to pursue their sustainability reporting efforts as these efforts are not just a regulatory requirement but a critical indicator of competitiveness, long-term resilience, risk management, and value creation.