European Commission Proposes Simplification of the CSRD and Certain Other Sustainability-Related Initiatives

On February 26, 2025, the European Commission published its Omnibus Simplification Package (the Omnibus Package) with proposed amendments to the Corporate Sustainability Reporting Directive¹ (the CSRD) and certain other sustainability-related initiatives.

Currently, the CSRD, which entered into force in January 2023, requires a large number of EU-based and EU-linked corporate entities to publish detailed disclosures covering a wide range of sustainability topics. The CSRD is being implemented progressively, between 2024 and 2028.

In the Omnibus Package, the European Commission proposes to: (i) decrease the number of entities in scope for CSRD reporting; (ii) reduce the number of mandatory data points required to be disclosed under the European Sustainability Reporting Standards (ESRS); and (iii) postpone reporting requirements for certain entities due to begin CSRD reporting in respect of their 2025 and 2026 financial years. The Omnibus Package also includes proposed amendments to the Corporate Sustainability Due Diligence Directive², similarly aiming to simplify the reach of that directive.

In this OnPoint, we focus on the key takeaways from the Omnibus Package for companies considering the impact of CSRD on their reporting obligations. The simplifications proposed by the European Commission in respect of CSRD include:
 

1. Proposed Significant Reduction of the Number of Entities in Scope

The proposal seeks to reduce the number of EU-based and EU-linked companies subject to the CSRD by approximately 80%.

The Omnibus Package aims to achieve this by: (i) requiring companies to meet an employee test to be in scope for CSRD reporting (rather than the current requirement of meeting two out of three of the existing tests relating to number of employees, net turnover and asset thresholds); and (ii) increasing the threshold of the employee test from 250 to 1,000 employees.

Under the Omnibus Package proposal, EU-based entities will be in scope if they have:

• over 1,000 employees; and
• either: (i) net turnover over €50 million; or (ii) assets of over €25 million.

For non-EU parent companies (of groups with large EU subsidiary entities/branches), the Omnibus Package proposes raising the minimum European net turnover requirement to bring such entities into scope to €450 million (rather than the current €150 million). Reporting requirements for such entities would continue to come into effect with respect to activities for the 2028 financial year.

The proposal anticipates that all categories of entities subject to the CSRD will be reduced in number as a result of such changes, and SMEs will be removed from the scope of the CSRD entirely.
 

2. Curtailed Reporting Requirements Under ESRS

For entities that remain in scope for CSRD reporting, the Omnibus Package also seeks to simplify reporting by amending the current ESRS, through the adoption of a delegated act, to, inter alia, reduce the number of mandatory data points to be reported. The Omnibus Package aims to achieve this by: (i) removing what the European Commission assesses to be less important data points; (ii) prioritising quantitative data points rather than those that are text-based; (iii) clarifying which data points are mandatory rather than voluntary; and (iv) refining instructions on how to apply materiality assessments, so that only material information is reported.
 

3. Postponement of Reporting Obligations

The first category of in scope entities, comprising of EU-based Public-Interest Entities³ that satisfy the tests for employees and net turnover or assets, must still prepare a CSRD report in 2025 in respect of its 2024 financial year. However, the Omnibus Package proposes a two-year postponement for the next two categories of in scope entities, which would (under the current position) be due to commence preparing reports in respect of the 2025 and 2026 financial years, respectively.

In essence, the proposal aims to avoid imposing reporting obligations on currently in scope entities that will be excluded from CSRD reporting if the Omnibus Package recommendations are enacted. Broadly speaking, this would postpone the first year of reporting for currently in scope private entities until reports are prepared in respect of the 2027 financial year and for currently in scope SMEs and certain other entities until reports are prepared in respect of the 2028 financial year.

The phasing in of reporting for non-EU parent companies is still targeted for reports in respect of the entity’s 2028 financial year.
 

Other Proposed Changes to the CSRD

In addition to the above, further changes to CSRD reporting proposed in the Omnibus Package include: (i) adopting voluntary and proportionate reporting standards for SMEs; (ii) extending the value-chain cap to all entities under 1,000 employees and reducing reporting requirements for those included; (iii) removing sector-specific reporting standards (to limit additional reporting burdens on in scope entities); (iv) issuing targeted assurance guidelines clarifying the required procedures to be undertaken in connection with the limited assurance of sustainability reporting by 2026; (v) removing the future adoption of standards for reasonable assurance; and (vi) adopting an “opt-in” approach for alignment with Taxonomy Regulation reporting for CSRD-reporting entities with less than €450 million in net turnover.

Approval and Implementation

The proposed changes in the Omnibus Package are intended to be implemented through a postponement directive (delaying certain reporting obligations) and an amendment directive (revising the key elements of the sustainability reporting framework, as discussed above). The Omnibus Package is now with the European Parliament and the Council of the European Union for consideration and adoption. The European Commission is working to a short timeframe and, with this in mind, in the text of its proposal the European Commission “invites co-legislators to reach rapid agreement on the proposed postponement, in particular to provide the necessary legal clarity for undertakings in the second wave that are currently required to report for the first time in 2026 for financial year 2025”. The European Commission has asked for the legislative process to be fast-tracked (although at this stage it is unclear if this will be agreed to) and has urged the co-legislators not to suggest further amendments to the proposal.

If approved at the EU level, Member States will need to enact implementing national legislation. The postponement directive is expected to be approved on a short timeframe and has a targeted transposition deadline of December 31, 2025. The amendment directive is expected to be subject to longer debate and to be required to be transposed within 12 months of the new directive entering into force. Certain Member States have, to date, implemented stricter reporting requirements than required under the current version of the CSRD (introducing gold-plating). Accordingly, even if the amendments forming part of the Omnibus Package are introduced, some Member States may continue to require greater reporting requirements under national legislation.
 

This factsheet is intended to be a general guide and does not constitute legal advice.
 

Footnotes

1. Directive (EU) 2022/2464.

2. Directive (EU) 2024/1760.

3. A “Public-Interest Entity” includes companies which are: (a) EU-incorporated and whose transferable securities are admitted to trading on an EU regulated market; (b) credit institutions; (c) insurance undertakings; or (d) designated as such by its Member State of incorporation due to its significant public relevance. (e.g., because of the nature of the business, its size or the number of employees).