The Corporate Sustainability Reporting Directive (CSRD) has undergone a significant step with the introduction of the Omnibus proposal, a set of amendments aimed at simplifying sustainability reporting and compliance requirements. The proposal, introduced by the European Commission on February 26, 2025, includes key adjustments to the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation.
These changes are designed to reduce administrative burdens caused by the legislation, especially for small and medium-sized enterprises (SMEs), and ensure greater alignment between EU sustainability laws. Below are frequently asked questions (FAQs) to help organizations understand the proposed changes.
What is the Corporate Sustainability Reporting Directive (CSRD)?
The CSRD is an EU directive aimed at improving sustainability reporting for large companies. Under the CSRD, companies must disclose information related to environmental, social, and governance (ESG) issues, with a focus on double materiality.
This principle requires companies to report both on how sustainability issues, including climate change, affect their business and how their operations impact the environment and society.
The CSRD builds on the Non-Financial Reporting Directive (NFRD) by expanding the scope of companies required to report, standardizing disclosure requirements, and improving the quality, comparability, and reliability of the information disclosed.
The Omnibus proposal introduces significant changes to simplify and streamline compliance with these requirements.
Who does the CSRD apply to under the Omnibus Proposal?
The Omnibus proposal revises the scope of the CSRD in several ways:
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arge and listed companies: The CSRD will apply primarily to large companies with more than 1,000 employees and either €50 million in turnover or €25 million in balance sheet total. This tightens the scope from the current thresholds, where large companies must meet two out of three criteria: €50 million turnover, €25 million balance sheet total, or 250 employees.
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Small and medium-sized enterprises (SMEs): Non-listed SMEs are generally excluded from CSRD requirements, although a voluntary ESG reporting standard will be introduced for them. Listed SMEs will have a delayed compliance timeline and will be subject to certain exemptions from full reporting obligations. Medium-sized enterprises should prepare for future regulations requiring more detailed sustainability disclosures.
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Non-EU companies: Non-EU companies with significant operations or turnover in the EU (i.e., exceeding €450 million) will still be required to comply with the CSRD and align with the European Sustainability Reporting Standards (ESRS).
What are the key changes introduced by the Omnibus Proposal?
The Omnibus proposal introduces a series of changes aimed at simplifying the CSRD’s compliance and reporting requirements for sustainability information:
Implementation delay
The CSRD implementation timeline for companies reporting in 2026-2027 (known as “Wave 2 and 3” companies) has been postponed by two years, allowing businesses more time to comply with the new regulations.
Reduction in reporting scope
The proposed changes narrow the scope of CSRD, requiring only large companies with more than 1,000 employees and specific financial thresholds (€50M+ turnover or €25M+ balance sheet total) to report under CSRD. This will affect fewer companies.
Voluntary taxonomy reporting
Companies within the CSRD scope, but with a net turnover below €450 million, will now be able to voluntarily report their alignment with the EU Taxonomy rather than being required to do so.
Suspension of sector-specific standards
The proposal removes the possibility of developing sector-specific European Sustainability Reporting Standards (ESRS), aiming to simplify reporting and enhance consistency across industries.
Due diligence adjustments
Under the revised Corporate Sustainability Due Diligence Directive (CSDDD), companies will only need to monitor their direct suppliers and will assess supply chain impacts once every five years instead of annually. This change reduces reporting burdens and improves focus.
Relaxed penalties
The proposed changes relax certain penalty measures, including removing the requirement to terminate relationships with non-compliant business partners and eliminating minimum financial penalties for non-compliance.
What is the impact of these changes on sustainability reporting?
Simplified reporting
By reducing the number of companies required to report, and suspending sector-specific standards, the Omnibus proposal aims to simplify sustainability reporting for companies while maintaining the double materiality principle.
Double materiality remains
Despite other changes, the double materiality principle remains intact. Companies will still be required to report both on the financial materiality of sustainability issues (how ESG factors impact their business) and the impact materiality (how their operations affect the environment and society).
Extended compliance timeline
The proposal offers an extended transition period, giving businesses more time to adjust to the updated CSRD requirements and produce high-quality sustainability and environmental information for stakeholders (more on this below).
How often do companies need to report on supply chain impacts?
Under the revised Corporate Sustainability Due Diligence Directive (CSDDD), companies with more than 500 employees are required to assess their supply chain impacts only once every five years, rather than on an annual basis. Ad hoc assessments will be required where necessary. This change reduces compliance burdens, focusing only on direct suppliers rather than the entire supply chain.
How should companies prepare for CSRD compliance?
With the proposed changes, companies should take the following steps to prepare for CSRD compliance:
- Review reporting obligations: Check if your company falls under the revised CSRD scope based on the updated thresholds (1,000+ employees, €50M+ turnover, or €25M+ balance sheet total).
- Focus on direct suppliers: Update your supply chain due diligence processes to focus on direct suppliers instead of the entire supply chain.
- Monitor EU Taxonomy reporting: Prepare for voluntary EU Taxonomy reporting if your company wishes to disclose its sustainability performance alignment.
- Monitor regulatory changes: Stay informed about ongoing discussions and updates to the Omnibus proposal. As the proposal is still under discussion, it is important to stay up to date with the latest amendments and their potential impacts.
- Enhance ESG data management: Invest in systems and processes that help manage and track ESG data effectively, ensuring accurate and reliable reporting for investors and other stakeholders.
What do non-EU companies need to know?
Non-EU companies with significant operations in the EU (i.e., those generating more than €450 million in turnover) will be required to comply with the CSRD and align with the ESRS, focusing on direct supplier risks and sustainability reporting. They will also need to monitor and assess their sustainability impacts according to the revised timelines and requirements.
What are the CSRD transition periods?
The revised transition periods under the Omnibus proposal, with member states playing a crucial role in facilitating the transition, are as follows:
- Large companies: Full CSRD compliance by 2027.
- Listed SMEs: Transition period until 2028.
- SMEs (voluntary reporting)
Looking ahead
The Omnibus proposal introduces significant changes aimed at simplifying and streamlining EU sustainability reporting. By narrowing the scope of the CSRD, delaying implementation deadlines, and making EU Taxonomy reporting voluntary for certain businesses, the European Commission is seeking to reduce administrative burdens for businesses, especially SMEs. However, sustainability reporting remains a priority, and companies must adapt their strategies to comply with the evolving EU regulations.
As the proposal is still under discussion, businesses should stay informed about further developments and prepare for potential changes to the regulatory landscape.
