EU Omnibus Regulation: What it means for CSRD and why sustainability remains a priority

The EU Commission has presented a proposal to simplify important sustainability regulations. This article highlights the changes to the CSRD (Corporate Sustainability Reporting Directive) and explains why sustainability continues to play a key role for companies.

The Omnibus Regulation contains simplifications of the CSRD (Corporate Sustainability Reporting Directive), the CSDDD (Corporate Sustainability Due Diligence Directive), the EU Taxonomy and the CBAM Regulation (Carbon Border Adjustment Mechanism). But what does this mean for companies in concrete terms? Does the simplification of reporting reduce the relevance of sustainability or does it rather offer new opportunities?

What are the changes in the CSRD?

1. Fewer companies are required to report
   Previously, companies were required to report if they met two of the following three criteria: 250 employees, 50 million euros in turnover or 25 million euros balance sheet total. In future, the number of employees will be the leading threshold, and only companies with over 1,000 employees and a turnover of EUR 50 million or a balance sheet total of EUR 25 million will remain subject to reporting requirements. This reduces the number of companies affected by 80 percent.
   
2. Start of the reporting obligation postponed
   In the spirit of the “stop the clock” approach, the EU Commission is proposing to postpone the reporting obligations for companies that currently fall within the scope of the CSRD and will have to report from 2026 or 2027 by two years. Listed small and medium-sized enterprises (SMEs) should then later be completely exempted from the reporting obligation.
   
3. Simplified reporting requirements & materiality analysis
   Another central element of the omnibus regulation is the simplification of the extensive “European Sustainability Reporting Standards” (ESRS). This standard is to be “substantially” reduced and the focus shifted to quantitative data points in particular. These changes are to be published no later than 6 months after the regulations come into force. The principle of double materiality analysis, by contrast, remains untouched by the simplifications.
   
4. Voluntary standard gains greater significance
   The EU Commission plans to enhance the significance of the Voluntary Sustainability Standards (VSME), which are currently defined for SMEs, and tailor them for companies not subject to reporting obligations. In the future, the VSME will also establish the maximum amount of ESG information that can be requested from companies with fewer than 1,000 employees.

Sustainability remains important

Does the simplification of regulation and reporting requirements mean that sustainability is becoming less relevant for companies? On the contrary! Sustainability remains a key success factor. After all, customers, investors and banks are demanding ESG criteria and sustainability data, regardless of whether there is a legal obligation or not. Also, climate change – caused by extreme weather events or resource scarcity, for example – represents a potential business risk regardless of strict regulation.