On February 26, 2025 the European Commission (“Commission”) published its highly anticipated amendments to EU sustainability disclosure regulations, which profoundly reshape reporting expectations and sustainability strategy for many enterprises. The Simplification Omnibus Package (“Omnibus Package”), contains (1) Amendments to the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”), (2) a draft proposal to amend the Taxonomy Disclosures and the Taxonomy Climate and Environmental Acts (“Taxonomy”) and (3) draft proposals to amend the Carbon Border Adjustment Mechanism (“CBAM”) and to amend the InvestEU and EFSI Regulations (“InvestEU”). Now these proposals will go through the EU legislative process, but even with a request for priority, this will take months.
A review of the entire Omnibus Package is beyond scope of this article. Here we will focus here on reporting highlights and changes to the CSRD and Taxonomy, and exclude discussion of changes to the CSDDD, CBAM and InvestEU.
Proposed Changes to CSRD
Scope. The Omnibus Package will limit the scope of CSRD to listed or unlisted companies with over 1,000 employees that exceed either $50M in annual revenue or $25M of assets. These thresholds also apply to parent companies on a consolidated basis. The Omnibus Package will further limit scope for EU subsidiaries or branch offices to aggregate annual EU revenue of $450M or branch annual revenue of $50M. The Commission estimates that 80% of companies will no longer be in scope of CSRD, including special purpose investment vehicles and SME.
Timing. For current CSRD first wave reporters, the Commission did not propose modifying the reporting deadline for Fiscal Year (“FY”) 2024 which is Calendar Year (“CY”) 2025. However, the Omnibus Package does propose to postpone for 2 years the reporting requirements for FY 2025 and 2026 first time reporters (second and third wave reporters). Most US multinationals are in the second wave and would begin reporting in FY 2027. The Commission has not proposed modifying the deadline for non-EU parent company reporting scheduled to begin in FY 2028.
Reporting Standards. The European Sustainability Reporting Standards (“ESRS”) are the technical requirements for reporting under CSRD, and currently include 12 standards, 82 disclosures and 144 data points in 4 categories. Within 6 months of enactment of the Omnibus Package, the Commission intends to greatly simplify ESRS by reducing the number of mandatory data points and prioritizing them, issuing clear instructions for materiality assessment and maintaining interoperability with ISSB standards, among other changes. In addition, the Omnibus Package removes the ability of the Commission to adopt sector-specific reporting requirements that currently exists under the CSRD.
Value Chain. Currently companies subject to CSRD are required to report on their value chain as well as their own operations. The Omnibus Package proposes to limit the information a company can request from companies in their value chain with less than 1,000 employees to a new standard the Commission will adopt, that will be based on the VSME standard developed by EFRAG. This should help shield companies under 1,000 employees from onerous requests for information from company’s working to comply with CSRD.
Assurance. The CSRD currently requires limited assurance based on nonbinding guidelines issued by the European Auditing Oversight Bodies. That’s caused significant confusion, especially among assurance providers. The Omnibus Package requires the Commission to adopt standards for limited assurance by October 1, 2026, and removes future requirements for reasonable assurance.
Strategic Implication: With narrowed scope and reduced immediate reporting requirements, organizations should use this period to streamline their sustainability data management processes, freeing resources to deepen ESG commitments rather than simply chase compliance.
Proposed Changes to Taxonomy
Currently, all companies in scope of CSRD must report on their Taxonomy eligibility and the alignment of their activities. This involves reporting the extent to which their activities are environmentally sustainable economic activities (“Taxonomy eligible”) and aligned with the detailed technical screening criteria for those activities (“Taxonomy aligned”).
The Omnibus Package proposes numerous changes:
Opt-In Reporting. Under the Omnibus Package, only companies with annual revenue exceeding $450M will be required to report under the Taxonomy. Other companies that are smaller but still in scope of CSRD may “opt in” to Taxonomy reporting if desired.
Option to Report Op Ex. The Omnibus Package seeks to reduce the reporting burden for non-financial companies reporting under the Taxonomy. Reporting of Cap Ex is mandatory but Op Ex is elective.
Reporting of Partial Taxonomy Alignment. The Omnibus Package enables companies to claim partial Taxonomy alignment, and allows them to build up to full alignment over time.
Businesses previously overwhelmed by Taxonomy disclosures should immediately explore whether the new 'opt-in' approach offers strategic marketing or investment benefits. Smaller firms that proactively report taxonomy-alignment could distinguish themselves positively to investors and partners.
Going Forward
Despite is volume and high level of detail, the Omnibus Package provides a way forward toward significant simplification and burden reduction for company’s subject to EU sustainability reporting requirements. We will be following the legislative process for the Omnibus Package closely, and reporting on important future events.
--Chip Horton, Tellus Markets Corp.
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