The Omnibus Package

In April 2024 the European Commission adopted the first such directive amending the EU Corporate Sustainability Reporting Directive No. 2022/2464 (CSRD) and EU Corporate Sustainability Due Diligence Directive No. 2024/1760 (CSDDD), effectively alleviating the reporting burden by postponing and descoping the ESG and sustainability reporting obligations.

“Stop the clock”

This first part of the Omnibus package called “stop-the-clock” directive is now effective and reduces the number of companies in the EU affected by the CSRD and CSDDD. These measures are intended to allow more time for EU bodies to properly develop implementing regulations, for national legislatures to develop national legislation and for businesses to adapt to proposed changes in sustainability regulation.

CSRD

The CSRD specifies the dates from which companies of certain sizes and significance are required to produce ESG and sustainability reporting.

The first wave of reporting in respect to 2024 financial year concerning public-interest entities remains unchanged by the Omnibus package.

The second wave of reporting concerning non-public-interest large companies is postponed by two years compared to the original reporting obligation and the first reports are scheduled to be made with respect to the 2027 financial year.

The third wave of reporting concerning listed SMEs is postponed by two years compared to original reporting obligation and the first reports are to be made with respect to the 2028 financial year.

CSDDD

The first wave of regulation regarding reporting on human rights and environmental impacts was originally intended to be adopted by the member states by 2027 according to the CSDDD. This deadline is postponed by one year in order to give companies more time to prepare for the requirements of CSDDD and to provide them with the opportunity to take into account the guidelines to be issued by the European Commission on how the companies should fulfil their due diligence obligations in practise.

Proposals

Ambitious and significant changes to currently planned ESG reporting obligations are considered with regard to alleviating the threshold criteria for companies which would be required to comply with CSRD:

• Higher Employee Threshold: the number of employees required for mandatory compliance could be raised from 250 employees to 1,000 employees.
• Higher Financial Thresholds: The revenue threshold for mandatory compliance could increase from €40 million to €50 million.
• Higher intra-EU revenue threshold for non-EU established companies: The revenue threshold for non-EU companies could increase from €150 million to €450 million.
• Simplification of Reporting: The changes are designed to simplify reporting obligations, especially for smaller businesses. By reducing the scope of companies required to report, it eases the burden on those that might struggle with the detailed ESG reporting obligations.

These proposed changes described above would effectively exclude SMEs from reporting obligations and reduce the number of companies under reporting obligations by up to 80 %. It is also considered that companies would be encouraged to comply with the reporting obligations voluntarily in order to increase their ESG rating and be more “green” or “blue” in the perspective of loan providers, business partners or consumers.

With these changes the regulatory burden on companies should be effectively alleviated. Given the fact that the EU directives implementing major regulations and reporting obligations are being amended even before becoming effective (and before being accompanied by proper implementing regulations), businesses are constantly forced to navigate through this unpredictable environment and to reassess its internal ESG policies, conduct risk assessments, and establish robust reporting systems.