At the end of last year, the European Commission announced that it would simplify and merge parts of the Green Deal legislation into one package: the EU Omnibus. Now that the Commission has published its proposal, we can take a look at the current state of affairs. The changes proposed by the Commission concern the CSRD, the CSDDD and the EU taxonomy. In this article, we focus on the CSRD.
Note that at this stage of the EU omnibus, it is a proposal. The European Parliament and the European Council still have to approve this text and may request adjustments from the European Commission before approving or rejecting the proposal. In other words: the exact outcome is as of yet unknown. By no means are all member states in favour of postponing the CSRD.
Smaller scope
The EU omnibus proposal limits the scope of the CSRD. The second wave, which currently includes all large European companies with a turnover of more than €50 million and/or more than 250 employees, would be limited to companies with more than 1,000 employees and either a turnover of more than €50 million or a balance sheet total of €25 million. This would reduce the number of companies with a reporting requirement by about 80%.
Both the second and the third wave (listed SMEs, small non-complex credit institutions and insurance companies) would get a 2-year delay. Non-European companies would only have to report if they had more than €450 million in EU sales in the last two years, rather than €150 million.
Companies outside of scope
Companies that are no longer required to report will be subject to a proportionate voluntary standard. The Commission will develop this, based on the current VSME standard. When CSRD-mandatory companies request information from their value chain, they must follow certain rules. Companies with fewer than 100 employees may not request more information than will be included in that proportionate voluntary standard. Information that is already commonly shared in a particular sector, would be exempt from this.
Simplification
To limit the number of data points for reporting, there will be no sector standards (which were previously envisioned). The requirement for report audits to achieve reasonable assurance over time is also set to disappear. In its place, by 2026 a targeted guideline for auditors will be created.
If the EU omnibus proposal is adopted, the Commission also plans to simplify and streamline the European Reporting Standards (ESRS):
It will be some time still before there is certainty about the EU omnibus. In the coming period, much will be said and written about the desirability of these adjustments. However, at the core nothing changes. Strong sustainability strategy and reporting remain necessary strategic tools with inherent value for companies that want to be future-proof. The market at large, customers as well as banks will continue to demand ESG efforts and sustainability information. For example, your sustainability reporting will still have a determining influence on the renewal of customer contracts, to win government tenders, to obtain credit, on your access to financing and so on. Moreover, you do not want to risk non-compliance and incur reputational damage.
Which steps are your best move, as a company in these uncertain times? Do not be thrown off guard by the proposed changes and the debate surrounding the Omnibus legislation. The actions you can take for your own benefit have not changed substantially. To get you started, we have listed some no regret actions for you here.
