On 26 February 2025, the European Commission introduced the Omnibus Directive. If passed, it will revise some requirements under the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). This alert outlines what these changes would mean for the CSRD. However, the Omnibus Directive is going through the legislative process and will likely change further.
KEY CHANGES TO THE CSRD
- Limited assurance is maintained but reasonable assurance requirements are removed –The EU Commission will adopt delegated acts setting out standards for limited assurance in 2026, although not by October 2026 as initially planned. The Commission specifically notes in the Omnibus that companies have raised concerns related to the work carried out by assurance providers and business need for flexibility in addressing specific risks and critical issues identified in the areas of sustainability assurance. The Commission is taking these concerns into account in how they draft the requirements for limited assurance. Due to the cost to companies, the Commission will no longer consider reasonable assurance requirements, which were initially expected for 2028.
- Fewer companies covered – The Omnibus introduces a new common threshold of 1,000 employees as the key benchmark for determining which companies are in-scope of the CSRD. This change affects all company categories, raising the threshold for large companies that previously only needed 250 employees to be covered (alongside financial criteria). Financial thresholds have also been adjusted, but these vary by the category a company is in. Overall, the Commission estimates an 80% reduction in the number of companies covered.
- Small and medium-sized companies, including those with trading on an EU-regulated market, would no longer be in scope.
- EU-based companies and parent companies with more than 1000 employees during the financial year (individually or on a consolidated basis) and which meet at least one of the following criteria: (i) net turnover above EUR 50 million (ii) balance sheet total above EUR 25 million are in-scope.
- Foreign-owned parent companies are in-scope if they generate more than EUR 450 million net turnover within the EU (up from EUR 150 million) for the last two years and meet at least one of the following criteria: (i) have a large subsidiary within the EU that is in-scope of the Directive and/or (ii) a branch within the EU with a net turnover of more than EUR 50 million (up from EUR 40 million).
- Delayed timeline for next group of companies – CSRD reporting for companies originally required to report in 2026 will be delayed by two years to 2028. This includes all large companies with more than 1000 employees during the financial year (individually or on a consolidated basis) and either a net turnover above EUR 50 million or balance sheet total above EUR 25 million. This does not include “public-interest companies,” i.e. listed companies, banks, and insurance companies, which were required to report under the legislation already.
- Reduced scope of ESRS – The EU Commission will simplify and streamline ESRS and will adopt delegated acts to do so as quickly as possible after the Omnibus is approved. The revisions will significantly reduce mandatory ESRS data points, prioritising quantitative over qualitative data. However, we do not yet know which specific data points or ESRS will be affected.
- Sector-specific ESRS are removed – This is a substantial change, as these were expected to set out specific disclosure indicators on human rights in the value chain for several sectors including garments (textiles, accessories, footwear and jewellery), agriculture, farming and fishing, and food and beverages.
- More flexible reporting requirements for medium-large companies – Companies that are in-scope of the Directive, but with net turnover less than EUR 450 million will have more flexible sustainability reporting requirements. These have not yet been developed and the recitals to the Omnibus indicate that these will prioritise issues covered by the EU Taxonomy – i.e. environmental issues. However, the final reporting requirements are still to be determined.
- Protection for smaller suppliers – Companies cannot be required to collect sustainability data from companies within their value chain which have fewer than 1,000 employees beyond what is included in the EU’s voluntary disclosure standards for companies that are not in scope of the Directive. The Commission has not yet developed these voluntary standards, which will be set through delegated acts and based on the existing voluntary standard for SMEs developed by EFRAG. The exceptions to this rule are that companies can still request information if it is common practice in the sector or if it is required for the CSDDD. This rule aims to prevent companies outside the Directive’s scope from being indirectly required to report. However, the specific provisions are unclear and, while they somewhat reflect similar changes to the CSDDD, they’re not completely aligned and somewhat tricky to work through in practice.
- Electronic reporting format – Company internal management and supervisory bodies (i.e. the board of directors and committees) will maintain responsibility for ensuring that the relevant reports (financial statements, management reports, corporate governance statements) are drawn up in accordance with the Directive. However, they are no longer responsible for ensuring that they are published in the single electronic format or marked up in-line with the Directive – this responsibility can rest elsewhere within the company and does not require board-level sign-off. Additionally, companies are not required to tag their sustainability reports in the electronic reporting format until the Commission passes rules on how to do this.
NEXT STEPS IN THE LEGISLATIVE PROCESS
- The proposal now (re)enters the EU legislative process. The European Parliament and the Council of the EU will review, debate, and negotiate potential amendments. The Commission states it “invites co-legislators to reach rapid agreement on the proposed postponement, in particular to provide the necessary legal clarity for undertakings in the second wave that are currently required to report for the first time in 2026 for financial year 2025,” emphasising the desire for urgency.