EU Omnibus proposes reduction of reporting requirements
Details on the EU’s ‘Omnibus’ package, which has the express goal of simplifying sustainability regulations, have been made available today. The scale of what is being proposed is significant and has implications for every company within the scope of the EU’s CSRD, CSDDD and CBAM regulations, which naturally includes UK companies in scope of CSRD.
What’s the news?
With the stated intention of increasing competitiveness by cutting the burdens and costs placed on companies, the Omnibus is proposing a raft of changes which reduce the number of companies which are subject to regulations, and weakening those regulations. The guiding principle is to keep only the biggest companies in-scope, while largely exempting mid-sized and small ones.
The total list of changes in the proposal is too large for this email – see the EU’s summary here, and, if you’re brave, the full proposals at the bottom here – but we’ve drawn out the main ones below.
CSRD
CSRD will only apply to large companies with over 1000 employees and a turnover greater than EUR 50m or balance sheet over EUR 25m. This aligns with the CSDDD’s thresholds, and reduces the companies in scope of CSRD by around 80% – which is a huge change.
For companies which are currently preparing to report for FY25 or FY26, a postponement has been proposed to make them not have to report. This is explicitly being done to prevent a situation where companies report CSRD for one or two years at a good deal of expense and effort, before no longer being required to (more on this further down).
ESRS (i.e. the standards you actually report in CSRD) are to be substantially reduced in terms of the number of reported data points, with some other changes for greater clarity and consistency.
The reasonable assurance requirement will be removed, with only limited assurance required and no subsequent migration to reasonable.
CSDDD
The deadline for companies reporting CSDDD has been postponed by one year to July 2028.
Requirements are to be focused on direct business partners, periodic assessments are to be reduced from annual to every five years, and the amount of information that can be requested of SMEs and smaller companies will be subject to limits.
CBAM
Small importers exempted from CBAM, which the EU claims will remove obligations for 90% of importers while still covering 99% of emissions.
EU Taxonomy
Companies currently in the CSDDD’s scope (over 1,000 employees and over EUR 450m turnover) will have to report. However, for companies with over 1,000 employees and less than EUR 450m turnover, Taxonomy reporting will now be voluntary – with the EU suggesting that this voluntary reporting might be pursued by businesses seeking sustainable finance.
When is this likely to be in effect? What's the impact for UK companies?
Normally, EU lawmaking takes a long time. A proposal’s pathway into law can sometimes take around two years. In order to prevent companies who are currently in-scope from reporting in the ‘in-between’ period between the proposal being announced and it coming into law – at which point they might have to halt reporting – the EU has included a postponement period of two years. This applies to companies set to report CSRD for FY25 or FY26, with the proposal accordingly asking co-legislators to reach “rapid agreement” on this point to prevent wasted work by these companies.
As well as plugging a gap, the postponement also implies that the EU will seek to move rapidly with the Omnibus. At this stage, however, it isn’t clear how quickly it will be pushed through.
The requirement for an undertaking not established in the EU – including UK companies with EU activities – to still be subject to reporting requirements at the Group level would be raised from EUR 150m generated in the Union to EUR 450m. In addition to having to exceed this EUR 450m threshold, a non-EU company would also need to have a subsidiary which is a large undertaking or is EU-listed, or have a branch with net turnover in the Union above EUR 50m (previously 40m). For companies still within this narrowed scope, it seems for now that this reporting will still have to be done for FY28.
If you’re a company and believed you were in scope of CSRD and now believe you may not be, but are confused – and rightfully so! – then be in touch with us and we can talk you through the implications.
What will happen next?
While the Omnibus will be subject to the usual rounds of discussions and alterations, and may well see some changes, it is in line with the EU’s current drive to enhance competitiveness and can be taken as likely to be implemented.
While these changes to scope and extent had been brewing for several years, the Omnibus represents a marked change in direction for a jurisdiction which had long been held as the vanguard for sustainability regulation. Partially a victim of its own ambition, CSRD represented (and for many, will still represent) a set of complex tasks which companies have been in many cases not well equipped to handle yet. In combination with a broader, but we expect not permanent, swing away from regulation in response to macroeconomic and global security pressures – encouraged in no small part by the political mood in the US – the desire to ease this burden, even at the expense of slowing sustainability progress, has proved too strong.
Nationally-backed regulations are certainly not the only driver of corporate initiative on sustainability, but are one of the major ones. The Omnibus is therefore likely to have meaningful and varied impacts on the extent of corporate commitments to sustainability. At the same time, we're optimistic that the reduced burden also represents an opportunity, with more time and money potentially freed up for teams to focus on action and implementation of commitments – rather than having their heads down on disclosures.
There will be much to unpack in the following weeks, so stay tuned to the Briefing and we will keep you updated on the parts which matter.
Want to talk about it?
If you’d like to discuss the Omnibus, unpack it further, or gain clarity on what it means for you, then be in touch at hello@sillion.co.uk. We're always happy to chat.