The EU Omnibus package: Commission proposal for simplified sustainability reporting

Rumors and speculation have circulated en masse about the so-called Omnibus package since von der Leyen hinted in November last year—following the Draghi report on the EU's future competitiveness—that relief was on the way. The proposal has now finally been published: Through extensive changes to the CSRD, the Taxonomy Regulation, CSDDD, and CBAM, as well as certain EU investment programs, the Commission will introduce relief estimated to save EUR 6 billion and boost public and private investment capacity by EUR 50 billion.

Here, we provide an overview of the proposals for key changes in reporting rules introduced with the CSRD and the Taxonomy Regulation.

Changes to rules introduced with the CSRD

The Commission proposes extensive changes to the rules introduced with the CSRD. Particularly important are changes that will reduce the number of in-scope companies by around 80% and postpone the deadline for initial reporting by two years for categories of companies that are not yet in scope. More specifically, the following is proposed:

• Changes in in-scope companies: The provisions of the EU Accounting Directive concerning sustainability reporting will be amended so that only "large undertakings" that, on the balance sheet date, have had an average of more than 1,000 employees throughout the financial year will be subject to reporting requirements. Under Norwegian law, the number of employees is calculated as the number of full-time equivalents. The definition of "large undertakings" remains unchanged, meaning that companies will be required to report if they (i) employ more than 1,000 full-time equivalents and (ii) either have a balance sheet total of more than NOK 290 million and/or net turnover of more than NOK 580 million. The same thresholds will apply to groups on a consolidated basis, where the parent undertaking would be required to report. All issuers with 1,000 or fewer employees will also be out-of-scope, which would be an important change for issuers from outside the EU with securities listed on a regulated market in the EU, as these are not covered by the provisions of the EU Accounting Directive. The changes are expected to be implemented in the EU member states' laws within 12 months after the amending directive is adopted and published in the EU's Official Journal.
• Changes in phasing-in: Alongside the proposal to increase the threshold values mentioned above, changes to the phasing-in rules are proposed. Under the current transitional rules, large undertakings or parent undertakings in large groups (that do not already report due to having more than 500 employees and being of public interest) are to report for the first time in 2026 for 2025, and listed small and medium-sized enterprises (SMEs) are to report for the first time in 2027 for 2026 (with a practically important option to postpone reporting to 2029 for the financial year 2028). The Commission proposes to postpone initial reporting for these two groups by two years, so they will report for the first time in 2028 and 2029 for the financial years 2027 and 2028, respectively. It is proposed that these changes are to be implemented in national law by 31 December 2025, i.e., before the thresholds mentioned above are adjusted upwards. The purpose of amending the phasing-in rules is to avoid a situation where certain companies are required to report for the financial year 2025 (second wave) or 2026 (third wave) and then become exempt from this requirement, which would entail unnecessary costs.
  
  These postponements will seemingly not prevent companies that are already part of the first reporting wave—i.e., those reporting this year for the financial year 2024—but that again will fall out of scope with the increased threshold value for employees, from having to report until the increased threshold value comes into effect. The companies falling in this category are large undertakings (or parent undertakings in large groups) that are public interest entities and have between 501 and 1,000 employees. These will be exempt from reporting obligations only when the changes in threshold value come into effect.

• Changes for third-country undertakings: The Commission will increase the thresholds for net turnover that must be exceeded before a subsidiary or branch of a company established outside the EU/EEA must issue a sustainability report. While currently, a subsidiary that is a large undertaking must report if the group has had sales revenues of over EUR 150 million within the EEA in each of the last two financial years, the Commission proposes that the sales revenues must be three times as high—EUR 450 million. The threshold for net turnover in branches is proposed to be increased from EUR 40 million to EUR 50 million. The phasing-in is proposed to remain as it is, meaning that initial reporting will be in 2029 for the financial year 2028. Additionally, the changes for third-country issuers mentioned above will apply.
• Changes in reporting standards (ESRS): The Commission proposes a number of changes related to the ESRS, which will reduce the reporting burden for in-scope companies.
  
  First, it is proposed to remove the sector-specific standards that were initially planned to be adopted as the second set of ESRS, thereby reducing the total number of data points that companies must report on. These are standards that would impose different reporting requirements on companies depending on the sector they operate in and would come in addition to the general standards adopted as the first set of ESRS. The entry into force of the sector-specific standards has previously been postponed to June 2026 to give companies more time to prepare, but is now proposed to be completely cut out.
  
  Second, the Commission will significantly reduce the number of mandatory data points in the already existing first set of ESRS by (i) removing those considered least important for general sustainability reporting, (ii) prioritizing quantitative data points over narrative text, and (iii) further distinguishing between mandatory and voluntary data points, without undermining the connection with global reporting standards and without affecting the companies' materiality assessment. The Commission will also aim to clarify provisions that are considered unclear.

• Changes in value chain reporting requirements: The Commission will further simplify the indirect reporting burden for smaller companies by easing the requirements for large undertakings' value chain reporting. Through a new provision in the EU Accounting Directive, member states must ensure that companies subject to sustainability reporting requirements do not require from companies in their value chain with up to 1,000 employees more information than what is to be specified in the voluntary reporting standards (see below), apart from sustainability information that is common to share among companies in the relevant sector. The Commission's intention is to significantly reduce what it calls the "trickle-down" effect on companies in the value chain of a reporting company.
• Changes in audit standards: In the existing rules, it is stipulated that the assurance of sustainability reporting should be provided with moderate assurance, but the Commission will assess whether it is necessary to require that the assurance is provided with reasonable assurance and possibly adopt rules on this by 1 October 2028. This possibility to increase the assurance requirement to reasonable assurance is proposed to be removed to increase predictability for companies.
• New voluntary standards: The Commission will introduce a provision to adopt reporting standards that companies not covered by mandatory reporting requirements can comply with on a voluntary basis. These standards will be based on the voluntary standards for SMEs developed by EFRAG.

Changes affecting Taxonomy reporting

The Commission proposes several changes affecting Taxonomy reporting, related to both the scope, form, and content of the reporting. Below, we outline some key parts of the proposal:

• Changes in in-scope companies: Currently, there is a one-to-one relationship between which companies must report under the CSRD and the Taxonomy, in the sense that all companies that are to issue a sustainability report must include Taxonomy reporting in that report. The Commission proposes to exempt companies with net turnoveer not exceeding EUR 450 million from Taxonomy reporting. For these companies, the Commission instead proposes a form of "opt-in" regime that would entail reporting obligations only where the company claims that all or some of its activities are environmentally sustainable in accordance with the Taxonomy. The company would then report on CapEx KPIs and may report on OpEx KPIs.
• Introduction of reporting on partial alignment: The Commission proposes to allow companies to report on partial alignment with the Taxonomy, which the Commission hopes will contribute to a gradual transition towards more companies conducting activities in full alignment with the Taxonomy.
• Introduction of materiality threshold: The Commission proposes to exempt in-scope companies from reporting on Taxonomy alignment for activities that are not financially material to the business (e.g., activities that do not account for more than 10% of revenue, CapEx, or assets).
• Simplified reporting templates: The Commission proposes to simplify the templates used for Taxonomy reporting in a way that will reduce data points by 70%.
• Changes in the calculation of GAR: Banks shall report on their Green Asset Ratio (GAR), which is essentially the ratio of the bank's assets that finance activities that are and are not aligned with the Taxonomy. The Commission proposes to allow banks to exclude from the denominator the exposures to companies not covered by the CSRD (assessed based on the proposed narrowed scope). This will lead to a significant increase in GAR for most banks.

Next steps

The proposals will now be assessed by the Parliament and the Council. The Commission encourages these institutions to prioritize the processing of the package, in particular the changes that postpone reporting obligations for certain companies under the CSRD, which, according to the proposal, should be implemented in member states by 31 December 2025. The second amending directive, which among other things changes the categories of in-scope companies, is to be implemented in member states within 12 months after the directive comes into force. It is not yet clear when this will happen.

The timeline for potential Norwegian implementation has not been set.

Comment

With these relief measures, the Commission aims to place the majority of the regulatory burden on the largest companies, which are also the companies that have the greatest impact on climate and the environment. The changes are estimated to provide significant cost savings, and many companies will likely welcome the proposals, whether they are exempt from mandatory reporting or because the reporting requirements will be simplified and improved.

Companies that, under current rules, are expected to become subject to reporting obligations in the coming years but are not yet subject must now consider the implications of the regulatory proposals. While awaiting final rules, some companies may find themselves in an uncertain position regarding which rules they should adhere to.

This Omnibus package is only the first in a series of announced simplification packages. The Commission has a clear goal of "delivering an unprecedented simplification effort" by achieving a reduction in administrative burdens of at least 25% for all companies, and at least 35% for SMEs, by the end of this commission's term, i.e., by 2029. We conclude where we began, by quoting EU President von der Leyen: "And more simplification is on the way."

• The Commission's subject page is available here.
• A separate Q&A on the proposals is available here.