EU Omnibus Package: Significant Rollback of Corporate Sustainability Reporting Rules

The European Commission has announced its first EU Omnibus package to significantly reduce sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) and other key ESG regulations. The proposal aims to streamline compliance, cutting annual administrative costs by an estimated €6.4 billion.

In addition to removing most companies from the CSRD, the Commission plans to revise the ESRS to substantially reduce the number of data points required by the sustainability reporting standards. It will not introduce planned sector-specific standards or require reasonable assurance under the CSRD.

Key Changes

• CSRD Scope Reduction: Only companies with more than 1,000 employees and €50 million in revenue or €25 million in assets will be required to report, exempting 80% of companies from the regulation. The second wave of CSRD reporting is postponed by two years.
• Simplification of reporting standards: The European Sustainability Reporting Standards (ESRS) will be revised to reduce data points, remove sector-specific requirements, and eliminate the need for reasonable assurance.
• Voluntary SME Reporting: Smaller companies can follow the newly introduced Voluntary SME (VSME) standards, which limit the sustainability data requests from larger companies and banks.

Implications for Financial Market Participants

• Regulatory compliance: Financial institutions must align their sustainability disclosures with the revised requirements.
• Supply chain adjustments: Banks and investors should adapt due diligence processes for SMEs, considering the shift to voluntary reporting.
• Strategic planning: ESG-driven investment strategies and risk assessments should account for these regulatory changes.

These reforms mark a significant shift in the EU sustainability reporting landscape, reducing the regulatory burden on companies while maintaining ESG transparency at a more targeted level. Companies should assess how the changes affect their reporting obligations and prepare accordingly.