As announced, on 26 February the European Commission presented the first part of the Omnibus Package to simplify the existing regulations in the field of sustainability reporting (“Omnibus Package”), namely:
- Corporate Sustainability Reporting Directive (“CSRD”) (Directive (EU) 2022/2464),
- Corporate Sustainability Due Diligence Directive (“CSDDD”) (Directive (EU) 2024/1760) and
- Taxonomy Regulation (Regulation (EU) 2020/852).
The aim of the Omnibus Package is to reduce sustainability reporting obligations by 25%, while additional relief of up to 35% is foreseen for the SME sector.
The reason for proposing the Omnibus Package was the EU Competitiveness Compass report, in which the Commission announced a series of measures to improve competitiveness and reduce bureaucratic obstacles through greater efficiency, less regulatory complexity and more efficient administrative procedures.
1. CSRD Amendments
The key changes to the CSRD are a smaller number of companies required to report and a postponement of the application deadlines.
The CSRD currently applies to:
- Public interest entities with more than 500 employees, starting from the 2024 financial year;
- Companies that meet at least two of the three criteria: over 250 employees, more than €40 million in revenue or more than €20 million in total assets, starting from 2025; and
- SMEs listed on the stock exchange (except micro-enterprises), small banks and insurance companies, starting from 2026, with the possibility for SMEs to opt-out in terms of a temporary exemption from the sustainability reporting obligation, until 2028.
Proposed changes:
- Reducing the number of reporting entities, so that the obligation now applies only to companies with more than 1,000 employees and revenues above 50 million euros or total assets above 25 million euros, which has reduced the number of reporting entities by as much as 80%;
- Limiting the obligations for third-country companies, so that the CSRD would apply only to companies that generate revenues above 450 million euros in the EU market;
- Voluntary reporting for SMEs, so that SMEs could use simplified standards (Voluntary reporting standard for SMEs – VSME), which reduces the administrative burden;
- Postponing the application of the obligations, so that the deadlines for the second (2025) and third (2026) reporting phases are postponed by two years and
- Simplifying reporting standards, so that the existing standards would be significantly simplified and the planned sectoral standards would be abolished.
2. Amendments to the CSDDD
The most important proposed amendments to the CSDDD are simplified supplier due diligence and extended implementation deadlines.
The CSDDD obliges large companies to observe due diligence with regard to human rights and environmental standards in supply chains.
The proposed amendments through the Omnibus package are as follows:
- Extension of the implementation deadline, so that the new rules would apply from 26 July 2028, instead of 2027;
- The focus shifts from all suppliers to direct suppliers, which companies would be obliged to check, while checking the entire chain would only be carried out if there are specific risks;
- Reduced frequency of risk analyses, by allowing companies to update their reports at longer intervals;
- Member States would independently decide on the liability of companies for breaching obligations, in relation to the EU’s competence to impose sanctions in case of non-compliance with the CSDDD obligations.
3. Amendments to the Taxonomy Regulation
The Taxonomy Regulation defines the criteria for determining the environmental sustainability of business activities and, from 1 January 2022, applies to companies subject to the CSRD, formerly the NFRD (Non-Financial Reporting Directive 2014/95/EU)/ reporting.
The proposed changes through the Omnibus package are as follows:
- Reducing the number of reporting entities, so that the reporting obligation applies only to companies with more than 1,000 employees and revenues exceeding 450 million euros.
- Introducing voluntary reporting for all companies below the specified threshold.
For additional information or consultations, the Tasić & Partners team is at your disposal.