As expected, the European Commission released its widely anticipated sustainability-related Omnibus simplification package. Notably, among other significant impacts, the European Commission’s FAQs indicate that the changes would reduce the number of companies in scope of the CSRD by about 80% and reporting and diligence requirements would be postponed, simplified, and reduced.
Key proposals include:
CSRD
- 2-year postponement of reporting requirements for companies who were expecting to report in 2026 for the 2025 financial year to 2027 financial year (see table in this Freshfields memo for proposed timing), to be agreed as a ‘quick fix’ standalone amendment to the directive
- Increasing the CSRD reporting thresholds to companies with over 1,000 employees plus €50 million in turnover or a balance sheet total above €25 million
- Limiting the information that in-scope companies can request from companies in their value chains with fewer than 1,000 employees
- Eliminating sector-specific standard-setting
- Removal of the potential for a reasonable assurance standard, but limited assurance remains
- Commitment to review the ESRS to substantially reduce the number of data points
CSDDD
- Postponement of implementation to July 2028 for largest companies, to be agreed as a ‘quick fix’ standalone amendment to the directive
- Limitation of due diligence obligations to direct business partners except where the company has plausible information of adverse impacts
- Limitation of information in-scope companies can request from their SMEs and small midcap business partners
- Removal of EU-wide civil liability regime for non-compliance
- Removal of the requirement to “put into effect” a climate transition plan in favor of adoption in alignment with the CSRD although language remains ambiguous
Taxonomy
- EU Taxonomy reporting would become voluntary for companies with a turnover below €450 million.
Next steps: This proposal will now undergo separate review and amendment processes by the European Parliament and the Council (representing the EU27 Member States). Once each institution has adopted its position, the Commission, Parliament, and Council will sit together in “trilogues” and seek to reconcile positions until they can agree on a final common text. This process has no set timeline, and usually lasts around 18 months or longer if positions are very far apart, as is expected in this case.
Please see the following additional summaries from Cooley, Fenwick, Hogan Lovells, Mayer Brown, Ropes & Gray, and Sullivan & Cromwell.