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The Omnibus Adjustment to CSRD: A Turning Point in EU Sustainability Reporting

1. Introduction

In February 2025, the European Commission unveiled a sweeping Omnibus Simplification Package proposing substantial amendments to key EU sustainability regulations — chief among them the Corporate Sustainability Reporting Directive (CSRD). Framed as a recalibration rather than a rollback, the package aims to reduce complexity, lighten administrative burdens, and align obligations more tightly with size and capacity.
Yet its implications are profound: the Omnibus shifts the balance between ambition and pragmatism in corporate ESG reporting, reshaping who reports, when, and how deeply.

2. Key Changes Introduced by the Omnibus

Below is a structured breakdown of the material transformations proposed — many of which your original overview captured, albeit with room for nuance.

2.1 Timeline & Wave Shifts (“Stop-the-Clock”)

  • The Omnibus introduces a two-year delay to reporting obligations for Wave 2 (large undertakings) and Wave 3 (listed SMEs) under CSRD.
  • Concretely: Wave 2 firms will now report for FY 2027 in 2028. Wave 3 firms report FY 2028 in 2029 (unless excluded by new scope thresholds).
  • Meanwhile, earlier waves or entities already under the regime maintain their original timing.
2.2 Scope Adjustments (EU & Non-EU Entities)

  • EU entities: The proposal replaces the old “2 of 3 metrics” trigger (≥ 250 employees / ≥ €50 m turnover / ≥ €25 m balance sheet) with a stricter employee threshold of ≥ 1,000 plus either €50 m turnover or €25 m balance sheet. Only those meeting both will stay in scope.
  • Non-EU firms: The EU turnover threshold jumps from €150 million to €450 million, and additional connection requirements apply: for instance, the foreign parent must either have a large EU subsidiary or a branch with turnover ≥ €50 million.
  • A consequence: the number of companies in scope may shrink dramatically — some commentators estimate reductions on the order of 80 %.
2.3 Value-Chain / Supply-Chain Data Requests (“Value Chain Cap”)

  • One of the more novel proposals is a “value-chain cap”, which limits how much data a reporting company may legally compel from upstream or downstream entities falling outside CSRD scope.
  • In practice, the cap ties requested information to what a non-CSRD entity could voluntarily report under a forthcoming VSME (voluntary SME) standard, to be developed via delegated acts.
  • This acts as a protective “shield”: companies not in scope cannot be burdened with open-ended demands from larger reporting firms.

2.4 Assurance Regime

  • Under original CSRD plans, reporting would begin under limited assurance, with a transition toward reasonable assurance by 2028.
  • The Omnibus proposal eliminates that escalation, so only limited assurance is mandated—reasonable assurance is no longer required.
  • Correspondingly, the requirement to develop a European limited assurance standard by October 2026 remains, but the obligation to adopt a reasonable assurance standard is removed.
2.5 ESRS / Disclosure Requirements

  • The Commission proposes substantive simplification of the ESRS (European Sustainability Reporting Standards): fewer datapoints, streamlined templates, and removal of sector-specific ESRS entirely.
  • The intent: reduce burden, eliminate overlap, and ensure consistency with other legislation (e.g. taxonomy, corporate law).
  • Final exposure drafts for the revised ESRS are expected by mid-2025, with adoption later in the year.
2.6 Taxonomy & Alignment

  • The Omnibus also loosens mandatory EU Taxonomy disclosure obligations for certain entities. Under the proposed change, only very large firms would be required to report taxonomy alignment.
  • Entities with ≤ €450 million net turnover (even if in future CSRD scope) may have the option to “opt in” to taxonomy reporting rather than being forced into full alignment.
  • The proposal also introduces a materiality threshold for taxonomy disclosures and simplifies the “Do No Significant Harm” (DNSH) criteria for pollution prevention and control.
3. Consequences & Strategic Impacts

Your original sections on practical impacts were solid; the following reorganises them slightly and tightens linkages to the Omnibus changes.

3.1 Impacts for Companies (Inside & Outside Scope)
Inside scope (very large, global firms):

  • The delay buys extra time to build data systems, governance structures, and staff capabilities.
  • The removal of the move to reasonable assurance lowers long-term audit and assurance burdens.
  • Requests to smaller suppliers for ESG data become bounded by the value chain cap and the emergent VSME standard.
  • Firms may choose lighter or voluntary paths for taxonomy alignment rather than mandatory compliance.
Firms previously in scope but now excluded (mid-size, threshold victims):

  • They lose mandatory disclosure obligations; many may shift to voluntary standards (e.g. VSME, GRI) to maintain credibility.
  • Existing momentum in ESG integration could stall, and a baseline of comparability across firms might weaken.
  • The signal to suppliers and value chain partners may diminish — less pressure to engage in ESG dialogues or capacity building.
SMEs and non-CSRD suppliers/value chain actors:

  • They are less exposed to data demands and reporting obligations.
  • But they may also lose visibility and pressure to improve sustainability practices, reducing overall chain ecosystem maturity.
3.2 Impacts for Investors, Lenders & Analysts

  • The shrinkage of scope (especially mid-size firms) will reduce the volume and uniformity of ESG disclosures — data gaps and information asymmetry risk rise.
  • With only limited assurance and flexibility in reporting, stakeholder confidence in disclosed ESG data may weaken.
  • Analysts will rely more on voluntary standards, third-party providers or sustainability ratings to fill gaps.
  • Comparability across industries will suffer as fewer firms report under a common ESRS framework.
3.3 Impacts for Regulators, Enforcement & Member States

The narrower scope means fewer companies to monitor, reducing administrative and enforcement burdens.
  • But Member States must carefully transpose the directive and ensure consistency in interpretation of limited assurance, value chain cap rules, and national deviations.
  • The delay and changes may spark legal or political pushback from stakeholders arguing that environmental and social accountability is being diluted.
  • The legislative negotiation is not yet done; the final text may shift further, creating uncertainty during the transition.
3.4 For Civil Society, ESG Advocates & Public Interest

  • Many will view the Omnibus as a rollback of transparency, particularly in sectors or firms now excluded.
  • There will be pressure for robust voluntary disclosures to fill accountability gaps.
  • Without sector ESRS, comparability and granular insights may decline, making benchmarking and advocacy harder.
  • The omittance of reasonable assurance may raise concerns about credibility and audit rigor in ESG disclosures.
4. Risks, Critiques & Open Unknowns

  • Transparency dilution & fragmentation: Slimmer scope and simplified rules risk weakening the unified architecture of CSRD; comparability may erode across sectors.
  • Assurance adequacy: Limited assurance alone may not suffice for forward-looking, complex ESG disclosures; stakeholders may question its rigor.
  • Sector blindness: Dropping sector ESRS shifts burden to individual firms to interpret their sector’s risks — likely yielding inconsistent disclosures.
  • Legislative instability: The Omnibus proposal still must navigate Parliament and Council; thresholds and rules could change materially.
  • Transition misalignment: Firms that have already invested heavily in full CSRD readiness may find themselves excluded, or forced to scale back investments.
  • Framework divergence: With fewer firms under the mandatory scheme and with optional taxonomy paths, alignment with ISSB, GRI, and other global standards may fragment.

5. Strategic Recommendations & Next Steps

Here’s how different stakeholders might respond:

For affected companies (or those near thresholds):

  1. Reassess scoping: Monitor final negotiations and estimate whether you will remain inside or fall outside under the new thresholds.
  2. Stagger investment: Delay full CSRD infrastructure investments until the legislative outcome is clearer, but continue building foundational data and governance systems that can adapt.
  3. Adopt voluntary standards: Even if excluded, consider disclosing under VSME, GRI, or others to maintain credibility.
  4. Engage advocacy & consultation: Provide comments during delegated act development (e.g. VSME, assurance standard) and liaise with associations and authorities.
For investors, analysts & lenders:

  1. Adjust models and expectations: anticipate fewer mandatory disclosures, weaker assurance, and gaps in comparability.
  2. Leverage third-party data, ESG ratings, and alternative data sources.
  3. Press firms (voluntarily) for transparency beyond the minimum — particularly in supply chains and climate metrics.
For regulators, national authorities & oversight bodies:

  1. Ensure consistent national transposition, especially for limited assurance regimes.
  2. Provide clear guidance on value chain caps, assurance practices, and voluntary standard development.
  3. Monitor legislative negotiations closely, and encourage alignment between member states to avoid fragmentation.
For civil society, standard setters & ESG advocates:

  1. Promote strong voluntary disclosure norms and amplify calls for high standards even outside mandatory scope.
  2. Advocate for credible assurance standards and transparency in legislative debates.
  3. Use public pressure and market incentives to maintain momentum in corporate ESG practices, particularly among excluded mid-size firms.
6. Conclusion

The 2025 Omnibus proposal marks a critical inflection in the EU’s sustainability framework. While it retains core CSRD architecture — double materiality, ESG in the management report, a baseline assurance level — it retrenches significantly on speed, coverage, and stringency. The logic behind it is clear: reduce compliance burdens, sharpen proportionality, and allow firms time to adapt.

But this recalibration comes at a trade-off. Transparency, comparability, and assurance rigor may be diminished. Many mid-size firms may drop out of the formal regime altogether, leaving a patchwork of voluntary disclosures in their stead. Ultimately, the success or failure of the revised CSRD will depend on how stakeholders — companies, investors, regulators, and civil society — manage the transition, guard against backsliding, and maintain pressure for credible sustainability disclosure.

Sources for Omnibus CSRD Article

  1. Deloitte — European Sustainability Reporting: Omnibus Update and Reporting Standards
  2. European Commission — Corporate Sustainability Reporting (CSRD)
  3. Grant Thornton — The Omnibus Package: EC Releases Proposals
  4. BSR — EU Omnibus Fact Sheet (Mar 2025)
  5. Skadden — European Commission Publishes ESG Reporting Omnibus Package
  6. European Commission — Omnibus Package (CSRD, ESRS, Taxonomy)
  7. Deloitte — Heads Up: Commission Proposes Reduction of CSRD Scope
  8. A&O Shearman — EU Omnibus and the CSRD – Ten Burning Questions
  9. Sodali — Breaking Down the Omnibus: Implications for the CSRD
  10. Mayer Brown — European Commission Presents “Omnibus” Simplification Package
  11. McDermott Will & Emery — Simplification Omnibus Package
  12. Morrison Foerster — Latest Developments on the Omnibus Package and ISSB
  13. Ropes & Gray — The Shape of EU CSRD and CSDDD to Come?

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