CSRD at a Crossroads: What the Omnibus Package Means for Corporate Sustainability

Introduction

The Corporate Sustainability Reporting Directive (CSRD) has been instrumental in enhancing corporate transparency and accountability within the European Union. Developed to ensure businesses provide accurate and comparable environmental, social, and governance (ESG) data, the directive has been a cornerstone of the EU’s sustainability agenda.  

‍

Recently, the European Commission announced the first official Omnibus proposal, detailing significant revisions to the CSRD. The proposal, leaked late on Friday evening, has sparked immediate controversy. Many experts see the change as a move towards deregulation rather than simplification, raising concerns about the EU’s commitment to sustainability.

‍

As businesses, investors, and policymakers prepare for this transition, understanding its implications becomes crucial. Will this shift enhance corporate sustainability reporting, or will it dilute ESG accountability?

‍

‍

CSRD Background

Introduced in 2023 as an extension of the Non-Financial Reporting Directive (NFRD), the CSRD significantly broadened sustainability disclosure requirements. Unlike its predecessor, which applied only to large public-interest entities, the CSRD expanded its scope to cover all large companies and publicly listed SMEs, ensuring that sustainability reporting became more standardised across industries.  

‍

One of the CSRD’s most notable features is its introduction of mandatory third-party assurance for ESG disclosures, increasing comparability and reliability. It also sought alignment with global standards, such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI), to facilitate cross-border investment and improve investor confidence.  

‍

By creating a structured framework for ESG disclosures, the CSRD aimed to ensure businesses were held accountable for their environmental and social impacts while fostering long-term sustainability commitments.  

‍

Omnibus Proposal

The Omnibus Package is a proposed legislative initiative designed to consolidate various EU regulations into a more cohesive framework. The first official proposal introduces several key modifications to the CSRD framework, including:

‍

• Narrowed Scope: The reporting threshold has been raised, limiting CSRD compliance to companies with more than 1000 employees and a turnover exceeding €450 million, significantly reducing the number of companies required to report.  

• Reduced Due Diligence Requirements: The Corporate Sustainability Due Diligence Directive (CSDDD) will now apply only to direct suppliers, and civil liability for companies has been removed.  

• Weakened Climate Obligations: While climate transition plans are referenced, there is no binding requirement for companies to implement them.

• Delayed Implementation for SMEs: Certain sustainability reporting requirements have been postponed, allowing SMEs additional time to comply.  

‍

The European Commission argues that these modifications will lower administrative costs, streamline reporting requirements, and create a more business-friendly regulatory environment. However, critics have labelled the change as “reckless” and “disproportionate”, warning that they could erode corporate accountability and transparency.  

‍

“Scaling back reporting requirements means losing vital insights into corporate risks and opportunities”, says María Mendiluce, Chief Executive of the We Mean Business Coalition, on LinkedIn. “Without comprehensive sustainability data, businesses, investors, and governments will struggle to address climate-related vulnerabilities, weakening their ability to drive resilience and long-term competitiveness.”

‍Industry Perspectives

Reactions to the proposed changes have been mixed. Several European nations, including Germany and France, support the initiative, arguing that reducing compliance burdens will boost economic competitiveness. However, sustainability advocates and some policymakers have expressed deep concerns.  

‍

“Overall, this would probably leave around 10 per cent of the largest firms (maybe 5,000 or so) within the scope,” says Maximilian Müller, a professor at the University of Cologne, on LinkedIn.  

‍

In addition, NGOs and investor coalitions warn that the lack of mandatory climate transition plans and the removal of civil liability provisions for due diligence obligations could significantly undermine corporate sustainability efforts.  

‍

What's next?

The release of the first Omnibus proposal marks a critical turning point for corporate sustainability reporting. While regulatory efficiency and reduced compliance costs are attractive, ensuring that sustainability standards remain robust is essential.  

‍

What Businesses Should Do Now:

‍

• Stay Informed: Closely monitor legislative developments, as the final version of the proposed Omnibus Package may evolve.  

• Engage with Policymakers: Actively participate in consultations to advocate for maintaining strong ESG standards to foster sustainable business practice and resilient markets.  

• Assess Internal Readiness: Evaluate how potential changes to the scope, reporting standards, and timelines of the CSRD will affect your business and adjust sustainability strategies accordingly.

• Prepare for Diverging Regulations: With member states likely to interpret the framework differently, multinational companies should prepare for potential compliance fragmentation.  

• Seek Expert Guidance: Specialist support can help businesses navigate these regulatory changes and ensure ESG commitments remain credible.  

‍

The coming months will be crucial in determining whether these changes result in enhanced regulatory efficiency or a weakening of sustainability obligations. As the debate continues, one thing remains clear: ESG transparency and accountability must remain central to corporate sustainability efforts.

At Arete Zero Carbon, we specialise in helping businesses navigate complex sustainability regulations. If you want to ensure compliance while maximising ESG opportunities, contact us today to learn how we can support your sustainability journey.

‍

Written by Zac Meadowcroft