As part of the EPCA Talent and Leadership Committee's ongoing commitment to fostering impactful leadership through ESG, we ran an ESG-related webinar series from November 2024 to March 2025. The final webinar wrapped up the series, summarizing the key strategies and best practices covered, as well as addressing the implications of the recent EU regulatory simplifications.
Download the webinar presentation slides HERE.
Expected changes to CSRD through the EU’s simplified regulatory proposal – Omnibus I
On 26 February 2025, the European Commission released two legislative proposals (referred to as the Omnibus package) designed to simplify regulatory frameworks related to sustainability (Omnibus I) and investment (Omnibus II). The sustainability package primarily aims to ease reporting requirements, reduce regulatory burdens, and boost the EU's competitiveness. This package proposes amendments to various directives and delegated regulations: the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy Delegated Acts, the Corporate Sustainability Due Diligence Directive (CSDDD), and the Carbon Border Adjustment Mechanism (CBAM).
The first part of this article summarizes the proposed changes regarding CSRD and EU Taxonomy and outlines feasible reactions to the Omnibus package based on a company’s affectedness and CSRD implementation progress. For detailed information on the proposal please refer to the official European Commission’s publication of the Omnibus package.
Proposed amendments
The proposed changes to CSRD are separated into two proposals.
The first proposal, also referred to as “stop-the-clock” proposal, offers a two-year postponement of reporting obligations for the second and third wave[1] of reporting entities. Companies that are set to begin reporting under the CSRD in the financial years 2025 and 2026 would now need to submit their initial reports for the financial years 2027 and 2028, respectively. This proposal is expected to undergo an accelerated legislation procedure and be adopted within a few months. However, the other drafts relating to content adjustments and simplifications are expected to follow the standard legislative procedure with extensive negotiations.
What is particularly relevant for wave 2 and 3 companies is the scope reduction, limiting the reporting obligation to companies with more than 1,000 employees. This is estimated to reduce the overall scope of affected companies by 80%. Additionally, there are plans - as part of the second proposal - to overhaul the ESRS standards to significantly reduce the number of reporting data points and to better align the requirements with other related EU legislation. While the details of these simplifications are not yet known, the concept of double materiality is expected to be maintained. The development of sector-specific standards is no longer planned. Instead, a voluntary reporting standard, likely based on the VSME standard, will be established as a “value chain cap” to limit information requests for entities outside the scope of CSRD. Furthermore, auditing requirements will remain at a limited assurance level.
The second proposal refers to the EU Taxonomy Regulation, where the Omnibus package proposes mandatory reporting obligations only for large companies with over 1,000 employees and a net turnover of 450 million EUR. Furthermore, it introduces a materiality threshold which will allow companies to focus on significant economic activities. In addition, further simplifications are planned with regards to key performance indicators (KPIs), reporting templates and Do No Significant Harm (DNSH) criteria as well as a future general revision of all technical screening criteria.
Courses of action
The potential reactions to the Omnibus package will vary depending on the progress of CSRD implementation and the specific reporting wave that a company falls under. Therefore, as a first step, companies should check how the proposed changes of the reporting scope affect their regulatory exposure. Subsequently, they can explore various options for action. In any case, it is important to bear in mind that these are just proposals, so further changes are likely to occur. Furthermore, with regards to CSRD, as opposed to the delegated regulations supplementing the EU Taxonomy, any adopted changes also need to be translated into national law by the corresponding member states. Taking these uncertainties into account, companies should concentrate on the core topics that are likely to remain relevant, and that generally support business decision-making as well as contributing to their long-term sustainable transformation, going beyond mere reporting requirements.
Figure 1 provides some recommendations for companies from different waves and varying CSRD implementation progress. The preferred course of action should be determined on a case-by-case basis, taking a company’s regulatory risk appetite into account.
Lessons learnt and best practices in implementing sustainability initiatives
Notwithstanding the current uncertainties surrounding the Omnibus proposal, implementing sustainability initiatives and adhering to regulatory requirements like the CSRD present considerable challenges. This webinar series has gathered insights from EPCA member companies and industry best practices that can help organizations overcome these challenges across four key areas:
- CSRD implementation
- Sustainability governance and leadership
- Strategic drivers for sustainability initiatives
- ESG data management and tools
CSRD implementation
As companies navigate the complexities of CSRD, early preparation is crucial, especially for companies new to sustainability reporting. This preparation can include writing test chapters, conducting trial runs for data collection, and aligning efforts with auditors. Given the extent of data required, establishing processes and responsibilities for data collection is essential. In addition, incorporating expertise from various areas within the company can greatly enhance the effectiveness of CSRD implementation. In view of the Omnibus package, companies should carefully reassess and plan the next steps of their CSRD projects, as outlined above
Sustainability governance and leadership
A clear governance structure and strong sustainability leadership are crucial in driving sustainability and reporting initiatives. This requires clearly defining roles, responsibilities, and allocating dedicated resources, while also ensuring transparency, both internally and externally. Internally, sustainability strategies and measures should be effectively communicated to foster awareness and acceptance. Sustainability capacity building, including training and education for employees and leaders, can empower teams to contribute meaningfully to sustainability efforts. Additionally, interdisciplinary teams often prove more successful due to their diverse range of insights and approaches.
Strategic drivers for sustainability initiatives
Sustainability initiatives should extend beyond compliance and align with a company’s overall corporate strategy to create real business value. The CSRD methodology, particularly the double materiality assessment (DMA), can be instrumental in identifying strategic drivers. By embedding ESG objectives into business-relevant KPIs and using techniques like predictive analytics and scenario analyses, businesses can proactively anticipate and respond to future sustainability challenges and opportunities. Recognizing the importance of ESG performance is crucial, as clients and investors increasingly prioritize companies with robust sustainability ratings and transparent sustainability efforts.
ESG data management and tools
Effective ESG data management is crucial to the successful implementation and reporting of sustainability initiatives. As organizations strive to enhance their ESG performance, they encounter significant challenges related to data availability, quality, and management. Therefore, companies should prioritize on developing meaningful, business-relevant KPIs and should integrate ESG data collection into existing systems where possible.
In addition, the implementation of a centralized ESG data management is essential to create a consistent, reliable data base. In order to consolidate often-fragmented ESG data sources, effective data collection and a robust data governance framework with clear roles and responsibilities should be defined. Automation can play a valuable role in streamlining data collection, but its benefits and costs must be carefully evaluated based on the scope, complexity, and update frequency of the data. A structured requirements analysis should be carried out to identify and prioritize critical data gaps and the most important bottlenecks.
Conclusions
Despite the uncertainties introduced by legislative proposals such as the Omnibus I, progressing the sustainability transformation remains critical in order to meet the ambitious sustainability targets set by companies and policymakers. The postponement of reporting requirements can thus be seen as an opportunity to allow companies to focus on high-impact sustainability initiatives that create business value and support strategic decision-making.
Authors: Denis Ludwig and Johannes Rehn, d-fine
[1] The waves refer to the first year of reporting obligation: wave 1 - reporting in 2025 (for financial year (FY) 2024), wave 2 - reporting in 2026 (for FY 2025), wave 3 - reporting in 2027 (for FY 2026). For more details cf. the article on CSRD basics: https://epca.eu/csrd-basics