Omnibus proposals - Changes the European Parliament and the Council must make to uphold the CSRD

Continuing on from our recommendations on the CSDDD, below we cover the key Omnibus proposals on the CSRD, their practical implications, and the necessary changes that must be made to prevent a complete backpedaling of the commitments to the EU Green Deal.

Corporate Sustainability Reporting Directive (CSRD)

The Omnibus has proposed to:

1. Exclude 80% of companies from reporting obligations, including many that were already disclosing or gathering data this year  
2. Forbid in-scope CSRD companies from seeking information from business partners with fewer than 1000 employees beyond what is reported under the voluntary SME standard
3. Relinquish the EU’s sovereignty in sustainability standard setting by terminating the work on sector-specific standards

These proposals pose a serious threat for both preparers and users of ESG data, by radically scaling back the legislation’s remit and capacity:

1. On scope:

• Dramatically reducing the number of companies reporting in a standardised manner will limit banks and investors' availability of comparable ESG data. This is especially damaging when it comes to the urgent need for information on decarbonisation efforts and will have serious consequences on the EU’s capacity to mobilise investment towards sustainable business.
• Taking out mid-caps will make it more difficult for them to access financing from the market or public finance opportunities, limiting their growth and competitiveness in the transition economy. It will also expose them to requests from data providers and proxy services who would otherwise fill the gap and provide their own (costly) assessments.
• The Commission’s proposal is confusing companies that already started reporting according to the CSRD this year (wave 1), as well as those that started to prepare to report in 2026 (wave 2) with unclear direction regarding which standard to use. The VSME standard was prepared for very small companies, not mid-caps. It has a completely different structure and covers an extremely limited set of data points.

2. On value chain cap

• This would mean that large companies in the EU would be forbidden to request key information to suppliers in their value chain such as about exposure to risks of severe human rights impacts (e.g. forced labour) or environmental impacts (e.g. deforestation). 
• The VSME standard was developed for very small companies (10 to 250 employees) starting their ESG reporting journey. It was not meant to address engagement with suppliers on heightened risks of severe impacts, or make it illegal to engage with them for the purpose of understanding and reporting on material sustainability impacts and risks. 
• This will create major legal uncertainty regarding what information can be asked or what is illegal, as well as lead to further chaos between companies in-scope, out-of-scope and users of information.

3. On sector-specific standards:

• There are major sustainability issues that are prevalent in individual sectors in which companies operate. The first set of ESRS provide a first layer for ‘sector-agnostic disclosures’. But companies still have to determine and report on material ‘sector-specific’ information on their own.  For this, they have to navigate through several voluntary standards (such as SASB, GRI, ISSB or other sectoral initiatives).‍
• Instead of abandoning companies to navigate different standards on their own, the EU should help companies narrow down their reporting exercise and data collection.

Our recommendations

As a result, we call on the European Parliament and the Council to amend these changes by:

• Maintaining CSRD scope and, as Draghi actually recommended in his report, provide a ‘simplified CSRD reporting standard’ to small mid-caps. 

This can be easily done through the revision of Set 1 sector-agnostic standards planned for this 2025.

• Remove value chain cap limitation and use safeguards already in place in the ESRS regarding companies' focus and collection of information in their value chain. 

Overcompliance and excessive requests by auditors of sustainability reports need to be tackled with specific guidelines and standards for limited assurance. The value chain cap cannot fulfil this purpose. The solution is not to make it more complicated for businesses to access information with regards to their suppliers in case they really need it.

• Maintain EFRAG’s mandate to continue with sector-specific work, with an option to adopt them as guidance

Without these changes, the CSRD will merely sustain the status quo, dealing a major blow to EU green finance efforts, as banks and investors will lack the data needed for informed decision-making.