The European Commission has introduced significant simplifications to the Corporate Sustainability Reporting Directive (CSRD) through its Sustainability Omnibus package. These changes aim to reduce administrative burden while maintaining the EU's commitment to sustainability goals.
The Business Impact of CSRD Simplification
The Omnibus package represents a major shift in the EU's approach to sustainability reporting. By focusing on proportionality and efficiency, these changes will save businesses an estimated €6.3 billion in annual administrative costs while mobilizing an additional €50 billion in investment capacity.
CSRD Before vs. After Omnibus
Before Omnibus
- Applied to all large companies (>250 employees) and listed SMEs
- Complex ESRS with numerous data points
- Required sector-specific standards
- Planned move to reasonable assurance
- No protection for SMEs in value chains
After Omnibus
- Only applies to companies with >1000 employees
- Simplified ESRS with fewer data points
- No sector-specific standards
- Limited assurance only
- "Value chain cap" protects smaller companies
Key Changes to CSRD Requirements
The Omnibus package introduces several major simplifications to the CSRD that will benefit businesses of all sizes:
1. Reduced Scope of Application
The most significant change is the reduction in the number of companies required to report under CSRD:
- Previous scope: All large companies (>250 employees, >€40M turnover, or >€20M balance sheet) and listed SMEs
- New scope: Only companies with >1000 employees AND either >€50M turnover or >€25M balance sheet
This change reduces the number of companies in scope by approximately 80%, focusing the reporting requirements on the largest companies while relieving smaller businesses of this regulatory burden.
Impact of the new employee threshold on CSRD reporting requirements
2. Value Chain Cap Protection
Companies with fewer than 1000 employees will be protected from excessive information requests through a "value chain cap":
- The Commission will adopt a voluntary reporting standard for companies outside the CSRD scope
- Companies in scope of CSRD cannot request information beyond this voluntary standard from their smaller value chain partners
- This creates a "shield" for SMEs and mid-sized companies from disproportionate reporting requests
Expert Insight: The Value Chain Cap
"The value chain cap is perhaps the most innovative aspect of the Omnibus package. It addresses the 'trickle-down' effect where reporting requirements cascade down supply chains, creating disproportionate burdens for smaller companies. By limiting what large companies can request from smaller partners, the EU has created a pragmatic solution that maintains transparency while protecting smaller businesses."
— Effix Regulatory Team
3. Simplified European Sustainability Reporting Standards (ESRS)
The Commission has committed to revising the ESRS to:
- Substantially reduce the number of data points required
- Clarify provisions deemed unclear
- Improve consistency with other legislation
- Remove the requirement for sector-specific standards
4. Partial Taxonomy Reporting
The Omnibus introduces flexibility in EU Taxonomy reporting:
- Companies with >1000 employees but turnover below €450 million can report on Taxonomy alignment voluntarily
- Introduction of "partial Taxonomy alignment" reporting to recognize transition efforts
- Simplified reporting templates with approximately 70% fewer data points
5. Extended Timeline
Implementation timelines have been extended:
- Two-year postponement for companies not yet implementing CSRD (Wave 2 and 3 companies)
- This gives businesses more time to adapt to the new requirements
Strategic Implications for Businesses
If You're No Longer in Scope
- Significant cost savings on reporting
- Protection from excessive information requests
- Consider voluntary reporting for competitive advantage
- Prepare for value chain information requests
If You're Still in Scope
- Simplified reporting with fewer data points
- Option for partial Taxonomy reporting
- Adjust value chain data collection processes
- Prepare for revised ESRS implementation
CBAM Simplifications: A Related Development
The Omnibus package also includes significant simplifications to the Carbon Border Adjustment Mechanism (CBAM), which are worth noting for companies involved in international trade:
- Small Importer Exemption: Importers bringing in less than 50 tonnes of CBAM goods per year are now exempt from all CBAM obligations
- Simplified Processes: For importers still in scope, the authorization, calculation, reporting, and financial liability processes have been streamlined
- Maintained Coverage: Despite exempting 90% of importers, the simplified CBAM still covers 99% of emissions
CBAM simplifications exempt 90% of importers while maintaining 99% emissions coverage
How Effix Supports the New CSRD Requirements
Our platform has been updated to fully support the simplified CSRD requirements:
Scope Assessment
Our platform automatically determines if your company falls under the new CSRD scope based on employee count and financial metrics. For companies no longer in scope, we provide guidance on voluntary reporting options.
Value Chain Management
We've implemented the value chain cap in our data collection workflows, ensuring you only request appropriate information from smaller partners while maintaining compliance with CSRD requirements.
Simplified Data Collection
Our forms and data collection processes are being updated to align with the simplified ESRS, reducing the reporting burden while ensuring compliance with the core requirements.
Partial Taxonomy Reporting
Our platform now supports reporting on partial Taxonomy alignment, allowing you to demonstrate progress toward sustainability goals even if you haven't achieved full alignment yet.
Next Steps for Your Organization
- Assess your scope: Determine if your company falls under the new CSRD threshold
- Review your value chain: Identify which partners are in scope and which are protected by the value chain cap
- Evaluate your Taxonomy alignment: Consider whether partial Taxonomy reporting would benefit your organization
- Update your sustainability strategy: Align your approach with the simplified requirements
- Implement the right tools: Ensure your reporting platform supports the new requirements
Need Help Navigating the Changes?
Our team of regulatory experts can help you understand how these changes affect your specific situation and how to adapt your sustainability reporting strategy.
Schedule a ConsultationConclusion
The CSRD Omnibus simplification represents a significant shift in the EU's approach to sustainability reporting. By focusing requirements on the largest companies and reducing administrative burden, the EU aims to balance its sustainability ambitions with business competitiveness.
These changes make sustainability reporting more manageable while still ensuring that material sustainability information is available to investors and other stakeholders. With the right approach and tools, your organization can efficiently meet these requirements while driving your sustainability strategy forward.