ESG – How Will the Omnibus Affect Sustainability Reporting?

written by: Vali Marszalek, Forvis Mazars

The European Commission presented on February 26 the first Omnibus package or a package of proposals to simplify EU rules regarding corporate sustainability reporting (CSRD and Taxonomy Regulation), in-depth analysis of corporate sustainability (CSDDD), and the carbon border adjustment mechanism (CBAM). These proposals aim to contribute to a reduction of administrative burdens by 25 percent (and at least 35 percent for small and medium-sized enterprises) by the end of this mandate of the European Commission, i.e., by 2029.

But let’s take a step back. At the end of 2019, the European Commission under the first mandate of Ursula von der Leyen presented the Green Deal or the European Green Plan aimed at creating a cleaner, healthier, and climate-neutral Europe. This plan triggered a wave of regulatory initiatives, including those related to corporate sustainability reporting. Thus, the EU Taxonomy was adopted in 2020, the CSRD in 2022, and the CSDDD directive was adopted in 2024. Now, the Green Deal has been replaced by a new plan, Clean Industrial Deal, and changes related to all three mentioned regulations have been proposed. Here, we will briefly present the changes proposed regarding the CSRD.

The changes envisaged by the first Omnibus package concerning the CSRD are proposed through the adoption of two new directives. The first is the “Stop-the-Clock” Directive, which aims to postpone reporting obligations for companies from the “second” and “third waves” by two years. Companies that are supposed to report for the first time under the CSRD in 2026, i.e., 2027, would receive a two-year extension upon the adoption of this directive to avoid having to meet reporting requirements that could be amended by the adoption of the second directive due to legal obligations.

That second directive is the so-called “Content” Directive, which aims to adjust the CSRD to reduce the burden on companies. This proposal delves into the very content of the CSRD and proposes a reduction in scope and thus the number of reporting obligations, simplification of the European Sustainability Reporting Standards (ESRS), including the abandonment of sector-specific standards, and the removal of the possibility of transitioning the audit of reports from limited to reasonable assurance.

For the currently valid CSRD directive and especially its transposition into national legislation, including the Croatian Accounting Act, this means that by adopting the “Stop-the-Clock” directive, companies that are not among those currently working on publishing their first reports under the CSRD will not have to report before 2028, and in the meantime, depending on how the “Content” directive is adopted and transposed, they will likely be completely exempt from the legal obligation to report. This would reduce the number of companies subject to reporting under the CSRD by about 80 percent.

At the Beginning of the Process

It should be noted that these directives will only come into force after the European Parliament and the Council reach an agreement on the proposals and after their publication in the Official Journal of the European Union (OJEU). After that, member states will have to adopt these provisions by transposing the directives into national legislation.

The European Commission has provided for an accelerated procedure for the “Stop-the-Clock” directive with the aim of having the text adopted and transposed into national legislation by December 31, 2025. The “Content” directive will follow the normal legislative procedure, which could take at least 9 months before adoption and publication in the Official Journal of the EU (OJEU). Member states would then have 12 months to transpose the adopted provisions into their national law.

Regarding the EU Taxonomy, the first Omnibus package contains a draft Delegated Act proposing amendments and supplements to the existing regulation. After formal adoption, the delegated act will be submitted to the European Parliament and the Council for review (which usually takes two months) before it becomes applicable. The revised delegated act would then apply from January 1, 2026 (for the fiscal year 2025).

Therefore, although this first Omnibus package has sparked a wave of discussions and speculations, even hasty conclusions, it is important to note that we are only at the beginning of the EU legislative process. Along this path, possible additional amendments before final adoption are also not excluded.

If we consider that so far 19 member states have transposed the CSRD into national legislation, this means for all companies covered by the current directive that, unless national governments or regulators state otherwise, they must comply with all existing national laws until the adoption and transposition of the two proposed directives mentioned above. Additionally, the seven remaining member states have yet to transpose the CSRD.

It is undeniable that these first proposals of the Omnibus could mark a significant shift in corporate sustainability reporting, introducing new thresholds, timelines, and standards that will affect the operations of all companies across all sectors. At the Lider conference ESG – Sustainable Future, you will learn about all the proposed changes for the CSRD and ESRS, the EU Taxonomy, and CSDDD, and how to navigate the future of sustainability reporting.

Applications and more details about the ESG – Sustainable Future conference program can be found at the link.