Sustainability Reporting & ESG
OMNIBUS PACKAGE: CSRD & CSDDD
On 26 February, the European Commission published an ‘Omnibus’ package, with proposals to aimed at simplifying obligations under the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).
Stop the Clock
The package includes a “stop the clock” proposal delaying CSRD reporting by two years for companies due to report in 2026 and 2027 and postponing transposition and first application of the CSDDD by one year. The proposal does not amend the reporting timeframe for companies within scope for the first phase of reporting, in respect of financial years starting on or after 1 January 2024.
Proposed Amendments to CSRD and CSDDD
A second proposal sets out amendments to the reporting, due diligence and climate transition plan obligations under the CSRD and CSDDD. Key proposed amendments include:
CSRD Scope - confining application to large companies/ groups with more than 1,000 employees, aligning it more closely with the scope of the CSDDD.
Non-EU Companies - the EU net turnover threshold for non-EU companies is increased to EUR 450 million.
Optional Taxonomy Disclosures - for companies with net turnover not exceeding EUR 450 million where they do not claim Taxonomy-alignment.
Value Chain Cap – a limit on the information that reporting companies can request from entities within their value chains with not more than 1,000 employees.
Climate Transition Plans - the requirement under the CSDDD to “put into effect” a climate transition plan is replaced with requirement to include implementation actions, aligning with CSRD reporting requirements.
Simplified Due Diligence – under the CSDDD due diligence would be limited to direct business relationships, other than where there is plausible information suggesting adverse impacts in the value chain.
ESRS
The current set of ESRS will be revised and simplified, including a significant reduction in the number of mandatory data points. The proposal removes the mandate for sector-specific ESRS but the requirement to report from a “double materiality” perspective is retained.
Next Steps and Timing
The legislative proposals will now be submitted to the European Parliament and Council for consideration and adoption. The European Commission has asked its co-legislators to expedite the legislative process, in particular for the “stop the clock" proposal which, as currently drafted, is due to be transposed by Member States by 31 December 2025. Member States will have a 12-month transposition period for the amendments to both CSRD and CSDDD set out in the second proposed directive once it enters force.
For more on the proposed amendments, see our recent Insights: Omnibus Package: Proposed Amendments to CSRD and CSDDD.
EU TAXONOMY: PROPOSALS TO SIMPLIFY REPORTING
Alongside the Omnibus Package, the European Commission published a call for evidence on a draft Delegated Act setting out proposed amendments to the Taxonomy Disclosures Delegated Act, Taxonomy Climate Delegated Act and Taxonomy Environmental Delegated Act, aimed at simplifying Taxonomy- reporting.
Proposed amendments to the Taxonomy Disclosures Delegated Act include the introduction of a de minimis threshold, simplified reporting templates resulting in a reduction of reported data points and simplified key performance indicators for financial institutions.
The Commission is also seeking feedback on two alternative options for simplifying the most complex ‘do no significant harm’ criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy.
The consultation remains open for feedback until 26 March 2025. The European Commission intends to adopt the Delegated Act in Q2 2025, and it will apply from 1 January 2026.
PROPOSED AMENDMENTS TO CBAM
The EU Carbon Border Adjustment Mechanism (CBAM) Regulation applies to certain goods being imported into the EU. Products currently within scope of the CBAM are listed in Annex I of the CBAM Regulation and fall into categories of cement, iron and steel, aluminium, fertiliser, and electricity and hydrogen.
The CBAM is designed to apply the same carbon costs to those goods as would have been incurred had they been produced in the EU. Transitional reporting obligations have applied since 1 October 2023 and run until 31 December 2025 with the CBAM applying in full from 1 January 2026. For more information on CBAM see our Insights: Carbon Border Adjustment Mechanism: Provisions applying from Q4 of 2024.
As part of the Omnibus package, the European Commission published proposed amendments to CBAM. Key proposed changes include exempting smaller importers by the introduction of a de minimis threshold, simplifying obligations around authorisation of declarants, data collection from producers outside the EU, calculation of embedded emissions, emissions verification rules, and calculation of declarants’ financial liability.
For more on the proposed amendments, see our recent Insights: Omnibus Package: Revision of the Carbon Border Adjustment Mechanism.
EUROPEAN SINGLE ELECTRONIC REPORTING FORMAT AND SUSTAINABILITY REPORTING
ESMA’s Consultation Paper on how the European Single Electronic Format (ESEF) can be applied to sustainability reporting closes on 31 March 2025. The Consultation Paper includes proposals for:
Defining the marking-up rules for sustainability reporting; with a phased implementation for ESRS sustainability statements in 3 steps, each lasting 2 years, and a full implementation for Article 8 Taxonomy disclosures.
- Redefining the marking up approach for the Notes to the IFRS consolidated financial statements.
- Amendments to the RTS on the European Electronic Access Point.
ESMA plans to publish a final report in Q3 2025 and to submit the draft RTS to the Commission for endorsement.
SUSTAINABILITY REPORTING HUB
Our Sustainability Reporting Hub is a resource to assist companies reporting under the CSRD and EU Taxonomy Regulation and preparing for due diligence and transition plan obligations under the CSDDD.