Omnibus – What’s the current status?

Why Omnibus and who will be affected by the legal requirements going forward?
The EU’s Draghi report, published in 2024, emphasised the need for a stronger business environment and reduced administrative burden for European companies. In response, the European Commission introduced the Omnibus proposal, aiming to simplify regulations such as the CSRD, the CSDDD, and the EU Taxonomy, while reducing the number of companies affected. The final decision on the legal requirements and the scope is pending, as these will be determined following a trilogue between the Commission, the Parliament, and the Council, which is expected to take place earliest in late 2025.

What will happen to ESRS for large companies?
On 31 July, EFRAG published a draft simplifying the ESRS, which is open for consultation until 29 September 2025. A final proposal is to be submitted to the Commission by EFRAG on 30 November this year. The goal of the revision is to make reporting more manageable while maintaining its relevance and alignment with the European Green Deal.

Below are some of the primary changes proposed by EFRAG:

• Fewer data points: A 57% reduction.
• New structure: Disclosure requirements (DR) and application requirements (AR) are merged, with supporting material provided in the annex.
• Double materiality assessment: Introduction of the Fair Presentation Framework and a top-down approach for material topics.
• Increased readability and clarity: Clearer mandatory content, removed voluntary disclosures, simplified language, eliminated repetitions, and fewer granular requirements.

What should be reported in the financial year of 2025?
Based on the ‘Stop the Clock’ decision made in spring this year, only large public-interest companies with over 500 employees (known as ‘first wave’ companies) will be required to report under CSRD in 2025. The reporting requirements for other companies have been postponed by two years. However, depending on the outcome of the Omnibus legislation (see earlier in this article), certain companies may be fully exempt from CSRD reporting in the future. In the meantime, the previous sustainability reporting requirements under the Swedish Annual Accounts Act (ÅRL, based on the NFRD Directive) is suggested to continue to apply for companies for whom CSRD is postponed, using the same criteria as before.

In July, the Commission decided on so-called ‘quick fix‘ changes, meaning certain reporting requirements for first wave companies have been postponed. Some phasing-in measures apply to all first-wave companies, while others only apply to those with fewer than 750 employees.

What has happened to the VSME standard? 
The VSME standard (Voluntary Standard for Small and Medium-sized Enterprises) has not been updated over the summer, and the December 2024 version still applies. The EU Commission has adopted a recommendation encouraging small and medium-sized enterprises to use the voluntary standard. The aim is, among other things, to help these companies meet demands from larger companies and investors. That said, the Commission has signaled that the VSME standard may be revised in the future, depending on how the scope of CSRD evolves and how ESRS develops.

How should companies of different sizes approach CSRD?
During the webinar, we discussed how companies of different sizes can respond to the uncertainty surrounding future reporting requirements. Please see the recording for more detailed insights. However, they all have one thing in common: all companies need to continue monitoring developments and consider what factors, apart from legal ones, are driving the need for sustainability work and reporting.

What is the current status of CSDDD and the Taxonomy? 
The Council has put forward a proposal to simplify CSDDD’s requirements. Among other things, this proposal states that companies only need to include their own operations and direct suppliers in their due diligence process, and the mandatory climate transition plan is also simplified.

For the EU Taxonomy, the Commission has adopted a regulation to simplify application for companies already in scope (or coming into scope by year-end). The regulation is expected to enter into force on 1 January 2026 (for 2025 reporting), but may be delayed if companies find the previous setup easier. The simplifications include introducing a materiality threshold, allowing operating costs to be excluded, and reducing the number of data points in reporting tables.

The future scope of both CSDDD and the Taxonomy is a part on the ongoing Omnibus negotiations.

So, what does this mean for the green transition?
Initially, the Omnibus was discussed as a means of simplification, but based on the current proposals, it is clear that this is not the only objective. The EU is proposing a significant lowering of ambition with regard to sustainability reporting. Not only are the proposals put forward by the Council, Parliament and Commission less ambitious than the original CSRD rules, they are even less ambitious than the old sustainability reporting legislation. The CSDDD proposal, in particular, risks significantly undermining the directive’s original purpose. The Taxonomy adjustments, on the other hand, appear reasonable, given the challenges seen in its earlier implementation.

The ongoing simplification of EU sustainability regulations could slow down progress and put companies that want to address sustainability-related risks and opportunities at an early stage at a disadvantage. Reporting alone does not automatically create a more sustainable world. But when reporting requirements are weakened, transparency and pressure for change are also reduced, shifting even more responsibility onto individual companies. In order to remain competitive and maintain trust, companies must therefore take the lead themselves, setting higher goals than the legal minimum and using the regulations as strategic tools for business development and innovation. Those who dare to stay one step ahead rather than waiting for the next compromise will be in the strongest position when requirements tighten and the transition accelerates again.

Questions and answers from the webinar

1. If a company in the first wave considers any of the E4, S2, S3 or S4 standards to be material, must information corresponding to the MDR still be reported when using the phasing-in provisions in the ‘quick fix’?

The quick fix does not specifically mention MDR requirements (minimum disclosure requirements).

If a company chooses to phase in one or more material standards permitted by the quick fix, certain summary information regarding the material topics must still be presented. Therefore, paragraph 17 of ESRS 2 has been replaced so that it can be applied to all companies, not just those with fewer than 750 employees. This means that, for example, summary information on material topics, targets, and metrics is required when phasing in material standards.

While this is similar to the information required under the MDR requirements, the information required under paragraph 17 is less detailed. 

Although the phasing-in of the MDR requirements is not explicitly specified in the Quick Fix Regulation, the same issue previously arose for companies with fewer than 750 employees, who were already permitted to phase in entire standards. In its  FAQs, question ID 291, EFRAG specifies that phasing in also applies to the disclosures contained in ESRS 2 (i.e. the MDR requirements).

2. What is the main reason sector-specific standards are not being introduced?

The aim is to reduce the overall reporting burden for companies and therefore not add additional disclosure requirements. The “basis for conclusions” section of the proposed amendments to the ESRS refers instead to best practices, including IFRS industry guidance and GRI sector standards.

3. Since S1 includes phase-in provisions for the majority of data points for companies with fewer than 750 employees, does this mean that S1 can effectively be skipped if the phase-in rules are applied?

The entire S1 can be phased in for companies with fewer than 750 employees, except for the summary information required under paragraph 17 of ESRS 2. However, many companies benefit from disclosing information about their own workforce to meet stakeholder expectations. The reporting burden under S1 is often limited, as companies are typically already accustomed to collecting and presenting this type of information.

4. What is the process in Sweden regarding amendments to the Annual Accounts Act (årsredovisningslag), which has already been adapted to the CSRD? The previous legal requirements have been removed from the Act (although they can still be found in the transitional provisions).

In the Swedish government memorandum on the Omnibus and “stop-the-clock” proposal, published in mid-May, the implementation of the stop-the-clock mechanism in Swedish legislation is outlined. The proposal, which aligns with the European Commission’s directive, is to be enacted into Swedish law no later than 31 December 2025.
The proposal also states: If a company was previously required to prepare a sustainability report, it must continue to follow the old rules until the new rules apply to that company. This means that companies are expected to prepare a sustainability report according to the previous requirements in the Annual Accounts Act (based on the NFRD), if they were previously obligated to do so, until the postponed CSRD enters into force.
The old reporting requirements are minimal in terms of scope and content, and it is advisable for companies to voluntarily consider using frameworks such as ESRS or VSME.

Link: https://lagen.nu/1995:1554?diff=true&from=2022%3A1028#K6R4 (red text shows the previous legal requirements which have been replaced by the CSRD requirements, shown in green). The CSRD was incorporated into the Swedish Annual Accounts Act (ÅRL) through amendment SFS 2024:347, and therefore the information is drawn from the most recent prior amendment (SFS 2022:1028) as a comparative reference point.

5. How should small and medium-sized enterprises (SMEs) that are part of a group with a larger company (which falls under the scope of the CSRD) report?

Legally, the company is covered by the CSRD together with the group, and this must be reflected in the group’s consolidated report. However, stakeholder expectations may also reveal a need for voluntary sustainability reporting at the subsidiary level.

6. Are there simplification proposals for the EUDR as well?

At present, no formal simplification proposals have been presented for the EU Deforestation Regulation (EUDR). However, the Commission opened a feedback process on environmental legislation during the summer, with a deadline in September. The EUDR may be included in the Omnibus package and thereby simplified, and some sources have indicated that this is expected to happen

7. Are economic associations also included in the reporting requirements?

According to currently available information, foundations and economic associations are not included under the scope of the CSRD.

8. Does the Quick Fix also cover financial effects, meaning that quantitative data does not need to be disclosed?

Yes, all companies may phase in information regarding financial effects.