EU releases Omnibus proposals

May 2025 update: A two-year postponement in mandatory reporting under ESRS and EU Taxonomy for second- and third-wave companies has been adopted by the EU under the ‘Stop the clock’ directive. Member states have until 31 December 2025 to transpose the directive into national law.

This article was published on 27 February 2025 and updated on 9 May 2025 to reflect these changes.

Highlights

– Reducing the number of companies in scope

– Simplifying ESRS

– Limiting the scope and amending the content of the EU Taxonomy

– What other key changes are proposed?

– How can companies prepare for the changes?

– What’s next?

The European Commission has released an Omnibus package of proposals to reduce sustainability reporting and due diligence requirements.

As part of this Omnibus package only the largest companies would report under European Sustainability Reporting Standards (ESRS); a subset of those companies would continue to report under the EU Taxonomy. These changes would need to be approved by the European Parliament and the Council of the EU, and transposed into national law, to become effective.

Furthermore, the Commission announced that it will simplify ESRS disclosure requirements and plans to adopt amendments to the EU Taxonomy in the second quarter of 2025.

To allow for time to agree these changes, the EU has postponed mandatory ESRS reporting for second- and third-wave companies by two years under its ‘Stop the clock’ directive.

Reducing the number of companies in scope

Under the proposed ‘Content directive’, only large¹ companies with more than 1,000 employees would be in scope of the CSRD² and therefore required to report under ESRS. The Commission estimates this would decrease the number of companies in scope by approximately 80 percent.

An overview of how the proposals would affect different companies is presented below.

Simplifying ESRS

Alongside communicating its first Omnibus package, the Commission has mandated EFRAG³ to amend ESRS to substantially reduce the volume of disclosures – e.g. by prioritising quantitative datapoints over narrative text and clearly distinguishing between mandatory and voluntary datapoints. The concept of double materiality would remain, but the Commission intends to provide clearer instructions on applying the materiality principle. KPMG has provided feedback on EFRAG’s call for input on simplifying ESRS. The deadline for EFRAG to present the draft amendments to the Commission is 31 October 2025.

Under the proposals, the Commission no longer plans to adopt sector-specific standards.

Limiting the scope and amending the content of the EU Taxonomy

The Commission proposes making the EU Taxonomy mandatory for only a subset of large companies – i.e. those with:

more than 1,000 employees; and
a net turnover of more than EUR 450 million.

In contrast, companies wanting to claim voluntarily that their activities are taxonomy-aligned would, as a minimum, need to disclose KPIs on turnover and capital expenditure.

Additionally, the Commission is working to simplify the EU Taxonomy, including introducing a materiality threshold, simplifying the ‘Do No Significant Harm’ criteria on pollution and revising the reporting templates. These changes would apply initially in FY25 for reporting in 2026. Read KPMG EMA DPP's comment letter on the EU Taxonomy consultation.

What other key changes are proposed?

The Commission proposes changing the CSRD to protect smaller companies (up to 1,000 employees) by limiting the ‘trickle-down effect’. Requests for value chain information could not exceed what would be reported under an amended voluntary reporting standard for SMEs (VSME).

The CSRD would still require limited assurance, but the Commission no longer intends to move to reasonable assurance. In addition, the deadline for a European limited assurance standard would be removed.

On the CSDDD⁴, the Commission proposes significant changes to reduce the compliance burden on companies. The proposals include delaying initial application by one year, reducing the number of business partners and stakeholders to consider, and less frequent assessments.

How can companies prepare for the changes?

With the release of the Commission’s first Omnibus package, now is a good time for companies to identify any ‘no-regret moves’ that they can focus on, such as:

revisiting CSRD scoping to understand how the proposed thresholds might influence reporting;
reprioritising efforts and focusing on strategic actions that go beyond compliance, for example:
- transition planning;
- materiality assessment; and
- a focus on the data that is relied on for strategic decision making.
continuing dialogue with stakeholders around policies, actions and targets across material topics and clarifying sustainability-related messaging; and
with reporting under IFRS^® Sustainability Disclosure Standards from the ISSB⁵ on the horizon in various major jurisdictions outside the EU, considering moving forward on climate, particularly preparing Scope 1, 2 and 3 greenhouse gas emissions inventory and identifying and mitigating climate-related risks.

What's next?

The Commission plans to announce further Omnibus proposals as part of its simplification agenda, for example, introducing a new small mid-cap category of companies later this year.

The proposed Content directive could be subject to change as it progresses through the European Parliament and the Council of the EU. It would need to be transposed into national law before it becomes effective. We’ll continue to monitor the developments – follow KPMG IFRS on LinkedIn for further updates.

¹ Large companies are those that, on the balance sheet date, meet two out of the following three criteria: 250 employees, net revenue of EUR 50 million, and EUR 25 million in total assets

² Corporate Sustainability Reporting Directive

³ The advisory body to the EU on corporate reporting.

⁴ Corporate Sustainability Due Diligence Directive

⁵ International Sustainability Standards Board

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