Omnibus in Practice: Is it worth easing ESG Reporting requirements?

On 26 February 2025, the European Commission presented the so-called "Omnibus package". The new proposed measures promise to reduce the administrative burden on companies by 25%, and up to 35 % for SMEs, which should help companies to focus on key sustainability areas for their business.

These proposals of the Omnibus package are currently at the beginning of the legislative process and only after review, comments and approval will it be necessary for Member States, including Slovakia, to incorporate the new rules into their national legislation (updating the Accounting Act).

However, countries have real climate problems, people are affected by health and livelihood issues, and for companies, ESG reporting is becoming a "business-as-usual" or global standard (confirmed by KPMG research) and also a prerequisite for the long-term resilience and sustainability of the business in a changing environment.

These are also the reasons why climate related and ESG topics have long been addressed by companies abroad (NFRD - Non-financial Reporting Directive, which is a precursor to the CSRD).

Despite the Omnibus proposal, companies should therefore continue to monitor developments and not stop or slow down their activities, especially if they are preparing for compliance in the near term. It is important to note that the final regulatory decision may contain changes from the proposal and therefore companies should continue their activities under the Accounting Act as it will not be possible to switch the implementation of the changes to the turnaround process at the last minute after the release of the final Omnibus package, which affects key ESG directives.

Author

Katarína Havlíková
Senior Consultant, ESG

Can sustainability afford simplification?

The omnibus package raises the debate on whether to ease off on regulations or to continue with long-term efforts and the implementation of strong ESG standards. But one thing is certain - transparent data on environmental, social and governance impacts will continue to be crucial for investors, customers, suppliers, as well as banks, insurers and other institutions.

Sustainability reporting on a mandatory and/or voluntary basis gives us not only a clear message of the need to reduce the reporting burden, but above all a message of the need for a transition to decarbonization as well as responsible planning for the transition to sustainability. All of these changes are about the values of how to be resilient and how to maintain business continuity in the sector. It is essential to create value through energy efficiency, technology and data-driven solutions, including ensuring circularity and eliminating waste.

In the future, there will be a need to prepare for the impacts of weather and climate change, including an analysis of sustainability risks. Risks can have a significant impact not only from a climate perspective, but also in terms of the impact on human, social and economic life and therefore on the specific activities of society. Sustainability risk management is a key part of the dual materiality assessment, which remains a mandatory standard in the Omnibus initiative. The same is true of the assessment of the double materiality of impacts on people and the planet, as well as of risks and opportunities, and thus of financial materiality. Nor will continue the trend towards reducing CO2 emissions, increasing demand for affordable energy, clean products, innovation, sustainable performance indicators in management. At the same time, the demand for quality skills and professions and digitalization to ensure a self-sufficient energy and single union will remain at the forefront.

What are the positives and negatives of the proposed "Omnibus package"?

+ Positives

Simplification of the reporting obligation (at the same time this is relative as the reduction in the number of data points and thus the comprehensiveness of the overall report could also be reduced by double significance assessment).
Simplifying companies' requests for information from firms in their value chain - the information requested should be consistent with and not exceed the scope of the VSME standard or sector-specific information.
Plans to revise and update the current European Sustainability Reporting Standards (ESRS), including reducing the number of data points required and prioritising quantitative data points over narrative data points - (we reiterate that this is relative as the reduction in the number of data points, and thus the comprehensiveness of the overall report, could also be reduced by assessing double materiality).
Retains the requirement for limited assurance but there will be a move to reasonable assurance.
Dual materiality analysis (DMA) remains unchanged - i.e. managing sustainability impacts, risks and opportunities remains and is a key part of the dual materiality assessment, which remains a mandatory standard in the Omnibus initiative (again, relative as ESRS standards had a comprehensive meaning and provided an overview, a report with a precise structure to non-financial data with a clearly defined structure).
There remains a requirement to tag data using the single European electronic format (ESEF) for CSRD reports, if such rules are adopted by the EU.
Removes the originally proposed introduction of sectoral standards.

- Negatives

New thresholds for CSRD, will exclude 80% of companies from the scope of CSRD - but sustainability reporting on a mandatory and/or voluntary basis is a competitive advantage and will be the trend going forward (regardless of mandatory or voluntary reporting obligations)
- How will the impacts of weather and climate change be addressed? To what extent do they remain a real threat.
- What if more diseases escalate in the face of a worsening climate?
- What if there is suddenly a lower employee threshold? Or what if the thresholds are adjusted and a report needs to be published in a few months? How will firms then catch up on a whole particular year of necessary analysis and data regardless of the report?
Small and medium-sized entities (SMEs) are being removed from the scope - from KPMG's perspective the regulatory obligation may be simplified but from a rational business retention perspective the obligations of firms will remain.
SMEs will equally need ESG because of the pressure to deliver sustainable projects that will come from stakeholders (suppliers, customers, companies, banks, insurers, etc.).
OMNIBUS proposals are not a final regulatory decision, and so limits may still change - overall changes must go through a process of review, comment and approval and then be implemented as law in individual EU member states - there may be pressure for last minute reporting in the final approved decision
Sustainability risks (extreme weather events continue to cause significant climate risks that are already visible today. Climate scenarios and temperature increases are very alarming in studies for Slovakia) can have a significant impact not only from a climate perspective but also in terms of the impact on human, social and economic life and therefore on specific activities of society.
- Natural disasters caused direct economic losses of more than €900 billion in the EEA between 1980 and 2023, with more than 18% of the losses over this 43-year period occurring in the last three years. The increasing trend of fluctuations and associated risks highlights the key role of the insurance and occupational pensions sectors in managing sustainability risks, promoting societal resilience and financing the transition to a carbon-neutral economy.
The market may see a proliferation of players offering cheap solutions to sustainability calculations and a continued lack of expertise in climate, environmental, social and governance analysis.
EFRAG plans to introduce voluntary sustainability reporting standards (VSME) for unlisted SMEs - any new and voluntary form of standards will place a new burden on companies and ultimately show the importance of transposed directives into national legislation as a necessity.

Contact our experts

In case you are interested in more information, do not hesitate to contact us. We would be happy to discuss the challenges of implementing sustainability in your business with you, even in a personal meeting.