Highlights
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.
Reducing the number of companies in scope
Under the proposals, 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.
Further, under a so-called 'Stop the clock' proposal, mandatory ESRS reporting for second- and third-wave companies would be postponed for two years. This postponement will allow more time for the EU to agree substantive changes to the CSRD.
An overview of how the proposals would affect different companies is presented below.
| Under existing CSRD | 'Stop the clock’ proposal | Substantive proposals | |
| Large PIEs with > 1,000 employees | 'Wave-one' reporting from FY24 under ESRS | Continue to report3 | Report under revised ESRS |
| Large PIEs with 500– 1,000 employees | Continue to report3 | No longer required to report. Value chain information requests could not exceed what would be reported under an amended VSME | |
| Large companies > 1,000 employees | 'Wave-two' reporting from FY25 under ESRS | Report from FY27 | Report under revised ESRS from FY27 |
| Large companies with up to 1,000 employees | Report from FY27 | No longer required to report. Value chain information requests could not exceed what would be reported under an amended VSME | |
| Listed SMEs | 'Wave-three' reporting under LSME standard from FY26 with the option to opt out until FY28 | Report from FY28 | No longer required to report. Value chain information requests could not exceed what would be reported under an amended VSME |
| Non-EU parents | Reporting under ESRS for non-EU groups (NESRS) at group level from FY28 when the group has:
| Report from FY28 if they meet the criteria | Reporting under NESRS at group level from FY28 when the group has:
|
Simplifying ESRS
Alongside communicating its first Omnibus package, the Commission announced it intends 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.
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 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 for FY25 for reporting in 2026.
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.
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.
All of the above Omnibus proposals could be subject to change as they progress through the European Parliament, the Council of the EU and are transposed into national law. We’ll continue to monitor the developments – follow KPMG IFRS on LinkedIn for further updates.
Read our comment letter on the proposal to amend the delegated acts on the EU Taxonomy.
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 Applies to companies in EU member states where CSRD has been transposed
4 Corporate Sustainability Due Diligence Directive
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