CSRD & Omnibus: What you need to know

What came out of Brussels on February 26, 2025, was nothing short of a bombshell. Following the adoption of the EU Taxonomy, SFDR, CSRD, and CS3D in recent years as part of the Green Deal, the European Commission has now proposed a radical streamlining of information requirements and due diligence obligations. This move aligns with the recently defined goal of making the EU’s economic area more competitive by reducing bureaucracy.

CSRD: The Current State

Banks, insurance companies, and large publicly traded companies with more than 500 employees are already required to report for the 2024 financial year. These companies were previously obligated to publish a sustainability report under the NFRD and will now use the ESRS. Despite the fact that the German Bundestag has not yet transposed the CSRD into national law, affected companies are likely to voluntarily comply with EU-wide standards. The ESRS-compliant sustainability reports of these companies are highly anticipated, as they represent the first step toward establishing a prevailing interpretation of the ESRS.

For the 2025 financial year, the scope of affected companies will expand to include large enterprises. A company is considered "large" under the directive if it meets at least two of the following criteria:

1. More than 250 employees
2. More than €50 million in net revenue
3. A balance sheet total exceeding €25 million

The reporting obligation also applies to parent companies if the group exceeds these size criteria on a consolidated basis.

Starting in 2026, publicly traded SMEs, as well as small and medium-sized banks and insurance companies, will also be subject to the CSRD.

CSRD: The Commission's Proposal

The Commission’s proposal includes three key changes:

1. A two-year postponement of implementation
   This means that companies originally affected from 2025 (second wave) will not have to publish a sustainability report until 2027. Publicly traded SMEs (third wave), as well as small and non-complex credit institutions and captive insurance companies (also third wave), would not be affected until 2028. This delay is intended to allow more time to discuss and implement changes to the scope of application (see point 2).

2. A drastic reduction in the number of affected companies
   Under the Commission’s proposal, only companies with at least 1,000 employees and either net revenue exceeding €50 million or a balance sheet total over €25 million would have to report. The "public interest" criterion would no longer have any special significance. As a result, all banks, insurance companies, and publicly traded companies with fewer than 1,000 employees would be outside the scope—except for those with over 500 employees, which have already been subject to the CSRD since 2024. Another consequence: publicly traded SMEs would be excluded from the CSRD by definition. This marks a fundamental shift in the EU’s approach: whereas the previous focus was on capital flows, the determining factor is now the size of the organization.

3. A reduction in requirements
   The Commission does not intend to publish sector-specific ESRS standards. Additionally, the number of data points required in the general ESRS, which are already in use, will be significantly reduced. Furthermore, the obligation to report under the EU Taxonomy would only apply to companies with a turnover exceeding €450 million.

What Comes Next?

The draft Omnibus Regulation will now be reviewed by the EU Parliament and member states. Following the formation of a coalition at the national level, Germany is unli

kely to block the proposal in the European Council, as reducing bureaucracy was a key campaign promise of the conservative parties. The voting behavior of other member states remains to be seen. In the EU Parliament, opposition is expected from the Green Party and left-wing factions. However, since the majority of EU parliamentarians belong to center-right and right-wing parties, a reversal of the retreat from sustainability reporting seems unlikely.

What This Means for Companies

All companies that are currently or will soon be subject to the CSRD under the existing legal framework should closely monitor discussions in the European Council and the EU Parliament. Regulatory monitoring is now more critical than ever.

Regardless of reporting obligations, risks arising from climate change and complex regulations will not disappear. It remains highly relevant for companies to understand and manage their risk profile. Heavy rainfall events, nuclear power plant shutdowns due to water shortages, volatile raw material prices in agriculture, and the CO2 price—all of these will continue to be part of business reality.

Companies already working on CSRD implementation should not hit the brakes. Instead, they should use their (possibly already conducted) materiality analysis as a foundation for a value-enhancing sustainability strategy.