Digital Pulse by RYZE - February 2025

EU Commission cancels reporting obligation in parts

 

There have been rumours and leaked documents over the last few days, but now the details are known: Yesterday (26 February 2025), the EU Commission published its proposals for the so-called omnibus package, which provides for a series of significant simplifications to its sustainability legislation. The CSRD, the EU taxonomy and the CSDDD, the counterpart to the German LkSG, are affected.

The most important changes at a glance:

CSRD

1. The group of companies affected will be adapted to the threshold values of the CSDDD: The reporting obligation now only applies to companies with at least 1,000 employees and more than EUR 50 million in turnover or EUR 25 million in total assets.
2. Deadline extension: Large non-capital-market-oriented companies and capital-market-oriented SMEs are given two years more time for implementation.
3. The ESRS (data points) will be revised and simplified.
4. Sector-specific standards that are still to be developed will be cancelled.
5. The possible extension to a reasonable assurance audit from 2028 will be cancelled.

 

EU taxonomy

1. This is now only mandatory for "very large companies", i.e. companies with a turnover of over EUR 450 million and over 1,000 employees.
2. The disclosure requirements are to be reduced by 70 per cent.

 

CSDDD

1. First-time application postponed to July 2028.
2. Only direct suppliers will be included instead of the entire supply chain.
3. Monitoring will only take place every five years.
4. Termination of the business relationship as a last resort will no longer apply.

 

With the planned legislative amendments, the EU Commission is pursuing the goal of simplifying reporting. Specifically, the Commission has set itself the goal of reducing the administrative burden for large companies by 25 per cent and for SMEs by 35 per cent.

 

The proposed legislative package is intended to remove around 80 per cent of companies that are currently required to report from the CSRD reporting obligation; indirect disclosure obligations, for example for smaller companies in the supply chains of larger companies that are required to report, are also to be removed. The EU Commission puts the estimated cost savings at 6.3 billion euros in total.

 

The legislative proposals will now be submitted to the European Parliament and the Council for scrutiny and adoption. They will enter into force after publication in the EU Official Journal. However, the omnibus draft could still be amended or even rejected outright by the EU Parliament and the Council.

 

 

What does this mean for companies and sustainability managers?

Companies with more than 1,000 employees

For companies with more than 1,000 employees, the omnibus package initially means a simplification and reduction in reporting obligations. This should allow those responsible for sustainability to focus more on strategic and operational tasks.

 

For companies in the second reporting wave, the question arises as to how reporting should be organised during the transition period. We recommend adapting reporting to the current status of data availability: If these are already fully available, they should also be included in the sustainability report. It is also conceivable that the sustainability report and annual report could be combined, although this could of course only take place in the next two years in order to be able to focus on one change in each reporting year.

 

If data availability is not yet very advanced, it is advisable to choose a leaner report variant.

 

Companies with fewer than 1,000 employees

Companies with fewer than 1,000 employees will no longer be required to report in future. However, there are good reasons for these companies to still prepare a sustainability report.

 

On the one hand, many companies have already invested in their sustainability strategy and communication in anticipation of CSR and have built up personnel and expertise. These investments and expertise should now also be utilised.

 

On the other hand, indirect effects such as competitive pressure, the pursuit of a good reputation or access to capital and better credit lines can favour further sustainability reporting. ESG information will continue to be important for the capital market.

 

Last but not least, some companies have set themselves goals and embarked on the path of sustainable transformation, which they should not abandon now. The abolition of the reporting obligation creates more room for manoeuvre. Instead of the full ESRS, these companies can also use the less extensive VSME, the voluntary reporting standards.

Why is sustainability reporting still worthwhile?

• 💰 Investments that have been made: Many companies have already invested and built up staff and expertise. The investment should be used wisely.
• 💡 Improved access to capital: Investors and banks are increasingly emphasising sustainability criteria and linking financing conditions to ESG performance.
• 📈 C ompetitive advantage: Sustainability is seen as a competitive factor on the market - it's not just a phrase.
• 📉 Long-term risk minimisation: sustainability management creates awareness of risks that can be minimised in a targeted manner.
• 🚀Strengthening corporate reputation: companies that act and report on sustainability improve their reputation and can build a strong brand identity.

 

RYZE is always available as a competent sparring partner for anyone who is unsure in the current situation about what the 2025 sustainability report should look like.

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