Updated May 2025 – The European Union has taken significant steps to ease the sustainability reporting burden under the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS), and the EU Taxonomy. Through its Omnibus package and the recently adopted “Stop the clock” directive, the EU has signalled a shift toward simplification, postponement, and recalibration of obligations for companies across Europe.

Two-Year Postponement: “Stop the Clock”

The EU has formally delayed mandatory ESRS and EU Taxonomy reporting for second- and third-wave companies by two years. Member states must transpose the directive into national law by 31 December 2025. This provides businesses with breathing space as negotiations continue on the broader Omnibus reforms.

Key Highlights of the Omnibus Package

The Omnibus package, released earlier in 2025, aims to reduce compliance burdens while maintaining the spirit of the EU Green Deal. Its main components include:

1. Reducing the Number of Companies in Scope

• Only large companies with more than 1,000 employees will remain in scope of the CSRD.
• The Commission estimates this would reduce the number of in-scope companies by around 80%.
• A smaller subset of these companies will continue to report under the EU Taxonomy.

2. Simplifying ESRS

• The Commission has tasked EFRAG with streamlining ESRS by cutting disclosure volumes and prioritising quantitative over narrative data.
• The principle of double materiality remains, but clearer guidance on applying it will be issued.
• Sector-specific standards are no longer planned.
• EFRAG’s revised draft is expected by 31 October 2025.

3. Limiting the Scope of the EU Taxonomy

• Mandatory reporting would apply only to large companies with over 1,000 employees and net turnover above €450 million.
• Voluntary reporters claiming taxonomy alignment would need to disclose at least turnover and capex KPIs.
• Simplifications include a materiality threshold, streamlined Do No Significant Harm criteria, and revised templates, applying from FY25 (reporting in 2026).

4. Other Notable Changes

• CSRD adjustments: Smaller companies (under 1,000 employees) are protected from excessive “trickle-down” data requests. Limited assurance remains, but there is no transition to reasonable assurance.
• CSDDD revisions: Proposals reduce compliance costs by delaying application, narrowing the scope of value chain assessments, and easing reporting frequency.

What Companies Should Do Now

Despite the postponement, companies are encouraged to focus on “no-regret” actions that strengthen both compliance readiness and long-term strategy:

• Reassess scope: Understand how new thresholds might change reporting obligations.
• Strengthen core processes: Focus on transition planning, materiality assessments, and reliable sustainability data collection.
• Engage stakeholders: Maintain transparency on policies, targets, and risks.
• Align globally: Prepare for convergence with ISSB standards, particularly around climate disclosures and Scope 1–3 GHG emissions.

What’s Next?

• The Commission will release further Omnibus proposals later this year, including a possible small mid-cap category.
• EFRAG is expected to publish simplified ESRS exposure drafts for consultation by end-July 2025, with a final version anticipated by November 2025.
• New EU Taxonomy rules, adopted in July, will take effect on 1 January 2026, with an optional one-year delay.

Balancing investor needs, preparer costs, and the EU’s sustainability ambitions remains a delicate exercise. Companies should stay alert to legislative developments and prepare strategically for a simplified but still demanding sustainability reporting landscape.

References 

Heath, N., Houston, R., Waugh, A., & Weicht, J. (2025, July 16). EU Omnibus Update: New draft ESRS and EU Taxonomy update increase clarity. Retrieved from ERM: https://www.erm.com/insights/eu-omnibus-update-new-draft-esrs-and-eu-taxonomy-update-increase-clarity/

KPMG. (2025, May 09). EU releases Omnibus proposals. Retrieved from KPMG : https://kpmg.com/xx/en/our-insights/ifrg/2025/esrs-eu-omnibus.html

Photo:
https://tse2.mm.bing.net/th/id/OIP.1Cy838YqnwgXucJ6PC7iSwHaEB?rs=1&pid=ImgDetMain&o=7&rm=3