EU Omnibus Package: CSRD

On 26 February 2025, the European Commission (EC) published the Omnibus Package (the package). The package proposes changes aimed at simplifying key reporting frameworks, including:

• the Corporate Sustainability Reporting Directive (CSRD);
• the Corporate Sustainability Due Diligence Directive (CSDDD);
• Carbon Border Adjustment Mechanism (CBAM); and
• and the EU Taxonomy.

The package has been published in response to concerns over the excessive complexity and regulatory burden of existing sustainability reporting requirements. The proposals are intended to strengthen the EU’s competitiveness by ensuring companies are not stifled by excessive regulation.

The EC has worked quickly to bring the Omnibus proposals that postpone the implementation deadlines for ‘wave 2’ and ‘wave 3’ reporters into legislation under the so-called ‘stop the clock’ directive.

For ‘wave 2’ reporters - those initially due to report in 2026 on 2025 information - mandatory reporting has been postponed by two years to 2028 (on 2027 information). A similar postponement of two years is proposed for ‘wave 3’ reporters. 

No changes have been made in respect of ‘wave 1’ reporters, being public interest entities with more than 500 employees, which remain required to report from 2025 on 2024 data. These companies, however, can benefit from the EC’s ‘quick fix’ amendments, which extend certain phase-in provisions and provide temporary relief from some reporting requirements. There is no change proposed to the effective date for ‘wave 4’ reporters, being non-EU companies operating in the EU market who exceed the relevant thresholds.

The proposed timelines are summarised below:

Having been approved by the European Parliament and the European Council, the ‘stop-the-clock’ Directive was formally adopted on 17 April 2025. Member States are required to transpose the directive into national law by 31 December 2025.

Reduction in scope

The EC proposes to revise the scope of the CSRD by increasing the threshold for what constitutes a large undertaking. The new thresholds would limit the application of CSRD to entities with:

• More than 1,000 employees (raised from the current 250 employee threshold); and
• Either a net turnover exceeding €50 million or total assets exceeding €25 million.

While still the subject of significant debate, if adopted this change would take approximately 80% of companies out of scope for CSRD, and would align the scope more closely with that of CSDDD. The change would also apply to credit institutions and insurance undertakings.

Value chain cap

The proposals include a provision designed to protect smaller entities within a larger entity’s value chain from excessive sustainability reporting requests, via the introduction of a new Voluntary SME Standard (VSME). This voluntary VSME standard would act as a so-called value chain cap to protect smaller entities in supply chains from excessive reporting requirements. Information that an entity can request from those in its supply chain would be limited to the information required by the VSME. 

Sustainability assurance

The package proposes the removal of the possibility of moving from a requirement for limited assurance to a requirement for reasonable assurance. This is proposed on the basis that this will provide clarity that there will be no future increase in costs of assurance for undertakings in scope. Also, instead of an obligation for the Commission to adopt standards for sustainability assurance by 2026, the Commission will issue targeted assurance guidelines by 2026.

European Sustainability Reporting Standards (ESRS)

The EC has committed to revising ESRS with the aim of substantially reducing the number of data points, clarifying certain provisions and improving consistency with other pieces of legislation. The requirement for the EC to adopt sector-specific standards is also to be withdrawn, with the intention of simplifying and reducing reporting requirements. 

To reach its target of at least a 50% reduction of mandatory datapoints, European Financial Reporting Advisory Group (EFRAG) has identified and activated six key levers to simplify the reporting burden, as outlined in its progress report as of 20 June 2025:

1. Simplification of the Double Materiality Assessment (DMA) by implementing changes and clarifications to make the DMA process less complex.
2. Better readability/conciseness of the sustainability statements and better inclusion in corporate reporting as a whole, for example by providing the option to have an executive summary at the beginning of the sustainability statement.
3. Critical modification of the relationship between Minimum Disclosure Requirements (MDR) and topical specifications, including reducing the number of requirements required on policies, actions and targets (PATs) in the topical standards.
4. Improved understandability, clarity and accessibility of the standards, such as by separating clearly mandatory and non-mandatory content.
5. Introduction of other suggested burden-reduction reliefs, including the incorporation the broad application of the ‘undue cost and effort’ relief in line with IFRS S1 and IFRS S2.
6. Enhanced interoperability, primarily with the ISSB Standards. Specifically, aligning terminology and the reporting boundary for Green House Gas emissions with IFRS S1 an IFRS S2.

EFRAG issued a public consultation on the revised ESRS in late July 2025, with a shortened feedback window of 60 days, compared to the usual 120 days, in order to meet the EC’s deadline by which to provide its technical advice. 

ESRS for non-EU Groups (NESRS)

The proposals would increase the threshold that brings non-EU companies operating within the EU into scope to €450 million in EU net turnover at group level (from the current €150 million threshold), provided the company also has:

• a large EU subsidiary exceeding two of these criteria: 250 employees, €50 million turnover or €25 million total balance sheet; or 
• a branch with over €50 million turnover (raised from the current €40 million threshold). Separate reporting standards for NESRS are not mentioned in the Omnibus proposals, and it is therefore expected that the (EFRAG) will revisit the development of NESRS after receiving the green light from the EC.

Following the publication of the Omnibus Package on 26 February 2025, EFRAG received a specific mandate from the EC to provide technical advice to inform a delegated act to revise the existing ESRS. Key milestones, as outlined in EFRAG’s Work Plan and the letter from the EU Commissioner to EGRAG sent on 1 July 2025, include:

• Late July 2025: Launch of the EFRAG consultation on the revised ESRS
• August and September 2025: Consultation period (this is expected to be 60 days)
• 30 November 2025: Deadline for EFRAG to submit technical advice to the EC. This is an extension to the original deadline of the 31 October 2025.

The draft delegated act will then need to be reviewed and approved by the European Parliament and the EC.  Member States will be required to transpose adopted changes into national law. 

The Omnibus proposals remain under debate as they go through the legislative process and are therefore still subject to change. ICAEW will continue to monitor developments and keep members informed.