In brief: Many companies are confused following the release of the EU Omnibus proposals, asking whether to stop, start or continue their sustainability reporting preparations. We break down the tasks in this blog, taking consideration of current and proposed status.
The recent Omnibus proposals from the European Commission to substantially scale back sustainability regulations like the CSRD and others (see our Flash Report) drew praise — and also caused confusion — among the companies potentially affected. Praise, because proposed higher thresholds[1] for compliance could cause approximately 80% of companies currently covered by regulations to fall out of scope — a significant compliance and reporting relief; and confusion because the proposal appears to reverse course on requirements with which many companies were preparing to comply and had already invested substantial time and funding to get ready.
In other words, if the proposals are adopted without significant changes, a large number of companies could potentially fall below the proposed thresholds, while others could potentially remain above them. This bifurcation can have significant implications for compliance requirements, reporting, and strategic decision-making.
Naturally, companies are asking how to handle the whiplash. We want to remind readers that this is still a proposal by the European Commission and not a final decision by the European Parliament — which could take months. And that when the Omnibus finally arrives at its destination it will most certainly look different from what is currently proposed.
This said, we see these pending changes as an opportunity. Companies should take stock of their efforts so far, then focus future work on sustainability areas that would provide the biggest strategic value — meeting current reporting obligations while positioning for the changes.
What should companies do now?
Companies potentially above the new thresholds:
Do not stop your current activities waiting for the final word. If the proposals are adopted, you may have an additional two years to prepare and adapt — and extra time to catch up if you are currently behind on your preparations. In the meantime, we recommend you focus strategically on the following:
- Conduct a double materiality analysis (DMA) to identify material topics, which can be used for reporting across different frameworks.
- Complete the gap analysis for European Sustainability Reporting Standards (ESRS) with a focus on E1, S1 and G1 since most companies assess these as material, increasing transparency and comparability of reports.
- Prioritise and close gaps based on your strategy and DMA results.
- Tip: Especially consider and close gaps in ESRS E1 Climate Change. It is anticipated that the updated ESRS will continue with high requirements in this area, such as the establishment of an emissions inventory and proper setup for Scope 1, 2 and 3 greenhouse gas (GHG) data, and the development of science-based transition plans.
- Establish a data management system/data lake to manage ESG data effectively.
- Establish controls over data points.
- Tip: Focus on quantitative data points. This is good practice because the proposals prioritise quantitative data points over narrative data points in the future (while also reducing the number of required data points overall).
- Conduct a solid climate risk analysis. This is a beneficial activity for companies, regardless of ESRS E1.
- Update your business strategy based on the outcomes of these activities, in particular the DMA, and align your sustainability management actions and measures with this strategy.
- Monitor for regulatory updates and developments, in particular the updated ESRS.
Companies potentially below the new thresholds
The key word is “potentially,” as input and debate on the proposals is still ongoing. If you expect that your company is not going to be in scope in the future, you may still want to report based on your corporate values, differentiation goals, and a host of other compelling reasons (e.g., questionnaires and requirements from stakeholders, bank requirements, etc.). Reporting voluntarily demonstrates commitment to sustainability, can help meet market and stakeholder expectations, and strengthens your competitive position.
You may already be reporting for the above reasons, or waiting for further clarification. Either way, we recommend that you focus now on the following:
- Ensure the completion of a DMA as it is useful to understand which topics are material to your company. This will inform your sustainability (and business) strategy and the sustainability management activities.
- Leverage what you have developed in your CSRD project so far for increasing the maturity of your sustainability program, such as clear governance and knowledge and awareness of the selected sustainability topics.
- Utilise the identified impacts, risks and opportunities (IROs) to refine your sustainability strategy and market approach.
- View the current draft of the Voluntary Sustainability Reporting Standards for non-listed SMEs (VSME) as a starting point for the coming new voluntary standards.
- Continue sustainability reporting using existing nationally or internationally established voluntary standards and frameworks such as the Global Reporting Initiative (GRI), International Sustainability Standards Board (ISSB) and Carbon Disclosure Project (CDP).
- Monitor for regulatory updates and developments, in particular the new voluntary standards.
What to expect next
The Omnibus proposals are now in the hands of the European Parliament and Council. The first “stop-the-clock” Omnibus proposal is set for a fast-track vote on April 1st, 2025, aiming to expedite the legislative process and provide clarity amid ongoing regulatory uncertainties. The second Omnibus proposal, which includes more substantial changes, will likely follow the ordinary legislative process, involving more extensive discussions and input from various actors and stakeholders, which may significantly prolong the timeline.
Advocates for swift implementation argue that it will enhance competitiveness and growth, while others urge a balanced approach to maintain essential social and environmental standards.
Among companies, some, like Nestlé and Unilever, have come out in support of existing EU sustainability rules to uphold their brand reputation and ensure long-term business stability. Others advocate for extended implementation timelines and reduced regulatory burdens to facilitate smoother transitions.
As these developments unfold, it’s crucial for businesses to stay informed and prepared for all possible outcomes. If adopted, the final changes will come into force after publication in the EU Official Journal. Afterward, the directives need to be transposed into national laws, the timeline for which depends on political drive, government capacity, and complexity of the existing transposition framework.
So stay alert to regulatory updates in your country — and in parallel, use the time to strengthen sustainability in your organisation as a basis for solid reporting, for meeting stakeholder and market expectations and for business benefits.
Learn more
Protiviti will hold a webinar to discuss the Omnibus proposals and their implications on April 3rd at 4 PM Central European Time. We strongly encourage you to attend and bring your questions for our experts. Also check out our Guide to Frequently Asked Questions, which provides answers to common issues for companies as they navigate the fluid sustainability environment. For more on how Protiviti can help with managing through the changes, visit our Sustainability page.
[1] New proposed thresholds for CSRD reporting are: >1,000 employees and either >€50M turnover or >€25M total assets.
