Newsflash - EC proposes significant reduction in sustainability and due diligence reporting requirements

The European Commission (EC) has proposed several pieces of legislation ('omnibus package') that aim to reduce significantly the sustainability and due diligence reporting burden for entities. The omnibus package includes a proposal for a directive amending the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive and the EU Taxonomy Regulation.

The headline proposals are:

• a substantial reduction in the scope of entities that are required to apply the CSRD with a voluntary and reduced reporting regime available for those that would fall out of scope;
• a commitment to revise the delegated act establishing the European Sustainability Reporting Standards, with the aim of substantially reducing the number of data points that entities are required to report, clarifying provisions deemed unclear and improving consistency with other pieces of legislation;
• removal of the plan to adopt reasonable assurance requirements by 1 October 2028 (so no change to the existing limited assurance requirements);
• removal of the plan to introduce sector-specific sustainability reporting standards;
• an “opt-in” regime for the EU Taxonomy reporting rules for large entities with more than 1000 employees on average and a net turnover not exceeding EUR 450 million which do not claim that their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation; and
• a two-year postponement of the entry into application of the existing reporting requirements under the current CSRD for the second wave (large entities that are not in the first wave) from 2025 to 2027, and the third wave (listed SMEs, small and non-complex credit institutions, and captive insurance and reinsurance entities) from 2026 to 2028.

As a next step, the EC’s proposals will be submitted to the European Parliament and to the European Council for scrutiny under the EU’s ordinary legislative procedure. Once finalised and adopted, the legislation would enter into force after the publication in the EU Official Journal and would need to be transposed into member state laws. 

Further details can be found here.