On February 26, the European Union’s (EU’s) European Commission issued its “Omnibus I” proposal to “recalibrate” the EU’s Corporate Sustainability Reporting Directive (CSRD), by reducing reporting requirements and excluding smaller entities. The CSRD was adopted in November 2022 and took effect in January 2023 (I wrote about it HERE), providing reporting requirements that are being phased in during 2024-2028. CSRD superseded and narrowed the EU’s previous Non-Financial Reporting Directive (NFRD; which I discussed HERE). The remainder of this note discusses the proposed changes.
How does the Omnibus propose to reduce the types of organizations required to report?
The proposal would reduce the types of organizations subject to CSRD reporting.
What are existing CSRD reporting requirement thresholds?
CSRD reporting requirements are presently scheduled to phase in over several years, with initial compliance deadlines varying for specified categories of companies (defined by reference to the EU Audit Directive). In each case below, reports are due on January 1 reporting data from the previous calendar year:
- First Wave (initial reports 2025 with 2024 data) – Companies already subject to NFRD requirements:
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- “large undertakings which are public-interest entities”, which requires both of the following:
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- “large entities” are those with more than 500 employees
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- “public-interest entities” are defined by reference to the as companies with securities listed in EU regulated markets, banks (whether listed or not), insurance companies (whether listed or not) and any other companies designated by a Member States (referencing the EU Accounting Directive)
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- “public-interest entities that are parent companies of a large group” (i.e., more than 500 average numbers of employees on a consolidated basis)
- Second Wave (initial reports 2026 with 2025 data) – additional “large companies” not already subject to NFRD (not listed or insurance company), but meet at least two of the following criteria:
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- more than 250 employees
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- annual turnover of over €40 million; or
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- over €20m total assets
- Third Wave (initial reports 2027 with 2026 data) - Listed small and medium enterprises (SMEs), except listed “micro-undertakings”
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- “Medium-sized undertaking” meets at least 2 of the following: balance sheet total €20 million; net turnover €8 million; or average 250 employees during the financial year
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- “Small-sized undertaking” meets at least 2 of the following: balance sheet total €4 million; net turnover €40 million; or average 50 employees during the financial year
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- “Micro-undertaking” no greater than at least 2 of the following: balance sheet total €350,000; net turnover €700,000; or average 10 employees during the financial year
- Fourth Wave (initial reports 2029 with 2028 data) –
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- Non-EU companies (“third country undertakings”) with a net annual turnover in the EU over €150 million, with at least one subsidiary or branch within the EU that is listed or large (over €40 million annual net turnover)
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- Listed micro-undertakings
Large and EU-listed subsidiaries are not subject to separate reporting if the parent company reports their data.
How would the Omnibus revise reporting thresholds and deadlines?
The Omnibus proposes the following changes to CSRD reporting requirements:
- “First Wave” reporting for “large undertakings which are public-interest entities” and “public-interest entities that are parent companies of a large group” – definitions and 1/1/25 deadline unchanged
- “Second Wave” reporting –
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- Raise applicability threshold to 1,000 employees, and either turnover exceeding €50 million or balance sheet total over €25 million
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- Defer reporting deadline to 1/1/28 for 2027 data
- “Third Wave” reporting – eliminated by raising reporting threshold
- “Fourth Wave” reporting – for non-EU companies with turnover in EU, raise threshold to net annual turnover in the EU over €450 million, with at least one subsidiary or branch within the EU that is listed or large (over €50 million annual net turnover)
Now What?
Companies in the EU and around the world should be assessing whether these proposed revisions would affect their reporting obligations. Readers should note that the Omnibus package also includes proposals to reduce reporting requirements under the European Sustainability Reporting Standards.
Self-Assessment Checklist
Is the organization a company, subsidiary of a company, or part of a company or subsidiary subject to the EU’s Corporate Sustainability Reporting Directive?
If the organization prepares its own non-financial reporting, does it use CSRD guidelines as a basis for the design and organization of its reports (even if not required to do so)?
Does the organization review CSRD reports as part of its own ongoing activities?
- Is the organization listed on EU exchanges, or a portion or subsidiary of a company that is listed?
- Does the organization or its parent/group qualify as a large, medium, small or micro undertaking as used in CSRD?
Where Do I Go For More Information?
Information available via the Internet includes:
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: tei@ix.netcom.com