The European Commission’s Omnibus Proposal, introduced in February 2025, represents a major shift in sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD).
According to Greenomy, the proposed changes aim to streamline compliance, reduce administrative burdens and provide much-needed clarity for companies navigating the evolving ESG landscape.
Two key legislative instruments underpin the Omnibus Proposal. First, the so-called “Stop-the-Clock” Directive offers a temporary two-year extension for companies yet to begin their CSRD reporting obligations. This delay also applies to listed small and medium-sized enterprises (SMEs) and affects the timeline for the Corporate Sustainability Due Diligence Directive (CSDDD), pushing it back by one year.
Second, the “Simplification” Proposed Directive introduces more permanent changes. It narrows the scope of the CSRD by raising the reporting threshold to cover only companies with more than 1,000 employees and either a balance sheet total above €25m or a turnover exceeding €50m. Additionally, the directive proposes significantly reducing the volume of data companies must disclose under the CSRD, CSDDD, and the EU Taxonomy.
These changes reflect broader efforts by the European Commission to simplify EU sustainability legislation. The aim is to strike a balance between ambitious ESG goals and growing concerns from the business community—particularly SMEs—over the burden of compliance. By reducing reporting demands and introducing voluntary standards, the proposal hopes to ensure more proportionate regulation.
If adopted, the new 1,000-employee threshold would mean that many businesses—especially smaller or listed entities with limited headcount—will no longer fall under the CSRD’s mandatory scope. These companies would instead be encouraged to adopt the voluntary standards being developed by EFRAG, based on the upcoming VSME framework. However, these standards are not expected to become mandatory for companies with 250–999 employees.
The legislative process is still ongoing. The European Parliament’s Committee on Legal Affairs is expected to vote on the proposal in mid-October 2025, followed by a plenary vote. It must then pass through the Council to become law.
A key point of clarification concerns the method for calculating the 1,000-employee threshold. The Commission refers to the 2003 Recommendation on defining enterprise size, using Annual Work Units (AWUs) as a proxy. This approach allows companies to count part-time and seasonal workers proportionately, based on time worked during the reference year.
Even firms with strong financials could now be exempt. For example, a company with over €50m in turnover and €25m in assets but fewer than 1,000 employees would no longer be required to report under the CSRD if the proposal is enacted.
Importantly, market dynamics suggest ESG reporting will continue to play a strategic role beyond regulatory compliance. Increasingly, companies are embracing ESG disclosures to boost transparency and build trust with investors, clients, and value chain partners. As a result, many firms falling out of the CSRD scope may still choose to align with voluntary standards to maintain competitive positioning.
With these proposals signalling a trend towards more targeted ESG regulation, organisations are advised to remain proactive. Whether in scope or not, no-regret actions—like double materiality assessments and gap analyses—will help maintain preparedness and demonstrate a commitment to responsible business practices.
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