The EU Commission has presented its proposal on amendments to the Corporate Sustainability Reporting Directive (“CSRD”), the Corporate Sustainability Due Diligence Directive (“CSDDD”), the EU Taxonomy and the Carbon Border Adjustment Mechanism (“CBAM”) as part of what is generally referred to as the Omnibus proposal.
The EU Commission’s Omnibus proposal aims to simplify certain sustainability requirements across the EU and to deliver on the EU Commission’s ambition to boost competitiveness and reduce burdens on European businesses.
The proposal includes significant simplifications in the fields of sustainability reporting and sustainability due diligence.
What will happen now?
The EU Commission’s Omnibus proposal will now be subject to the normal EU legislative process of negotiations with the European Parliament and the Council and changes will (only) enter into force once the co-legislators have reached agreement on the proposals[1].
Following the EU legislative process, the agreed amendments must go through the Danish legislative process to incorporate the changes into Danish law.
Below, we have summarized some of the most significant elements included in the omnibus proposal.
Corporate Sustainability Reporting Directive (CSRD)
- Reduction of in-scope companies: The CSRD will only apply to large companies with more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million. Thereby, the number of companies in scope of the CSRD will be reduced by around 80%.
- Postponement of reporting requirements: The reporting obligation will be postponed by two years (until 2028) for in-scope companies that would otherwise have been required to report as of 2026 and 2027 (wave 2 and wave 3).
- Deletion of sector-specific standards: The contemplated sector-specific standards will not be further pursued.
- Revision of the European Sustainability Reporting standards (“ESRS”):The Commission will revise the delegated act establishing the ESRS, with the aim of substantially reducing the number of data points, clarifying unclear provisions, and improving consistency with other pieces of legislation.
Corporate Sustainability Due Diligence Directive (CSDDD)
- Postponement: The transposition deadline is postponed by one year (to 26 July 2027) and the application of the due diligence requirements to the in-scope companies is postponed by one year as well. The due diligence requirements will apply to the first group of companies (companies with more than 3,000 employees and a net worldwide turnover of more than EUR 900 million) from 26 July 2028 and to all other in-scope companies (companies with more than 1,000 employees and a net worldwide turnover of EUR 450 million) from 26 July 2029.
- Primary focus will be on direct business partners: The due diligence requirements will focus on direct business partners. However, where the company has plausible information suggesting that adverse impacts have arisen of may arise with an indirect business partner, due diligence will be required beyond the level of the direct business partner.
- Other simplifications of the due diligence requirements: The generally expected frequency of the periodic assessments and monitoring of business partners will be extended from annual to every five years, however the company must assess the implementation of its due diligence measures and update them whenever there are reasonable grounds to believe that the measures are no longer adequate or effective. Further, the obligation to – ultimately – terminate a relationship with a business partner is removed.
- Trickle-down effect is limited by reducing information requests: The information that in-scope companies may request from their SME and small midcap business partners will be limited to what is specified in the CSRD voluntary sustainability reporting standards, unless additional information is needed to carry out the mapping and such information cannot be obtained in any other reasonable way.
- Harmonized EU civil liability regime is omitted: The harmonized EU conditions for civil liability are deleted, deferring to national regimes to define whether its civil liability provisions will be applicable to a situation of specific harm to rightsholders. The competencies to trade unions and NGOs to bring actions are revoked. Further, with respect to the administrative fines, the minimum cap (related to group turnover) is to be abolished.
- No review of financial services: The review clause on inclusion of financial services in the scope of the due diligence directive is deleted.
- Maximum harmonization: Provisions regarding the core due diligence obligations in the CSDDD are now subject to maximum harmonization to avoid the risk of different regimes developing in various member states and to underline the original purpose of ensuring a level playing field across the EU.
- Climate transition plan obligation adjusted: The requirements related to a climate transition plans for climate change mitigation will no longer include the obligation to “put into effect” a climate transition plan. The obligation to adopt a climate transition plan remains.
The EU Taxonomy
- Reduction of in-scope companies: For companies comprised by the (future) CSRD scope and with a net turnover of up to EUR 450 million, the full Taxonomy reporting requirements will apply. For companies with a net turnover of less than EUR 450 million, the Taxonomy reporting will be voluntary.
- Limitation of reporting requirements: The draft proposes to simplify the mandatory reporting templates, introduce a materiality level and the possibility to report on partially sustainable activities. In addition, it is proposed to reduce the volume of reporting of operating expenses (OpEx).
Carbon Adjustment Mechanism (CBAM)
- Exemption for small importers: A new CBAM cumulative annual threshold of 50 tonnes per importer is introduced. This change will exempt small importers, mostly SMEs and individuals, from the CBAM obligations.
- Simplification of rules: The process for authorisation of CBAM declarants and the rules related to CBAM obligations, including the calculation of emissions, reporting requirements and compliance with the financial liability, will be simplified.
How Gorrissen Federspiel can assist
Gorrissen Federspiel closely follows the development of the EU Omnibus Proposal, and we stand ready to advice companieson any potential implications of the contemplated changes for their sustainability reporting and due diligence obligations.
If you have any questions, please feel free to reach out to a member of our dedicated Compliance & Sustainability team.
Meet the Compliance & Sustainability team
[1] Amendments to the EU Taxonomy Regulation will be in the form of a delegated act amending the current delegated acts under the Taxonomy Regulation, which will be adopted after public feedback and will apply at the end of the scrutiny period by the European Parliament and the Council.
