European Commission:
First Proposals to Simplify Sustainability Reporting and Assurance (“Omnibus Package”)

On February 26, 2025, the European Commission published proposals to simplify sustainability reporting and assurance. The proposals essentially comprise the Omnibus Directives amending the Statutory Audit Directive, the Accounting Directive, the CSRD and the CSDDD.

The initiative was announced following a meeting of EU heads of state and government with the European Commission in Budapest on November 8, 2024. Existing and future ESG reporting obligations are to be bundled and harmonized in order to strengthen the competitiveness of European companies.

Step 1: Postponement

In a first step, a separate omnibus directive (COM(2025) 80 final) (PDF) is to postpone the application period for the “2nd wave” companies originally required to report from 2025, i.e. large corporations, and for the capital market-oriented SMEs originally required to report from 2026 by two years to 2027 and 2028 respectively, in order to be able to adopt and implement the expected changes in content in the meantime. This directive is to be transposed into national law by December 31, 2025 at the latest.

Step 2: Amendments

In a second step, the substantive changes are to be implemented in a further omnibus directive (COM(2025) 81 final) (PDF) amending the aforementioned directives (Statutory Audit Directive, Accounting Directive, CSRD and CSDDD). The transposition into national law should take place no later than twelve months after the entry into force of this further omnibus directive.

Amendments to the Accounting Directive and the Statutory Audit Directive

The main changes to the Accounting Directive and the Statutory Audit Directive relate in particular to

• Significant reduction in the number of companies subject to reporting requirements
  The reporting obligation should now only apply to large corporations with more than 1,000 employees and an annual turnover of more than EUR 50 million or a balance sheet total of more than EUR 25 million (amendment of Art. 19a, 29a Accounting Directive). The EU Commission estimates that around 80% of companies will thus be exempt from the reporting obligation.
• Adjustment of the value chain cap
  Companies subject to the reporting obligation should only be allowed to obtain information from companies in the value chain with up to 1,000 employees (instead of previously from SMEs) that is provided for in the standards for voluntary reporting (VSME), unless information customary in the industry goes beyond this (amendment to Art. 19a para. 3 of the Accounting Directive). According to the EU Commission, this should significantly reduce the “trickle-down” effect.
• Adoption of standards for voluntary sustainability reporting as a delegated act
  The EU Commission is to adopt standards for voluntary sustainability reporting (VSME) by means of a delegated act no later than four months after the directive comes into force (insertion of Article 29ca of the Accounting Directive). According to the EU Commission, these should be based on the VSMEs already published by EFRAG.
• Easier taxonomy disclosures
  For companies with more than 1,000 employees whose net turnover does not exceed EUR 450 million, simplifications are to be provided with regard to the disclosures in accordance with Art. 8 of the Taxonomy Regulation (Art. 19b and 29aa Accounting Directive). Further simplifications are contained directly in a draft amendment to the EU Taxonomy Regulation, which was also published by the Commission on February 26, 2025.
• Deletion of the LSME and sector-specific standards
  The obligation to apply standards for capital market-oriented SMEs (LSMEs) is to be deleted, as these companies are no longer subject to the reporting obligation. Furthermore, the development of sector-specific standards should be waived (deletion of Art. 29b (1) subparagraph 3 and Art. 29c Accounting Directive).
• Waiver of the audit with reasonable assurance
  The development of standards for the assurance engagement with reasonable assurance is no longer planned, meaning that it can be assumed that the assurance engagement on sustainability reporting will only be performed with limited assurance in the long term (amendment of Art. 26a (3) of the Audit Directive).
  The original obligation of the EU Commission to adopt standards on limited assurance by 1 October 2026 has been changed to a pure authorization without a deadline. The EU Commission has announced that it will instead publish targeted assurance guidelines by 2026.

Amendments to the Supply Chain Due Diligence Directive (CSDDD)

With regard to the Supply Chain Due Diligence Directive (CSDDD), the following significant changes are proposed:

• Transition plan to combat climate change
  The proposal does not explicitly mention implementation (“put into effect”), but requires that the plan already contains concrete measures (adaptation Art. 1 para. 1 c).
• Amendment to the definition of “stakeholders”
  National human rights and environmental organizations and civil society organizations whose purposes include the protection of the environment have been removed from the definition of stakeholders (amendment Art. 3 para. 1 n).
• Restriction of due diligence obligations to “direct” business partners
  An in-depth assessment of business activities should only be carried out with regard to direct business partners. For indirect business partners, it is only required if the company has plausible information indicating actual or potential negative effects (amendment of Art. 8 para. 2 letter b and insertion of Art. 8 para. 2a).
• Restriction of the scope of information from companies with fewer than 500 employees
  For direct business partners with fewer than 500 employees, the information to be obtained as part of the risk assessment in accordance with Art. 8 (2) (a) may not go beyond the information provided for in the standards for voluntary reporting (VSME) (insertion of Art. 8 (5)).
• No specific definition of the minimum level of periodic penalty payments
  The obligation that periodic penalty payments must amount to at least 5% of global net turnover has been deleted. Instead, the EU Commission is to work with the Member States to draw up guidelines for the supervisory authorities on setting periodic penalty payments (amendment of Art. 27 (4)).
• Extension of the interval for monitoring due diligence obligations
  The monitoring of the appropriateness and effectiveness of the measures to comply with the due diligence obligations should only take place at least every five years instead of every twelve months (amendment to Art. 15).
• Changes with regard to civil liability and compensation
  It is no longer stipulated that the Member States must issue regulations on civil liability. A possible transfer of the right to sue to non-governmental organizations has been deleted. (Adaptation of Art. 29).

The two directives will be submitted to the European Parliament and the Council for consultation and published in the Official Journal of the European Union after their approval. The first omnibus directive will be given priority with the postponement.

Further proposals

In addition, the Commission intends to adopt a delegated act to revise the ESRS (Set 1) within six months of the directive coming into force and to make the following changes in particular:

• Simplify the structure and presentation of the standards,
• Reducing the number of data points,
• clarification of previously unclear provisions and
• improving the consistency of the ESRS with other EU legislation.

The concept of double materiality is to be retained.

In addition, the European Commission has published questions and answers on the Omnibus Directives (PDF).

We will keep you informed of further developments.