CSRD, ESRS, VSME: Where is the Omnibus heading?

In this Omnibus article, we will focus on the suggested changes to the CSRD, the EU’s cornerstone sustainability reporting law. But before anything else, let’s explain what we’re talking about.

Omni-what?

On 26 February 2025, the European Commission proposed a set of changes to EU rules on sustainability reporting, covering the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), Taxonomy on sustainable economic activities, and the Carbon Border Adjustment Mechanism (CBAM).

Together, these proposals form an “Omnibus” approach: a type of EU process where a number of related laws are amended at the same time to enable closer alignment and avoid inconsistencies. In light of the EU’s new political priorities that focus on economic competitiveness and security, the aim of this “Omnibus” is to simplify non-financial reporting for EU companies.

The five key takeaways:

1. Legal obligations to publish non-financial reports might be limited to large companies with more than 1000 employees (and above EUR 50m in turnover or EUR 25m in assets).
2. However, these large companies will need ESG data from their suppliers and other business partners to be able to report. To standardise the data requests emanating from this “trickle-down effect”, a simple EU reporting standard modelled on the “VSME” (voluntary standard for SMEs) is likely to be enshrined in EU law.
3. If the laws are adopted as drafted, there could be an up to two-year delay in reporting obligations for companies that, under current laws, would have had to report next year (on 2025 data).
4. Changes to the content of reporting are also likely, including a more simplified approach to mandatory reporting standards (ESRS).
5. Companies in the EU – and those based outside of the EU with business partners based in Europe – need to be cautious not to drop the ball. Requests from large companies and other stakeholders will continue to drive the need for accurate non-financial data. Collecting and publishing this data is not an end in itself. To be able to deal with real-world challenges such as the destabilizing effects of climate change, a more diverse workforce, or heightened litigation risks, properly managing your strategy and performance indicators for E, S, and G is essential. The ESRS and VSME are en route to become the standardized, essential tools to do just that across Europe.

CSRD: The key changes proposed to who needs to report when, and what

With regard to the cornerstone EU law for sustainability reporting, a number of updates are suggested. If the proposals are adopted as is, the following changes would be introduced.

Who needs to report?

Only companies with more than 1,000 employees and EUR 25m in turnover or EUR 50m in assets would be obliged to report under the CSRD. Those companies – and other stakeholders such as banks which need ESG data for risk management purposes – would need to limit their data requests from other non-CSRD companies to the content of a new, standardised “simple” reporting standard modelled on the voluntary SME standard (VSME). Such a standard has already been drafted by the EU body advising the European Commission on financial and non-financial reporting (EFRAG).

“In practice, this “trickle-down” effect means that all companies across Europe need to diligently collect and manage their non-financial data.”

Julia Staunig – Position Green

In practice, this “trickle-down” effect means that all companies across Europe need to diligently collect and manage their non-financial data. Either because they are directly caught by regulation (CSRD & ESRS) or because their customers and other business partners will ask them for it (VSME).

Finally, there is also a proposed for companies based outside of the EU. If a company based in a third country has more than EUR 450m of combined revenues across EU countries.

When do reports need to be published?

As to the deadlines, there are three scenarios to distinguish between:

1. For companies already reporting according to the current CSRD this year (on 2024 data), there is no change. They need to continue as is.
2. For companies that have to report next year according to the CSRD, and which are also above the potential future thresholds of 1000 employees etc., a two-year delay is proposed. This means that they would need to report in 2028 on 2027 data instead of 2026 on 2025 data, as is currently the case.
3. Companies outside of the EU might also get more time to prepare. Their reporting deadlines might shift by two years, as well (2030 data instead of 2028 data).

What do companies need to report on?

Depending on the size of the company, and whether it is based inside or outside the EU, there are three cases to consider.

At Position Green, we recommend approaching them as follows:

1. Companies above the current and future CSRD thresholds will need to continue to report according to the ESRS. The European Commission plans to simplify the ESRS, though, especially with regards to the number of data points. However, in practice, this “simplification” should not necessitate big shifts for companies who have done CSRD implementation well, and who have taken a strategic approach to their Double Materiality Assessment. A rigorous DMA – and push back against auditors who might drive a “compliance gold-plating” approach – should already have whittled down the number of points to report on considerably.
   
   It should also be noted that the European Commission suggests sticking to limited assurance for the auditing of non-financial data (in the current CSRD, a shift to reasonable assurance is planned). Finally, the Commission wants to see plans for sector-specific ESRS scrapped.
2. Companies that are currently under the scope of the CSRD but might fall outside of the scope in the future need to stay the course. Until the legislative processes on the omnibus are finalised, it is risky to stop preparing and risk non-compliance. Investments in non-financial reporting now will not be wasted. The “trickle-down effect” from large companies that remain in scope of the CSRD, means that companies will need to provide sustainability data to their business partners in the future. Preparing for the ESRS now sets you on an easy path to report according to the VSME in the future.
3. Companies that are neither in scope of the CSRD now or in the future should start preparing for a world where sustainability reporting is the norm, and standardized, according to the VSME.
4. For companies outside the EU, it is still planned to develop a specific ESRS approach over the next few years. Some jurisdictions, such as Switzerland, might opt to give companies the choice to report according to the ESRS (perhaps alongside the international standards – the ISSB’s IFRS-S) also for their national reporting obligations.
5. Finally, and importantly: collecting, analyzing and reporting non-financial data can never be an end in itself. Just like in financial reporting, it also needs to be a management tool.

On the one hand, E, S and G data is needed for efficiency levers: better risk management, more resilience, tighter cost control. This is especially important in a world that is amidst a huge shift – where companies need to navigate geopolitical uncertainties, the real-world impacts of changing climate patterns and biodiversity loss, as well as more polarized societies and a lack of trust in traditional institutions, to name just a few of the challenges business leaders face today.

On the other hand, non-financial data systems need to be geared to help companies pull their growth levers. Where are there new revenue opportunities stemming from the sustainable transition? How can a strong sustainability approach boost employee engagement, and the employer brand, to bolster productivity? And where does a company have the opportunity to lower its cost of capital by attracting new types of investors or achieve lower financing costs by showcasing that it has a good handle on its ESG risks?

So what’s next? How likely is it that the proposed changes become reality?

All changes to the CSRD are currently only expectations, not facts. The European Commission’s proposals will need to go through:

1. the EU’s legislative process, where the European Parliament and Council (where the 27 EU Member States’ governments are represented) first discuss the changes individually and then need to hammer out a compromise, and
2. EU countries’ national lawmaking machines, which will need to implement the Directives into their own legislation.

At this stage, it is difficult to predict how rough or smooth a ride the Commission will get when it tries to defend its proposals during the legislative process.

In the Council, large Member States such as Germany, France, and Poland are expected to be in favour of the changes (or might even want to go further). Italy and Spain might find the changes too extreme. But all in all, it is currently expected that there will be a majority in favour of the changes.

In the European Parliament, the Commission will face more of a battle. Ideological and political arguments will be made against the perceived “watering down” of the EU’s green goals. The centre-right parties are likely in favour of the changes – and could indeed find a majority if teaming up with the ultra-right, nationalist parties. But that would mean that a major taboo is broken: the EU’s political tradition to find compromises across the centre, and shun extremist influence from the right and left. In the end, it is hoped that a common approach across the centre-right and Social Democrats can be found, perhaps changing the Commission’s approach somewhat.

Finally, on the timeline, it is likely that some of the changes – especially the postponement of reporting by 2 years – will go through the process quicker than others. EU processes usually take many months, even years. But, given the situation we are in with the CSRD, where companies absolutely need legal certainty as soon as possible, the European Commission will push for a “fast track” process that enables adoption and transposition this year. Whether this is realistic remains to be seen.

Until the updated CSRD is adopted and transposed in Member States’ laws, the existing CSRD and its offshoots in countries’ national legislation, remain in force.

To sum up…

The European Commission’s proposed Omnibus changes signal a shift toward streamlined sustainability reporting, but the road ahead remains uncertain. If adopted, the updates could simplify CSRD obligations, introduce a standardized SME reporting model, and delay compliance timelines for some companies. However, sustainability data collection will remain essential—both for regulatory compliance and strategic business advantages. With political negotiations still underway, companies should stay proactive, ensuring they’re prepared for both mandatory and market-driven ESG demands.

But you can ahead of these compliance curveballs and gain the insights you need to take action in our dedicated webinar on these Omnibus changes, happening on March 11th. Just click below to register for free!