Our thinking

Thrown under the Omnibus

28 February, 2025

This week the EU Commission published its much-awaited changes to the alphabet soup of sustainability reporting and disclosure regulation that it has rolled out. Late last year, the Commission President Ursula von der Leyen announced plans to “simplify” the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy and the Corporate Sustainability Due Diligence Directive (CSDDD) into a single piece of legislation (henceforth known as the Omnibus legislation). Earlier this year we reflected on the implications of this, concluding that while simplification is almost always welcome, that should not be at the expense of rigour.  

 At the time, the promise was that the legislation would not be watered down. What emerged this week in the Omnibus is a singular definition of “not watered down”, as the proposed changes (leaked over the past few weeks by those close to the discussions) reduce both the ambition and the reach of the current regulation. It is important to note that this proposal has been presented to the Commission, but still needs to be voted on and adopted. This process will take several months, and may lead to further change yet.  

But we have moved beyond leaks and rumours to having a full summary of the proposed changes, which is available here. There are a few key takeaways.  

The biggest axe has fallen on CSDDD (which was already significantly watered down from what was initially proposed after heavy lobbying from business), with a focus on direct suppliers only, reduction in the importance placed on climate transition plans, limited enforcement and liability for non-compliance and delays to implementation. CSRD keeps the double materiality focus and (we assume) topic areas, but there is a promise to “substantially reduce” the data points required and sector standards have been removed (arguably the element that would have been most useful for many companies and stakeholders). Around 80% of companies who were due to produce their first reports in the next couple of years will now no longer be required to report, and the application to companies still in scope but due to report for the first time in 2026 and beyond is delayed by two years. It’s unclear what this means for companies in wave 1 who may well already have published their first set of CSRD-aligned reports for FY24, but we’d expect some visibility on what their FY25 reports will need to include relatively soon.  

This is described – still – as a simplification. And arguably, not reporting on your sustainability impacts is indeed simple. But it isn’t really simplification, so much as a declaration by the EU that only the largest, most well-resourced businesses should be reporting on their sustainability impacts in a structured and transparent way.  

 Communications from the EU Commission emphasises that the proposed changes will release businesses from the “very burdensome” regime put in place by (checks notes) the EU Commission, and how these changes will boost competitiveness and unlock investment. And how – apparently – it will do this while still supporting the Green Deal objectives which the legislation was designed to support in the first place. There’s some muddled thinking going on there. And civil society and indeed many investors and businesses are outraged, by the fact they have been shut out of the process of renegotiation, and by the fact that the effort and time they have already devoted to this now seems to have been wasted.  

But no one likes bureaucracy, except bureaucrats, and there was much that was imperfect in the existing legislation. It encouraged everyone to focus hard on disclosure, which in many cases took the focus away from action: certainly, it generated a lot of heat and arguably not a great deal of light. Good news for the sustainability reporting industry, bad news for those of us who like our sustainability reporting with a side order of tangible and meaningful change.  

The underlying intent of all of this was never really about disclosure, it was about change. It was about asking businesses to think about where their impacts and risks lie and encouraging them to act on these. The science of climate change is exactly as it was a week ago. The threat to nature and biodiversity hasn’t gone away. The risks to human rights in value chains remain. We can remove the requirement to talk about it publicly, but the risks (and the opportunities) that material sustainability issues present to a business remain unchanged. Boards should want to know what these are, and should be thinking about how to manage them, and how to engage in honest and transparent discussions with stakeholders about them.  

So if you’re breathing a sigh of relief that you’re off the hook for sustainability reporting (for now, at least) and can shelve those plans for a double materiality assessment, it’s probably worth a bit of reflection. What may seem like a win in the short term for efficiency and competition may end up severely disadvantaging your business in the long run if it is taken as a signal to down tools on sustainability and focus on other priorities.  

Much is still uncertain. But our view is that as things pan out in the weeks and months to come it will be important to take the time to stop and think. To reflect on what you’ve learned and what it means for you going forward. To consider if there are elements that you might want to adopt voluntarily, or collaborate on with others in your sector and beyond. And ultimately, if you have more flexibility at least in the near term, to find your own path to using disclosure to drive the change that will make your business more resilient and more successful. We’d love to have a conversation with you about how to do that.

By Claire Jost