Navigating the EU Omnibus Simplification Package: CSRD

EU undertakings and non-EU issuers which on an individual or group basis have > 1’000 employees and > EUR 450 million net turnover

Non-EU ultimate parent undertakings with > EUR 450 million net turnover generated in the EU (individually or on a consolidated basis) for each of the last two consecutive financial years; and one subsidiary/branch with > EUR 200 million turnover

+ exemption of financial holding undertakings from scope¹

+ Member State option to exempt Wave 1 companies from reporting obligations for 2025 and 2026²

+ review clause concerning a possible extension of the scope

EU companies: Reporting in 2028 (for the financial year starting on or after 1 January 2027)

Non-EU ultimate parent undertakings: Reporting in 2029 (for the financial year starting on or after 1 January 2028)

Cap on downstream information requests linked to VSME standard³

Commission empowerment to develop sector-specific standards removed⁴

Limited assurance standards are to be developed by the European Commission by 1 July 2027

The DMA remains central and the core principles of impact materiality and financial materiality are unchanged.

The chapter on ‘Double materiality as the basis of sustainability reporting’ has been restructured into 3 sections to increase readability and understandability:

• The first section, “Assessing information to be reported”, covers aspects on how to determine information to be reported by introducing the “Information materiality” concept.
• The second section “Double materiality assessment: impact materiality and financial materiality” explains the methodological steps to be taken to perform the DMA.
• The third section covers “Specific circumstances”, such as how to treat the level of aggregation and disaggregation in the DMA.

These changes shall allow companies to focus on outcome and what really matters, by:

• applying a top-down approach which allows to only make a specific IRO assessment if the materiality conclusion on topic level is not evident
• applying an undue cost or effort approach to reduce the time spent on the DMA
• updating the DMA only if significant changes in the reporting period occurred and
• applying a principle-based approach when taking into account remediation, mitigation and prevention policies and actions. This approach generally allows implemented and effective prevention and mitigation policies and actions to be reflected in the assessment of impact materiality

Reporting boundaries aligned with financial statements with some reliefs

• Alignment with the scope of the financial statements; own operations include parent, subsidiaries and joint-operations
• Possible exclusion of acquisitions and disposals of the reporting year from the sustainability statement

Fair presentation

• General principle of fair presentation as explicit objective which requires disclosure of relevant information about the company’s material IROs and their faithful representation
• This new concept requires consideration of the overall picture of the reported information (so “taking a step back”) by requiring companies to disclose:
• A complete, neutral and accurate depiction of the material IROs
• Information that is comparable, verifiable and understandable
• entity-specific information when applying ESRS is not sufficient to enable users to understand the undertaking’s material IROs

Materiality of information

• Systematic overarching filter for the inclusion of information: no disclosure required for non-material information
• Applies to all Disclosure Requirements (DR), including ESRS 2 – General disclosures

Focus on decision-making needs of users, including “informed assessments” that other users of “general purpose” sustainability statements make based on the sustainability statement

Same topics and areas covered

• Same architecture: 2 cross-cutting and 10 topical standards
• Same topics and areas of disclosures covered

Significant reduction in datapoints

• -71% reduction overall, -61% reduction of “shall datapoints”
• Removal of all voluntary datapoints
• Reduction of qualitative datapoints, redundancies and granularity of information
• Evolution of quantitative datapoints (deletion, grouping, methodological changes)

Improved accessibility and understandability of the standards

• Disclosure Requirements (DR) and Application Requirements (AR) are now presented in the same section of each standard
• Simplified articulation between general (ESRS 2) and topical disclosures

More flexible structure and level of reporting, enabling to “tell the story”

-Structure of sustainability statement

o   Executive Summary (optional)

o   4 mandatory sections with connected information between sections

General information section

• E: Environmental information
• S: Social information
• G: Governance (business conduct)

o   Appendices (optional) with detailed tables, taxonomy; Supplementary non-material information could be included subject to conditions

-Aggregation and disaggregation of information

o   Report only the material information for the sub-topic a material IRO relates to

o   Flexibility on the level aggregation or disaggregation to reflect:

• the level at which significant variations of IROs arise (topic, geography, sector, subsidiary, asset)
• the nature of IRO or their management (by topic, IRO or group of IROs based)

Additional guidance on material geographies 

Other reliefs and proportionality mechanisms applied. ‘Reasonable and supportable information that is available without undue cost or effort’ means:

-Proportionality mechanism applies to:

o   Identification of IROs

o   Scope of value chain

o   Value chain information

o   Preparation of metrics.

-Depends on entity-specific circumstances

-Subject to reassessment each year, with expectations of progress over time

-Flexibility in value chain data: removal of systematic preference for direct data in value chain metrics

-No comparative information required for newly identified IROs

-Phase-ins: extension from Quick Fix + two additional ones (anticipated financial effects and Substances of Concern)

Omission of information (reference to upcoming legislation)

Financial effects

-Direct/indirect connectivity with financial statements:

o   Mandatory cross-referencing maintained
o  Explanation of differences in assumptions

-Anticipated financial effects: both qualitative and quantitative information is required

o   Additional proportionality mechanisms
o   Phase-in reliefs for quantitative information (with exceptions - See E1) until financial year 2030
o   Enhanced interoperability with IFRS standards

Connectivity with the financial statements and comparatives

-New topics or IROs reported for the first time: no comparatives required

-New information received on estimated figures: revision of comparatives is not required if it does not provide useful information, such as when the estimation methodology relies systematically on an input of the previous period

-Major acquisition or disposal: description of impact on progress towards the target (when necessary, without prejudice to the relief)

Phase-in on comparative information only applies to ‘Wave 1’ for 2024 (even if CSRD has not been transposed yet)