Omnibus Initiative in motion: How far along is the EU with its course correction?

The three EU institutions involved in the legislative process – the EU Commission, the Council of the EU and the EU Parliament – currently hold differing positions, particularly with regard to the size criteria above which a company should be obliged to report on sustainability.

On 23 June 2025, the Council published its position: according to the Council, the CSRD reporting obligation should only apply to companies with more than 1,000 employees and more than € 450 million in revenue. Compared to the EU Commission's proposal, which also envisages an increase in the threshold to 1,000 employees, but (analogous to the current version of the CSRD) continues to be based on more than €50 million in revenue or more than €25 million in total assets as an additional criterion, this would result in a further re-striction of the user group.

Similarly, according to the Council, the user group of the CSDDD is to be limited to companies with more than 5,000 employees and more than €1.5 billion in sales. To date, the size criteria – after staggered introduction – have been more than 1,000 employees and more than € 450 million in sales revenue.

Due to the divergent proposals, it is currently not possible to make a reliable statement on the future user group of the CSRD and CSDDD. It is not yet possible to predict when a final agreement will be reached at EU level. The EU Parliament must first adopt its position before entering into interinstitutional negotiations with the Council on a final legislative text. 

Until the amending directive comes into force, the current version of the CSRD (including the amended reporting dates due to the “Stop-the-Clock” directive) is the applicable European law. In member states such as Germany that have not transposed the CSRD into national law by the deadline, the Non-Financial Reporting Directive (NFRD), the predecessor directive to the CSRD, will continue to apply until further notice. As soon as it has been adopted, the amending directive on reporting obligations must first be transposed into national law by the member states in order to become valid there.

As part of the Omnibus initiative, the European Commission has tasked the European Financial Reporting Advisory Group (EFRAG) with revising the European Sustainability Reporting Standards (ESRS) by 30 November 2025. The original deadline of 31 October 2025 was postponed at the request of EFRAG in favor of an extended consultation phase. The aim of the revision is to significantly simplify and streamline the standards, as they were often perceived as too complex and extensive in practical application.

On 20 June 2025, EFRAG presented a progress report outlining the six key levers for simplifying standards and reducing reporting obligations:

The first drafts of the revised ESRS are to be published at the end of July 2025 and then put out for public consultation.

Details on the simplification levers and further information on the timetable can be found in this background article.

On 4 July 2025, the EU Commission has now issued a corresponding delegated act. The amendments include, in particular, the introduction of a materiality principle, the simplification of the reporting forms and adjustments to the ‘Do No Significant Harm’ criteria in relation to pollution prevention and control (environmental objective 5).

It is expected to be possible to apply the new regulations as early as the 2025 financial year. However, there is the option of a transitional year in which reporting can still be carried out in accordance with the previous requirements. The delegated act will only enter into force upon publication in the Official Journal of the EU, provided that the EU Parliament and the Council of the EU do not raise any objections. You can find more information on the changes to the EU Taxonomy Regulation and specific recommendations for action in this detailed article. 

At the same time, the EU Commission is currently working on updating, simplifying and making the existing technical screening criteria more user-friendly, with a particular focus on the ‘Do No Significant Harm’ criteria, which were often perceived as too complex in the past. A public consultation on this is expected to take place at the beginning of 2026, with the adoption of the delegated act planned for the second quarter of 2026. In addition, the Commission announced that it would include new economic activities in the EU taxonomy at a later date, based on the Commission's political priorities and the needs of the economy.​

On 11 July 2025, the European Commission adopted a delegated act amending the first set of ESRS (Regulation (EU) 2023/2772).

The aim of this so-called “quick fix” is to extend and partially broaden the scope of certain ESRS phase-in requirements. The measure is intended to ease the reporting burden particularly for companies in “wave 1”, which are subject to reporting requirements under the CSRD as early as the 2024 financial year.

Specifically, the amendment allows companies with more than 750 employees to opt out of reporting on selected standards — including ESRS E4 and the social standards ESRS S2 to S4 — for the financial years 2025 and 2026. If these phase-in reliefs are applied, this must be disclosed in the sustainability report.

Furthermore, reliefs that were originally limited to the first year of reporting — for example, regarding complex disclosures such as anticipated financial effects from sustainability-related risks — are now extended and applicable to both 2025 and 2026.

As a result, wave 1 companies are not required to provide new disclosures in 2025 compared to the 2024 reporting year (unless changes in the materiality assessment result in new data points being reportable). The European Commission has published a clear summary of the modifications.​

The delegated act applies retroactively and directly (i.e., without the need for national implementation) to financial years starting on or after 1 January 2025 — provided that neither the European Parliament nor the Council raises objections within four months.

Due to the pending transposition of the CSRD into German law, wave 1 companies in Ger-many have not yet been required to report under the CSRD and thus were not obligated to use the ESRS as a reporting framework. However, the publication of the draft bill on 10 July 2025​, suggests that transposition into national law is intended by 31 December 2025. According to EFRAG’s FAQ ID 1090, the ESRS phase-in reliefs only apply starting from the first year of mandatory application — in this case, the 2025 financial year.

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Current developments at EU level make this clear: There is still considerable regulatory uncertainty in the area of sustainability reporting. Final decisions on the scope of application of the CSRD and CSDDD as well as the specific configuration of the ESRS are still pending. However, publications such as the progress report on the revision of the ESRS al​​low initial conclusions to be drawn about future simplification and focusing of the reporting requirements. The EU Commission is also taking account of regulatory uncertainty through measures such as the extension of phase-in relief.

Companies are well advised to keep a close eye on ongoing regulatory developments – such as the ESRS drafts announced for the end of July 2025 – in order to be able to react to changes at an early stage.

At the same time, the time until the new requirements come into force should be used sensibly – for example, to analyze existing reporting processes, to adapt internal structures and IT systems and to further develop an efficient, practical and future-oriented sustainability strategy, ideally based on the results of a robust materiality assessment. Those who act with foresight now can not only minimize regulatory risks, but also secure competitive advantages – for example through increased transparency, credible ESG communication and a stronger positioning vis-à-vis banks, investors, customers and employees.​