Background
On 26 February 2025 the European Commission published a new package of proposals to simplify and reduce the reporting requirements under Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy (EUT), and the Corporate Sustainability Due Diligence Directive (CSDDD), the Omnibus package.
This proposal marks an effort to enhance competitiveness and investment capacity, by decreasing administrative burdens and compliance stringency under the applicable overlapping directives and distinct regimes.
This article provides an overview of the proposed changes to the EUT and CSRD regimes. For more details on the CSDDD proposed amendments, please consult our separate newsletter article on Omnibus Package regarding CSDDD.
EU Taxonomy
The EU Taxonomy Regulation is a classification system that defines environmentally sustainable economic activities to guide investments toward the EU’s climate and environmental goals. It provides detailed technical screening criteria, established through delegated acts. The EU Taxonomy Regulation became applicable in phases starting from January 2022, from which time in-scope entities were required to report the proportion of their turnover, capital expenditures (CapEx), and operational expenditures (OpEx) that were aligned with the taxonomy’s criteria for environmentally sustainable activities. For more details on the regime, please consult our previous EU Taxonomy article.
Some of the key substantive changes to the EUT framework include:
- Amendments to delegated acts regarding the content and form of taxonomy reporting, including the following:
Financial materiality threshold
Companies would be exempted from assessing taxonomy-eligibility and alignment of economic activities that are not financially material for their business (i.e. accounting for less than 10% of their total revenue, capital expenditure or assets). This change is expected to lead to approximately a 70% reduction in data points.
Simplification of reporting templates - eliminating redundant or overly complex disclosure requirements
Introduction of an "opt-in" regime
For companies with more than 1,000 employees and net turnover below EUR 450 million taxonomy reporting will not be required. These would have the benefit of a voluntary "opt-in" taxonomy reporting with lighter disclosure requirements.
Adjustment of the green asset ratio
The green asset ratio (GAR) represents the proportion of assets invested in taxonomy-aligned economic activities as a share of total covered assets. To make the GAR more representative of a financial institution's sustainable activities, it is proposed to exclude reporting assets that relate to companies falling outside the revised scope of the CSRD, excluding SMEs and large companies with fewer than 1,000 employees (see CSRD Section below).
"Do no significant harm" criteria
Simplifications to the “Do no significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy would be introduced.
"Stop-the clock": Implementation delay
The Commission plans to adopt the final amendments in the second quarter of 2025. If the proposal is adopted, large EU undertakings falling under the voluntary "opt-in" exception, as well as listed SMEs would benefit from a two-year delay in the effective date.
CSRD
The CSRD strengthens and standardises corporate sustainability reporting across the EU, replacing the Non-Financial Reporting Directive. Effective from January 2023, it expands reporting requirements under the European Sustainability Reporting Standards (ESRS). Entities in scope must disclose audited ESG data, including sustainability risks, impacts, and performance.
The Omnibus Package proposes significant changes to the CSRD reporting scope. Among the key amendments, we note the following:
Reduction in scope
The CSRD would apply only to large undertakings with more than 1,000 employees (an increase from the previous threshold of 250 employees) and either a turnover exceeding EUR 50 million or a balance sheet total above EUR 25 million. For companies with fewer than 1,000 employees that are no longer in scope of the CSRD, the Commission would, through a delegated, introduce a voluntary reporting standard. This standard would be based on the standard for SMEs (VSME) developed by the European Financial Reporting Advisory Group (EFRAG) - a private association established to work with the European Commission, in charge of drafting and amending European Sustainability Reporting Standards.
According to the Explanatory Memorandum of the Omnibus Package Proposal, this change is expected to exempt around 80% of previously covered companies, including listed SMEs, unless they meet the new thresholds. Non-EU parent companies would be subject to CSRD only if they generate EU-derived turnover of EUR 450 million, up from EUR 150 million.
Simplification of reporting standards
The ESRS will be revised to:
- reduce mandatory data points by focusing on key quantitative metrics,
- eliminate sector-specific standards and prioritise interoperability with global frameworks, and,
- provide clearer guidance on materiality assessments.
Postponement of reporting deadlines
Similarly to the EUT regime, the large entities with opt-in exemptions and listed SMEs, would begin reporting for financial years 2 years after the initial set date.
The CSRD has not yet been implemented in Luxembourg law. However Draft Law No. 8370 has been submitted on 29 March 2024 before the Luxembourg Parliament to transpose the CSRD and the Commission Delegated Directive (EU) 2023/2775 into national legislation, and the legislative process to adopt that draft law is currently underway.
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