The European Commission’s long-awaited revision of how businesses report their environmental strategies is set to shake up the scope and depth of sustainability reporting.
Its new ‘Omnibus’ package aims to simplify the Corporate Sustainable Reporting Directive (CSRD). The move aims to reduce the administrative burden on businesses – especially for smaller firms – while maintaining the key elements of transparency and accountability.
In a nutshell, the significant changes proposed include:
- The full reporting threshold for companies would be redefined as those with more than 1,000 employees, rather than 250 – a reduction of around 80% – and with a net turnover of €450m
- A company’s reporting requirements would be postponed by two years, until 2028 reporting of the 2026 financial year
- Firms not subject to mandatory reporting can choose to report voluntarily
With the Omnibus proposal still in its draft form – it will need to go through public consultation and parliamentary approval before becoming legislation – businesses are understandably experiencing a sense of uncertainty about the future. The current CSRD rules are in place, and if the Omnibus package does not pass, it’s likely the existing reporting requirements will need to be met.
What are the proposed changes to CSRD reporting?
The European Commission says the proposal to simplify EU rules would boost competitiveness and unlock additional investment capacity. It hailed the move as a ‘major step forward’ in creating a more favourable business environment to help EU companies grow, innovate, and create quality jobs.
The Omnibus package brings together proposals in a number of related legislative fields. As well as the two-year reporting postponement, the commission explained the main changes to CRSD sustainability reporting will:
- Focus the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment
- Ensure that sustainability reporting requirements on large companies cannot be passed on and hence do not burden smaller companies in their value chains
- Not include sector-specific reporting guidelines
- Simplify data collection and reporting
The history of the Corporate Sustainable Reporting Directive (CSRD)
As we highlighted in our previous blog, the demand for businesses and organisations to be transparent and take accountability for their impact on nature is essential as the world grapples with the climate change crisis.
The UK became the first G20 country to make it mandatory for Britain’s largest companies and financial institutions to disclose their climate-related risks and opportunities. They must also explain how their environmental, social and governance (ESG) actions affect their business, including their supply chains.
A timeline of CSRD events:
2023-2024: The European Sustainability Reporting Standards (ESRS) framework was created to support the CSRD’s implementation. The directive originally applied to the 2024 financial year.
January 2025: Phased-in reporting was scheduled to start in January 2025.
February 2025: The proposed Omnibus changes were published.
What do the proposed CSRD changes mean for businesses?
Understanding the scope and requirements of the measures can be something of a minefield, made complicated by nothing yet being passed into law.
But companies and organisations need to be serious about their sustainability strategies and how their operations impact people and the planet. Simply claiming they embrace ‘green’ issues is no longer an option. It makes sense for companies to start planning how to report their strategies now, in anticipation of the proposals being adopted.
How are farms affected by the CSRD?
Even though the UK is no longer in the EU, farms that supply products to European-owned businesses such as retailers, wholesalers or food manufacturers and processors can expect to be impacted by the CSRD requirements. This also applies to businesses headquartered outside of the EU that do sufficient levels of trading within the EU to trigger compliance with the regulations.
These large businesses must account for emissions throughout their supply chains – farms play an integral role in the food industry and may be required to provide detailed environmental data to support this. Read our tips for farms to prepare for the future through adopting more environmentally friendly methods and procedures – and that all-important documentation.
How are farmers responding to the introduction of the CSRD?
Here at CSX, we engage closely with the farming community and it is clear that currently that many, if not most, haven’t heard of CSRD, the Task Force on Climate-related Financial Disclosures (TCFD) or the Task Force on Nature-related Financial Disclosures (TNFD).
Those operating in the food supply chain know that change is coming but are unsure how to deliver on the requirements. Most farmers are being told ‘carbon accounting’ information will need to be provided – but that does not reflect the bigger picture of the reporting requirements of the manufacturers and retailers higher up the supply chain.
How should organisations prepare for the future of CSRD?
While many firms may have breathed a sigh of relief that reporting requirements could be postponed until 2028 – or that their size has moved them out of the proposed scope – they mustn’t rest on their laurels.
They will still need to address the long list of data points on the ESRS framework and address their sustainability performance in their annual reports.
The change in scope is a concern for companies that may have been preparing for months with dedicated teams and will find themselves outside it. There could be a financial trade-off – they might decide whether to stop or to continue reporting voluntarily. There may also be a need to assess how any change in approach could impact a business’s ESG policy and commitments.
Meanwhile, farmers must proactively prepare for these evolving requirements to ensure smooth compliance and maintain supplier relationships. This could include collecting data relating to their farm’s environmental footprint, including the use of chemicals, fertilisers, water and energy.
What effect does CSX believe the CSRD changes will have?
The changes could be a positive step for companies by reducing the regulatory pressure on them with a simpler framework while also making them more accountable for their actions. Standardising the reporting across all organisations certainly makes sense. But there are concerns:
- Data transparency could be undermined – the driver behind this reporting is to actually add more data integrity to the supply chain
- Confidence in corporate sustainability accountability could be impacted – a company cancelling its reporting based on its size could appear not to be committed to carbon reduction
How can CSX help clients navigate the CSRD?
As a company with the methodologies in place to provide this data, we’ll be keeping a close eye on the changing scene as we help farmers and organisations navigate the future.
The data that farmers can harvest is incredibly valuable as their produce moves up the supply chain. They could charge a premium from those buying their agricultural outputs, for example, if they have strong data available that details their farm’s carbon footprint, energy use and nature impact.
We can help farmers to ‘baseline’ their land, calculating the value they could add, such as adding new biodiversity measures or being more carbon neutral, to kickstart their data collection process. That will also enhance their business opportunities with the larger companies.
Organisations within the CSRD scope are now likely to have a grace period until 2028, but their data will still need to factor in the supply chain. We can help them to process the data and support their required transition plan for achieving net zero, contact us for help and advice.