Omnibus, Supply Chain Act & Co.: Less bureaucracy or new hurdles?

The conversation between Code Gaia CEO Markus Adler and Lisa Schosser, Partner in the Sustainability Reporting & Governance department at KPMG Germany, can also be listened to in our podcast Code Green.

Sustainability reporting, supply chain regulations and cutting red tape – with the omnibus proposal published by the European Commission on February 26, the EU is bringing a new dynamic to ESG compliance. But what does this mean for companies? What opportunities and challenges arise and what next steps should those responsible take now? This article aims to answer these questions.

Table of contents

1. The omnibus proposal: less bureaucracy or new uncertainty?
2. Challenges for companies: Who is affected and what is changing?
3. Opportunities in practice: How companies can use the regulation
4. The next steps: what companies should do now
5. Conclusion

1. the omnibus proposal: less bureaucracy or new uncertainty?

The EU Commission has launched the omnibus proposal in order to make sustainability requirements more practical and simpler. A particular focus here is on the planned reduction of the user group, the simplified reporting obligations and the adapted due diligence obligations in the Supply Chain Act. Companies should be able to concentrate more on relevant data instead of getting bogged down in bureaucracy.

Whether these changes actually lead to more legal certainty or rather create new uncertainties depends largely on the actual implementation. What is certain, however, is that the proposal will meet with mixed reactions. While some companies are hoping for noticeable relief, others fear that they will lose the value of investments already made in sustainability processes.

2. challenges for companies: Who is affected and what is changing?

The omnibus proposal entails significant changes for companies, especially for those that have already started implementing the CSRD requirements at an early stage. Medium-sized companies with 250 to 1,000 employees, which would previously have been subject to the CSRD sustainability reporting requirements, are particularly affected. The proposed increase in the threshold values could mean that many of these companies could fall out of the obligation. Companies with more than 1,000 employees and a turnover of over 450 million euros will remain subject to reporting requirements. The existing EU taxonomy requirements will continue to apply to them in addition to the CSRD.

A key problem is the unclear transition period. Although there is a “stop the clock” provision that could postpone the introduction by two years, the final details are still unclear. At the same time, sector-specific standards have been removed, which could lead to companies having less comparability in their reporting in future.

Pressure from investors and banks is also increasing. Sustainability data is increasingly being demanded by capital market players, even independently of regulatory obligations. Companies therefore face the challenge of continuing to use their ESG data strategically in order to remain competitive in the market.

The omnibus proposal is intended to ease the burden on companies, but it does not mean that sustainability will become less important. Those who act with foresight will benefit in the long term.

Lisa Schosser

Partner at KPMG Germany

3. opportunities for practice: how companies can use the regulation

Despite the uncertainties, the omnibus proposal also offers new opportunities for companies. The adjustments enable a more pragmatic implementation of sustainability reporting. Companies can now set more targeted priorities in order to make their processes more efficient.

Taking on a pioneering role

Those who voluntarily adhere to the VSME standards or other official reporting standards can also position themselves as pioneers in sustainability reporting. This proactive approach could prove to be a strategic advantage, especially when working with business partners or acquiring new sources of funding. So if a company is active in a business sector that is seen as sustainable, it can be a comparative disadvantage if others report and your own company does not. You should therefore carefully examine where your own strategic relevance lies.

Double materiality assessment still important

Sustainability should also be seen as an integral part of the corporate strategy. The double materiality assessment has established itself as a valuable tool for strategic decisions – regardless of regulatory obligations. Companies that use this methodology gain deeper insights into their long-term risks and opportunities. Companies should therefore use the time gained to optimize their data quality and processes.

Many CEOs have said to me: “The double materiality analysis was a game changer for our strategy process. It gives companies a formal, structured process to assess strategy, risks, opportunities and impacts.

4 Next steps: What companies should do now

Companies should closely monitor regulatory developments and address the potential impact on their reporting at an early stage. Even if the final changes are still pending, it is advisable to prepare for various scenarios now.

Stay tuned

The existing sustainability strategy should be expanded further. Companies that have already invested in data processes, software solutions and reporting should not put their progress on hold. The insights gained can also be beneficial for strategic decisions beyond pure ESG reporting. Relevant stakeholders should continue to be involved.

Key sustainability figures remain crucial

Investors, banks and business partners are increasingly demanding sustainability figures – regardless of the regulatory obligation. Those who prepare for this at an early stage can secure a competitive advantage. It is also important to improve your own data quality. A robust and efficient ESG data strategy can not only facilitate reporting obligations, but can also be used for new financing and funding opportunities.

5. conclusion

The omnibus proposal is a reaction to the discussion about reducing bureaucracy and practical sustainability reporting. However, this does not mean that ESG is becoming less important for companies – on the contrary. Companies that act strategically now and embed sustainable processes will benefit in the long term.

In my opinion, it is important not to lose faith now. Every topic sometimes needs an adjustment. But everything that has meaning and purpose remains in the end.