On February 26, the European Union proposed far-reaching changes to companies’ sustainability reporting and obligations with its omnibus proposal. These changes aim to reduce the regulatory burden on small and medium-sized enterprises (SMEs), while at the same time further advancing the EU’s sustainability goals.
But what does this mean for your company? What changes are on the horizon and what should you prepare for? We talked about this in our webinar with our Head of Sustainability Phillip Blumenthal and our CEO Markus Adler.
Watch the recording here or get an overview first in the following blog post.
Table of contents
1. what changes does the omnibus proposal bring?
The EU Commission’s omnibus proposal entails extensive changes in various areas of sustainability regulation. The most important changes to the CSRD, EU taxonomy, CSDDD and CBAM are explained below.
Corporate Sustainability Reporting Directive (CSRD)
Reduction of the scope of application
Around 80% of companies will be excluded from the scope of the CSRD. Only companies with more than 1,000 employees and a turnover of 50 million euros will continue to be required to report.
Relief for small companies in supply chains
The EU wants to ensure that large companies do not transfer disproportionate reporting obligations to their smaller suppliers.
Postponement of reporting obligations
Companies that would have been required to report from 2026 or 2027 will receive a two-year extension until 2028.
Double materiality analysis remains a key methodology
Despite the simplifications, the concept of dual materiality is still recommended as best practice for companies.
EU taxonomy
Limitation to the largest companies
In future, only a small group of the largest companies will have to submit taxonomy reports, based on the Corporate Sustainability Due Diligence Directive (CSDDD).
Voluntary reporting
Large companies that are not subject to the obligation can still report voluntarily.
Facilitating reporting
Companies may now also report on partially sustainable activities.
Reduction of reporting obligations by 70
The EU is planning a significant streamlining of the taxonomy templates.
Simplification of complex requirements
The particularly complicated “Do no significant harm” (DNSH) criteria for pollution prevention and environmental control are being adapted.
New financial materiality threshold
Banks and other financial institutions will receive relief in the calculation of their Green Asset Ratio (GAR).
Corporate Sustainability Due Diligence Directive (CSDDD)
Focus on direct business partners
The duty of care is no longer extended to the entire supply chain, but concentrates on direct partners.
Reduced inspection frequency
Companies only have to review their supply chains every five years instead of annually.
Limited information requirements
SMEs need to provide less detailed information on the value chain.
Easing of liability regulations
Companies are better protected against excessive claims for damages.
Postponement of duties
The largest companies will not have to comply with the new rules until July 26, 2028.
Clearer definition of risk areas
Certain environmental and social risks are now named more specifically in order to provide companies with better guidance.
Carbon Border Adjustment Mechanism (CBAM)
A new minimum threshold value
Companies only have to prepare CBAM reports from a CO₂ import of 50 tons per year.
Simplification of the calculations
The rules for calculating and reporting emissions will be clarified.
Prevention of circumvention
New rules should ensure that companies cannot circumvent CBAM through creative supply chain design.
Planned extensions
CBAM is to be expanded to other industrial sectors by 2026.
2 What does this mean for the sustainability management of SMEs?
For many companies, the omnibus bill means a drastic reduction in regulatory pressure. However, sustainability management remains relevant. The introduction of the CSRD and ESRS has created the basis for standardized, comparable and assessable sustainability reporting. Before the introduction of international standards, reports were often inconsistent and difficult to compare. These standards enable companies to present their sustainability performance transparently and provide investors and other stakeholders with a sound basis for decision-making.
In this way, sustainability reports can offer a competitive advantage even without a statutory reporting obligation and contribute to strengthening the company in the long term. The existing reporting standards such as ESRS and VSME remain in place and continue to offer uniform guidance. In addition, many SMEs benefit from higher threshold values that make cost-intensive audit procedures superfluous. Those who work with larger companies should nevertheless align themselves with their ESG standards in order to remain competitive. Despite the regulatory relief, the EU continues to pursue ambitious climate targets, which is why sustainable strategies remain relevant for companies.
3. how can code support Gaia?
Code Gaia helps companies to adapt efficiently to new regulatory requirements and implement ESG strategies in a targeted manner. The platform relies on automation to reduce the effort involved in sustainability reporting and offer companies practical solutions.
With our software, companies can report directly in accordance with VSME, which simplifies reporting for SMEs in particular. A central component is our module for double materiality analysis, which helps companies to focus on the material and relevant topics and reduce unnecessary reporting effort – exactly what the EU is aiming for with the omnibus proposal.
Code Gaia simplifies compliance documentation and increases data quality through AI-supported reporting, automated CO₂ balances and integrated audit trails. This allows companies to continue to pursue their sustainability goals efficiently and make strategic decisions based on reliable data.
In addition, Code Gaia offers an active community and expert support through regular webinars and workshops. Companies continue to benefit from the active exchange with ESG experts and best practices from various industries.
5 Conclusion and next steps
The EU omnibus significantly reduces regulatory pressure, but sustainability remains a key success factor. Companies should adapt their strategy and prioritize targeted measures in order to secure competitive advantages in the long term. Those who continue to focus on ESG standards will be better prepared for market requirements and regulatory developments.
Furthermore, sustainability measures should be chosen that create long-term value, support financial stability and convince customers and investors. Increasing efficiency through digital solutions helps to reduce costs and optimize processes. The strategic integration of sustainability and a risk-based approach ensure that companies not only adapt to regulatory requirements, but also use sustainability as a competitive advantage.
5. frequently asked questions
CSRD Scope & Thresholds
Are companies with fewer than 1000 employees permanently exempt?
At the moment it looks like this is the case, but the final decision of the European Parliament remains to be seen.
Will the thresholds be adjusted to 750 or 500 employees?
No, such a change is not yet planned.
How are employees counted? Does only the EU count or worldwide?
The threshold of 1,000 employees refers to the average number consolidated at Group level, not just in the EU.
Will the balance sheet total of € 25 million continue to be used as a criterion?
Yes, companies must have more than 1000 employees and either a turnover of more than € 50 million or a balance sheet total of more than € 25 million.
Reporting deadlines & postponements
Is the postponement of the reporting obligation to 2028 final?
No, it is still only a proposal and has yet to be approved by the European Parliament.
Does the postponement also apply to companies that already have to report now?
No, Wave 1 companies (first-time reporting 2025 over 2024) with more than 1000 employees must continue to report. Wave 2 (first reporting in 2026 over 2025) and Wave 3 (first reporting in 2027 over 2026) are affected by the postponement.
When will the final decision on the postponement be made?
The exact timing is unclear. The EU Commission wants to have the “Stop the Clock” proposal discussed in Parliament as soon as possible.
Should the current reporting process be paused or continued?
Keep working! Use the time to prepare better and wait for final EU decisions before sustainability ambitions are scaled back.
EU taxonomy & other regulations
If the CSRD is postponed, will companies still have to comply with the EU taxonomy?
Yes, companies with more than 1000 employees and a turnover of over € 450 million remain subject to EU taxonomy.
What impact does the postponement have on the German Supply Chain Due Diligence Act (LkSG)?
This is still unclear. The current LkSG exemptions relate to CSRD and CSDDD. It remains to be seen how the German government will react to the new proposals.
Does the CSRD still have to be transposed into national law?
Yes, EU law must be transposed into national law by the member states. The national legislators remain sovereign.
Impact on companies outside the EU
What reporting requirements apply to international groups with subsidiaries in the EU?
International groups with a turnover of more than €150 million in the EU must report on the 2028 financial year from 2029. There are discussions about raising this threshold to € 450 million.
Are non-EU companies affected by the postponement?
No, as they are not required to report until 2029 anyway.
Do subsidiaries in the EU have to report if the parent company is based outside the EU?
Yes, if the subsidiary has more than 1000 employees AND over €50 million in turnover, it remains subject to reporting.
Company-specific implementation
What should companies that fall outside the scope do? Report voluntarily or use VSME?
This depends on the strategic orientation. Companies can report voluntarily or use the VSME (voluntary sustainability reporting standard for SMEs).
Should companies pause the double materiality analysis (DMA)?
No, if the analysis has already been started, it should be completed. It provides valuable insights, even independently of the reporting process.
How do companies deal with investments already made in the reporting process?
The investments should be used sensibly to build up a solid sustainability strategy in the long term.
Is voluntary reporting audited?
No, voluntary reporting is not subject to mandatory auditing.
VSME
Does Code Gaia offer a VSME reporting solution for customers?
Yes, the Code Gaia software already contains the final version of the complete VSME.
Should companies that were originally required to report under CSRD but are now no longer required to do so switch to VSME?
Yes, it is recommended to use both the Basic Module and the Comprehensive Module of the VSME ESRS in order to be best prepared for sustainability requests.
What is the best strategy for companies switching from CSRD to VSME?
Continue to use existing materiality analyses and focus on the management of impacts, risks and opportunities. Code Gaia is working on a mapping to transfer ESRS data into VSME reports in a meaningful way.
Should Wave 2 companies that now fall outside the CSRD scope switch to VSME?
Yes, if ESRS reporting is considered too extensive, VSME ESRS is a sensible alternative. To stop the reporting process completely now would be a step backwards.
Should voluntary reports according to VSME continue to be published in the annual reports?
Not a legal requirement, but useful from a stakeholder perspective, e.g. as an appendix to the annual report.
Is it worth switching from GRI III to VSME?
GRI III is more comprehensive and internationally recognized. It entails additional administrative work, while VSME is less bureaucratic.
Should companies that have already started reporting processes (e.g. double materiality analysis) for CSRD continue or switch to VSME?
If the CSRD reporting obligation is dropped, DMA is no longer legally required, but remains relevant as a valuable scoping tool.
Will large companies require VSME reports from their suppliers (SMEs)?
Possible, but not required by law. Companies can decide individually which information they request.
Will the “trickle-down effect” mean that companies that are no longer covered by CSRD will still be asked to report by customers?
Yes, customers could continue to demand sustainability information. The EU Commission plans to only allow large companies to request information that is provided for in the VSME ESRS.
