The omnibus proposal, which was presented by the European Union on February 26, entails far-reaching changes for sustainability reporting and is currently causing uncertainty for many companies. But what do these changes mean in concrete terms for sustainability management? How can companies strategically align their reporting, take sensible measures and plan the next steps?
These questions were the focus of our last webinar, in which our CEO Markus Adler explained current developments, talked about the next steps and recommendations for action and emphasized the importance of voluntary reporting.
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 has initiated several key changes to sustainability reporting. The thresholds for mandatory reporting are to be raised so that companies are only required to report if they have 1,000 employees and net sales of €50 million or more, or a balance sheet total of €25 million or more. At the same time, the number of required data points is to be substantially reduced. The audit requirements are also to be relaxed. There are also changes to the EU taxonomy. Companies with more than 1,000 employees and a net turnover of over 450 million euros would still have to report, albeit with simplified requirements. The Supply Chain Directive (CSDDD) will in future only focus on direct suppliers (Tier 1), while civil liability for managing directors will no longer apply.
These planned adjustments will lead to a significant simplification of reporting, while at the same time creating uncertainty for companies that have already prepared reports or aligned their sustainability strategy accordingly.
2 Stop the Clock: Why the EU is playing for time
The stop-the-clock proposal was put forward by the European Commission in order to give the EU time to implement these proposals and to ease the burden on companies for the time being. Without this measure, the CSRD reporting obligation would already apply to certain companies before the new regulations are finalized. The aim is to create a clear transition period and avoid uncertainty for companies. After all, many companies are currently facing the challenge of adapting to new reporting requirements while these have not yet been finalized.
The proposal provides for the reporting obligations for Wave 2 and 3 to be suspended until the new requirements are enshrined in law. Wave 1 must continue to report. The vote in the European Parliament on the proposal is currently scheduled for April 1, 2025.
Despite these uncertainties, companies should continue to focus on a solid data basis, push ahead with a materiality analysis where necessary and further develop their sustainability strategy. Even if the reporting obligation is temporarily suspended, the topic of sustainability remains highly relevant for investors, customers and other stakeholders. Forward-looking planning will help companies to react flexibly to regulatory developments and secure competitive advantages.
3. the next steps for companies
The next steps depend heavily on the company’s current positioning. There are different scenarios depending on whether a company is already in the process of reporting or is still at the beginning. It is important not to let uncertainty slow you down, but to pursue a clear strategy. There are various ways for companies to further develop their sustainability reporting and prepare for future requirements. It is crucial to create a solid basis now in order to be able to react flexibly to regulatory developments.
Code Gaia has developed and presented a decision tree to enable companies to individually assess how they are dealing with the current situation. This divides companies into five different groups with recommendations for the respective next steps.
Category 1: Companies with over 1000 employees that will have to report in 2025.
These companies remain subject to reporting requirements and should carry out their reporting as planned. It makes sense to optimize the process and use the experience gained from the first reporting cycles. A solid materiality analysis helps to make the reports more efficient and to focus on the most important sustainability issues. At the same time, companies should develop measures to reduce CO₂ and optimize their ESG strategy in order to be well positioned in the long term.
Category 2: Companies with over 1000 employees that are required to report from 2026 onwards
Companies that are not required to report until 2026 should complete their materiality analysis promptly in order to create a reliable database. Even if the “stop the clock” proposal postpones the reporting obligations for companies that still have to report in accordance with the CSRD by 2 years to 2028, it is advisable to start collecting data early, as this process usually takes 12 to 18 months. In order to prepare in the best possible way, companies should prepare test reports now and optimize their internal processes to ensure that mandatory reporting works smoothly later on.
Category 3a: Companies with fewer than 1000 employees that will have to report in 2025.
Companies that have already started reporting should complete and publish the process as planned. Despite the expected relief from the omnibus proposal, lean, strategic reporting remains sensible. Early and transparent communication is important in order to actively manage stakeholder expectations and ensure trust. Companies should clearly signal that they will continue to report, but on a reduced scale. At the same time, it is essential to continue internal data management in order to be able to react flexibly to future regulatory requirements. This includes the complete implementation and use of the materiality analysis as well as continuous data collection in order to optimize processes and focus specifically on material topics in the future.
Category 3b: Companies with fewer than 1000 employees that would not be required to report until 2026.
Companies that are no longer expected to be required to report but are already in the reporting process should not lose sight of the issue. We therefore recommend continuing to focus on structured data collection and the further development of sustainability management. Strategically-minded companies can use this time to report voluntarily and in a targeted manner – for example in accordance with the VSMS standard – and thus secure competitive advantages. Existing efforts should continue to be used sensibly and the added value of voluntary reporting should be made available to the company in a targeted manner.
Category 4: Companies with fewer than 1000 employees that are already working on the materiality analysis.
Companies that are currently undergoing a materiality analysis should complete this process consistently – even if they are exempt from the reporting obligation. The dual materiality analysis provides key insights into the risks, opportunities and impacts of the business model and therefore forms an important strategic basis for effective sustainability management. It also supports the definition of clear sustainability targets and measures and creates the basis for future reporting and the application of other standards such as GRI or environmental management systems. In addition, the data collected helps to optimize internal processes and identify potential savings. Even without a direct reporting obligation, voluntary reporting can be useful in order to create transparency, involve stakeholders at an early stage and strengthen a company’s own positioning as a sustainable company.
Category 5: Companies with fewer than 1000 employees that are still at the beginning.
Companies that have not yet carried out any reporting should use the time to familiarize themselves with the basics of sustainability reporting. A materiality analysis can help to better understand business risks and opportunities and develop targeted measures. Even without a commitment, structured sustainability management can be useful in order to remain competitive in the long term. Companies that are involved in the supply chains of large companies in particular should collect ESG data at an early stage to make it easier to meet future requirements.
4. why voluntary reporting is also important
Even if the omnibus proposal is likely to remove the reporting obligation for some companies, voluntary sustainability reporting remains a valuable strategic tool. Companies can make targeted use of their previous experience to efficiently align their reporting and focus on operationally relevant aspects.
The dual materiality analysis remains central: it not only identifies regulatory requirements, but also economic opportunities and risks, thus forming the basis for well-founded strategic decisions and effective prioritization. Sustainability reporting also creates transparency and strengthens the trust of investors, customers and business partners, who are increasingly demanding ESG data – even from companies that are not directly required to report. It facilitates access to financing, promotes early risk identification and enables long-term efficiency gains.
At the same time, a clear ESG focus increases competitiveness and employer attractiveness – a significant advantage in the competition for skilled workers. Sustainable innovations also open up new business opportunities and strengthen the future viability of the company. Instead of waiting and seeing, companies should take the opportunity to actively develop their sustainability strategy and thus ensure resilience and long-term economic success.
Opportunities for voluntary reporting
Companies that wish to continue publishing sustainability information can choose from various reporting standards and formats that can be adapted to their individual requirements:
- ESRS (European Sustainability Reporting Standards): Companies that already report in accordance with ESRS or have prepared for this can continue their reporting voluntarily, even if they are no longer required to report. This offers the advantage of continuing to provide comparable ESG data. In addition, cost-intensive audits no longer need to be carried out.
- VSME (Voluntary SME Standard): A simplified and targeted alternative for smaller companies that want to create a structured sustainability report without having to fulfill the full scope of the ESRS requirements. You can simply switch from the ESRS requirements to the VSME. Code Gaia offers mapping to find the right place for content that has already been created.
- Hybrid solutions: Companies can use a combination of different standards to adapt their reporting specifically to their stakeholder requirements. For example, the VSME can be voluntarily supplemented with elements from the ESRS.
- GRI (Global Reporting Initiative): An internationally recognized standard that is particularly suitable for globally active companies and enables broad comparability.
These flexible reporting options enable companies to continue to make their sustainability strategy visible, proactively address regulatory developments and take advantage of the benefits of structured ESG communication.
5 Q&A: The most important questions and answers
Does ESRS reporting lead to more sustainable corporate governance?
Yes, by reporting in accordance with ESRS and in particular by carrying out the double materiality assessment, companies are made aware of material sustainability issues in a targeted manner. This leads to sustainable measures being taken and improved.
How should companies deal with the reporting requirements from 2026?
Companies should continue to prepare for reporting, further develop report content and collect data. Data management and action management should continue to be stepped up. The “stop-the-clock” process should be closely monitored in order to be able to react in good time and not be overrun.
How useful is it to carry out an ROI assessment?
If there is management commitment, work on sustainability issues should continue, even if the EU Commission’s omnibus proposal to simplify sustainability reporting has not yet been finalized. A specific ROI assessment can be very useful to quantify the financial benefits of sustainability measures and support decision-making. The double materiality assessment and the carbon footprint should ideally be completed for this purpose, as they represent important foundations for a well-founded ROI assessment.
How relevant will international standards such as GRI be in the future? Will they be replaced by standards such as VSME?
International standards such as the Global Reporting Initiative (GRI) remain relevant, particularly for international reporting. For European companies, it is advisable to focus primarily on the European Sustainability Reporting Standards (ESRS), which were developed as part of the Corporate Sustainability Reporting Directive (CSRD). For international partners, a mapping strategy between ESRS and GRI can be useful in order to meet the requirements of both standards.
Does the VSME standard also ask about CO₂ balancing?
Yes, the voluntary standard for small and medium-sized enterprises (VSME) includes CO₂ accounting for Scope 1 and 2 emissions. However, Scope 3 can also be reported voluntarily. This standard enables SMEs to record and report their sustainability performance in a structured manner.
Is there still a CSRD obligation for small and medium-sized enterprises after the Omnibus Initiative?
According to the EU Commission’s current proposal as part of the omnibus package, the CSRD requirements for small and medium-sized enterprises (SMEs) are to be abolished. It is planned that only companies with more than 1,000 employees will be required to report, which would significantly reduce the number of companies affected. However, these changes still have to be approved by the EU Parliament and the member states.
What happens if a company is obliged to report but does not report?
Companies that fail to comply with their reporting obligations may face sanctions ranging from fines to further legal consequences. The exact penalties vary depending on national legislation and can be significant.
How does the Code Gaia software support auditors in sustainability auditing?
Our software supports auditors in sustainability audits with functions such as access options for auditors, traceability of changes, document attachments and approval processes. In addition, the Coda Gaia software is certified in accordance with auditing standards such as IDW PS 880, which increases the quality and reliability of the audits.
Will the Green Claims Directive continue to exist?
Yes, the Green Claims Directive will remain in place. However, it will be reviewed as part of the deregulation debate in order to make possible simplifications or adjustments.
