On February 26 last, the European Commission published its much-heralded Omnibus package, with far-reaching proposals to modify key EU laws on sustainability reporting. Under the proposed changes, implementation of the Corporate Sustainability Reporting Directive (CSRD) will be delayed by two years and only companies with more than 1,000 employees and either at least €50 million in turnover or a balance sheet of more than €25 million will have to report. It is believed that the change will reduce the number of businesses within the scope of the directive from about 50,000 to around 10,000.
Changes have also been proposed to the Corporate Sustainability Due Diligence Directive (CSDDD), according to EY Ireland assurance partner and sustainability services lead Derarca Dennis. “The main headlines are that CSDDD reporting has been deferred by one year to 2028, and the penalty of five per cent of global revenues has been removed,” she says.
The Omnibus proposal also covers the carbon border adjustment mechanism (CBAM) and aims to simplify it for fairer trade. “The main change is that now small importers, who import small quantities of CBAM goods entering the EU from third countries will be exempted.” A proposed 50 tonne threshold could exempt up to 90 per cent of companies previously covered under the regulation.
The package may have the unintended consequence of introducing an element of uncertainty for Irish companies, however. “Irish implementing legislation passed in July 2024 places sustainability reporting obligations on in-scope Irish companies,” says A&L Goodbody ESG and sustainability lead Jill Shaw. “This means that it will be necessary for amending legislation to be introduced in Ireland to provide for this delay. Until this happens Irish companies that are preparing to report in 2026 face continued uncertainty and potentially more costs, having an opposite effect to what the Commission is seeking to achieve – regulatory simplification and reduced administrative burden.”
The Omnibus is “a response to a collective view that it was too much change too fast,” according to Dennis.
She notes that the regulation was developed prior to factors like “energy inflation, geopolitical challenges and global trade uncertainty, and regulatory change in other jurisdictions – so the environment in which they were expected to be implemented was very different.
“I believe that the current Commission has been very clear that they remain committed to the targets set by Ursula von der Leyen in the previous Commission,” she continues. “These changes are a response to the challenges that reporters experienced in wave one and from wider stakeholders. The Omnibus has the potential to benefit global business and to foster the EU’s competitiveness. It will also support companies in articulating the positive impact they are having within their sector. The EU is still very committed to addressing climate challenges and these changes should facilitate this ambition.”
Deloitte Ireland sustainability lead Glenn Gillard believes the scale, scope and breadth of CSRD has been overwhelming for business and the Omnibus package is welcome in that context.
“The vast majority of businesses were not ready to report and were diverting attention and resources away from sustainability actions to reporting compliance,” he says. “As a result, the simplification package is welcomed. However, we are at the point of delicate balance where the reduction in regulation along with a wider geopolitical shift on the urgency on climate action, could result in a material deviation from the EU’s commitments to net zero. However, along with the Omnibus directive, the Clean Industrial Deal was also launched which reaffirms the EU’s commitment to meaningful action and seeks to put in place the supports and mechanisms to push business forward in meeting sustainability goals. The next 12 months are going to be critical in determining the path the EU takes.”
Dennis emphasises the need to maintain decarbonisation efforts, regardless of changes to the reporting regime. “Current indications are that if we don’t meet our decarbonisation targets, we could face penalties as high as between €8 billion to €26 billion. So, it’s critical that we focus on investment now in upgrading Ireland’s energy grid, the rollout of electric vehicles and supporting changes in farming practices.”
Regulatory simplification efforts are not confined to sustainability and are part of a wider competitiveness agenda, according to Shaw. “The Commission intends to introduce further packages of simplification measures throughout 2025. A digital package, a targeted revision of the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation and simplification of the Common Agricultural Policy are also initiatives that are expected to be published in 2025. The emphasis on simplification ties in with one of the European Commission’s strategic priorities, to boost Europe’s competitiveness. Ultimately, these proposed simplification measures are designed to enhance the competitiveness of European businesses and the Omnibus package on sustainability forms part of these efforts.”
