How will the EU Omnibus impact middle-market businesses?

The Corporate Sustainability Reporting Directive (CSRD) has been a major topic of discussion for companies preparing to align with new sustainability reporting standards. The recent EU Omnibus proposals have introduced significant changes, particularly the threshold for the number of employees, which promises to shift the scope and consequently impact many organisations.

What has or will change with the EU Omnibus?

In our previous article, we dived deeper into the key changes proposed by the EU Omnibus. To quickly summarise, one of the most notable changes in the proposal is the adjustment to the employee threshold, which determines whether a company falls under the CSRD’s scope. Under the proposed amendments, this threshold would increase from 250 employees to 1,000. This change dramatically reduces the number of companies impacted in Waves 2 and 3 of implementation by more than 85% — from around 50,000 to approximately 7,000.

For companies with more than 1,000 employees, the CSRD’s requirements remain applicable, although they will benefit from a two-year delay to comply under the “Stop the Clock” postponement directive, which came into effect on 17 April. This delay has been largely welcomed by organisations, offering them additional time to streamline reporting systems and relieve the pressure many felt to meet earlier deadlines. However, questions of momentum arise as organisations strive to maintain progress amid this pause. For companies newly excluded from the updated scope, the response spans a mix of relief, strategic reassessment, and adjustments in planning.

What this means for companies

Reassessing scope and preparation

Organisations should begin by reassessing whether they remain within the CSRD’s scope under the new proposals. If your company has already invested resources in preparations but falls below the 1,000-employee threshold, it is essential to evaluate how previous efforts can still provide value. For example, companies may leverage their work on double materiality assessments to enhance sustainability strategies or reporting to showcase their commitment to transparency and competitive differentiation.

Additionally, companies within the value chain of larger organisations mandated to report under the CSRD should be prepared to provide relevant sustainability information. Thus, maintaining accurate and reliable data becomes increasingly important to meet such requests.

Large companies over 1,000 employees

For large companies that remain subject to the requirements, the priority should be to keep moving forward with preparations, making strategic use of the additional time provided by the two-year delay. This extra time is a chance to focus on strengthening internal processes and ensuring that data collection systems are reliable and accurate. The emphasis should also be on setting up robust internal controls to be ready for the assurance requirements. Key focus areas that are not expected to be revised include core data points such as Scope 1, 2, and 3 carbon emissions, climate-related risks and opportunities, as well as essential social metrics like diversity, inclusion, and workforce characteristics. For companies that have yet to complete their Double Materiality Assessment exercise, it remains a mandatory requirement under the CSRD. The insights gained from this assessment can be leveraged to shape their strategy and guide actions to better prepare for the future.

These metrics are not only integral to the CSRD but are also consistent with other sustainability reporting frameworks worldwide, so significant shifts in these areas are not expected. Companies looking to forge ahead with CSRD preparations should centre their efforts on these metrics to align with global standards while adapting to the evolving requirements.

Small to medium-sized companies

If your company now falls below the updated threshold, the impact will depend largely on where you are in your preparation process. For those who have already initiated actions, using these insights to pursue voluntary reporting aligned with industry norms can still demonstrate leadership on sustainability issues. For less impacted organisations, adoption of best practices, like double materiality assessments, remains critical to align with shifting market expectations and avoid falling behind industry standards.

Country-specific implications

Different EU Member States are at varying stages of transposing the CSRD and “Stop the Clock” directive into national legislation. For organisations operating across borders, this presents a potential legal grey area. Some countries that have already incorporated the CSRD into their local laws may enforce requirements earlier than others, depending on the "Stop the Clock" provision that grants the two-year delay to applicable organisations. Businesses should carefully monitor both EU-level developments and updates within each member state where they operate to ensure compliance.

The risk of losing momentum

An overarching concern for many companies is losing the momentum they have worked hard to build. Buying time with the delay should not result in stalled progress. Companies are encouraged to maintain internal stakeholder engagement, keep advancing sustainability initiatives, and use the additional time to take a more focused, strategic approach to their sustainability goals.

How can companies prepare?

1. Perform scope reassessments

   Determine whether your organisation still falls under the revised CSRD threshold. If not, assess how to leverage sustainability investments already made to maintain competitive advantage and ensure preparations for the Double Materiality Assessment.

2. Focus on consistent metrics

   Prioritise data points unlikely to change, such as emissions data, climate risks, governance, and core social metrics, to remain consistent with global sustainability frameworks.

3. Enhance data reliability and assurance readiness

   Ensure that collected sustainability data is accurate, reliable, and ready for limited assurance by building robust governance and controls.

4. Monitor legislative timelines

   Keep track of developments at both the EU and Member State levels to stay ahead of potential compliance variations in different countries.

5. Adopt no-regret activities

   For companies facing delays, continue building a solid foundation for sustainability governance and reporting practices, which will benefit long-term business goals.

6. Consider voluntary reporting

   Smaller companies or those opting out of CSRD compliance should align themselves with emerging best practices to avoid falling behind market norms.