CSRD: How the Omnibus Regulation Changes the Reporting Obligation

The Corporate Sustainability Reporting Directive (CSRD) is the central instrument of the European Union (EU) to anchor sustainability in corporate reporting. Since its introduction, it has already occupied many companies. Companies had to establish new structures and processes, penetrate the complexity of sustainability, and deal with the high demands of the CSRD. But with the omnibus package of February 2025, the rules are changing again. The new requirements relieve many companies from the reporting obligation – but they also bring new uncertainties.

What does this mean concretely? Who will still have to report in the future – and when? What is dropped, what remains, and what is new? In this article, we provide a comprehensive overview of the CSRD directive, the planned changes through the Omnibus 2025, and what this means for companies in practice.

The Essentials in Brief

• The CSRD reporting obligation is dropped for around 80 percent of companies due to the Omnibus Regulation

• Also reduction of reporting obligations and data points

• Deadline extension by two years

  
  

What is the CSRD Directive?

The CSRD Directive is the further development of the previous Non-Financial Reporting Directive (NFRD). The aim of the CSRD is to collect sustainability information in a binding and standardized manner just like financial figures.

Since January 5, 2023, the CSRD has been in force. It obliges companies to report systematically on ecological, social, and governance aspects (ESG). The principle of double materiality is at the center: companies must report both on the impacts of their business activities on the environment and society – as well as on sustainability risks that affect their own business model.

Compared to the NFRD, the CSRD significantly expands the scope and introduces binding reporting requirements for the European Sustainability Reporting Standards (ESRS) for the first time.

CSRD: Who is Affected – and When?

The original CSRD directive anticipated a gradual introduction of the reporting obligation in three waves:

• Wave 1 (from 2025): Companies that were already subject to the NFRD (capital market-oriented, >500 employees)

• Wave 2 (from 2026): Large companies with at least two of the following characteristics:

  • 250 employees

  • 25 million euros in balance sheet total

  • 50 million euros in revenue

• Wave 3 (from 2027): Capital market-oriented SMEs
  
  

Even non-EU companies with a turnover of more than 150 million euros in the EU will be subject to reporting requirements starting in 2028 if they operate at least one subsidiary in the EU.

This structure has been fundamentally revised by the Omnibus Regulation 2025.

The Most Important Innovations by the Omnibus Regulation

New Thresholds: Who Still Has to Report?

With the omnibus package, the EU Commission has significantly raised the thresholds for the CSRD Directive. In the future, only companies will be affected that:

• have more than 1,000 employees and

• show at least 50 million euros in revenue or 25 million euros in balance sheet total

This reduces the circle of companies required to report by about 80 percent. Especially smaller publicly traded companies and larger SMEs will benefit from this change. 

Temporal Shift of Reporting Obligations

A central element of the Omnibus Regulation is the so-called "Stop-the-clock" regulation. It shifts the reporting deadlines of the second and third waves by two years:

• Large companies (originally from 2026) will report only in 2028

• Capital market-oriented SMEs (originally from 2027) will report only in 2028

The deadline for wave 1 remains unchanged. Capital market-oriented companies with more than 500 employees must continue to report from 2025.

Simplifications in Reporting Obligations

In addition to the temporal adjustments, the Omnibus Regulation also brings structural reliefs:

• Sector-specific ESRS standards are completely dropped

• Reduction of data points by up to 70 percent

• More focus on quantitative rather than narrative information

• Simplified materiality analysis with a top-down approach

Moreover, certain ESRS elements will be voluntary in the future – especially for companies below the new thresholds.

Changes in Auditing and Assurance

There are also easements in external auditing:

• Auditing will continue in the mode of Limited Assurance

• The planned transition to Reasonable Assurance has been dropped

• The requirements for audit planning will be reduced

Companies must still have their reports externally audited, but can expect decreased effort and clearer framework conditions.

CSRD in Practice: Requirements for the Sustainability Report

Despite the reliefs, the CSRD directive remains a comprehensive reporting instrument. Companies that will be subject to reporting in the future must fulfill a variety of requirements:

• Reporting obligation in the management report (not separately)

• Consideration of all twelve ESRS standards

• Presentation of double materiality with a clear methodology

• Providing qualitative and quantitative key figures on ESG topics

• Target and action planning (e.g., decarbonization goals, supply chain strategy)

The reporting obligation covers both historical and forward-looking information. Data quality, data availability, and IT systems play a decisive role.

The New VSME Standard: What SMEs Need to Know

For small and medium-sized enterprises (SMEs) that are not subject to the reporting obligation of the CSRD Directive, the EU has announced a voluntary reporting framework: the VSME Standard (Voluntary Standard for SMEs).

This standard:

• is voluntary, but aligned with the ESRS

• provides a simplified structure for sustainability reports

• allows a gradual approach to the CSRD requirements

• is compatible with supply chain requirements of large companies

The VSME standard is particularly relevant for SMEs that are part of the supply chains of large companies. Even if they are not directly subject to reporting, they often have to provide sustainability information.

Why Even Non-Obligated Companies Should Engage with the CSRD

Many companies are currently exempt from the reporting obligation – for now. Nevertheless, the CSRD will also affect them. Major business partners and corporations will increasingly demand ESG data along their supply chain. Those who are prepared can react more quickly and remain relevant as suppliers.

Additionally: Investors, banks, and public clients are already evaluating how well a company understands and manages sustainability risks. Starting early with implementation creates transparency, reduces risks, and provides a strategic advantage. Entering into CSRD-compliant thinking and action is worthwhile even without an obligation.

CSRD, CSDDD, and Supply Chain: How Everything is Connected

The CSRD Directive does not stand alone. It is closely linked with the Corporate Sustainability Due Diligence Directive (CSDDD) and other EU initiatives.

While the CSRD aims at reporting, the CSDDD obliges concrete due diligence along the supply chain:

• Identification and avoidance of human rights and environmental violations

• Control mechanisms and audits along the entire value chain

• Obligation to take corrective measures in case of violations

The Omnibus Regulation specifies the reporting requirements for these obligations. Companies will now have to clearly document how they fulfill their due diligence obligations – even with indirect suppliers.

This increases the relevance of sustainability reports even for companies that are not formally subject to reporting.

Frequently Asked Questions about the CSRD Directive

What is the CSRD Directive and what does it regulate exactly?
The CSRD (Corporate Sustainability Reporting Directive) is an EU directive that obliges companies to disclose their sustainability strategy and ESG risks. It replaces the previous NFRD and prescribes the application of uniform reporting standards (ESRS).

Which companies will still be affected by the CSRD according to the Omnibus Regulation?
Only companies with more than 1,000 employees as well as over 50 million euros in revenue or 25 million euros in balance sheet total. Smaller companies are exempt from the obligation but can report voluntarily.

What does the CSRD Directive bring to companies that are not directly affected?
It helps to think systematically about sustainability and prepare for the requirements of investors, customers, or banks. The pressure for ESG transparency is also increasing along the supply chain.

How do CSRD and VSME differ?
The VSME is a voluntary reporting standard for SMEs, while the CSRD represents a mandatory directive for larger companies. The VSME aims to provide SMEs with a simplified way to report on their sustainability performance, while the CSRD prescribes comprehensive sustainability reporting for certain companies. 

How do ESRS and CSRD differ?
The CSRD provides the framework for reporting. The ESRS (European Sustainability Reporting Standards) specify how and on which content reporting must take place.

What data is needed for CSRD-compliant reporting?
Companies must collect qualitative and quantitative data on environmental, social, and governance issues – including strategic goals, risks, key figures, and measures.

When should companies start preparing?
As soon as possible, even without obligation. Establishing data structures and responsibilities takes time. Those who start early secure flexibility and credibility.

ℹ️ This article is based on the status as of July 2025. The final regulations for the Omnibus Regulation depend on its adoption by the EU Parliament and national implementation in the member states.

Sources (accessed: July 2025)

EMAS: CRSD-Omnibus – Innovations in Sustainability Reporting
https://www.emas.de/aktuelles/news/2025-02-crsd-omnibus

IHK Pfalz: Corporate Sustainability Reporting Directive (CSRD)
https://www.ihk.de/pfalz/innovation-umwelt-und-existenzgruendung/energie-und-umwelt/umweltschutz/corporate-sustainability-reporting-directive-csrd--6029704

Morrison Foerster: EU Sustainability Reporting Unpacked: Latest Developments
https://www.mofo.com/resources/insights/250707-eu-sustainability-reporting-unpacked-latest-developments

EFRAG: Voluntary Sustainability Reporting Standard for Non-listed SMEs
https://www.efrag.org/en/news-and-calendar/news/efrag-releases-the-voluntary-sustainability-reporting-standard-for-nonlisted-smes

CSR-Tools: CSRD explained simply
https://csr-tools.com/csrd/

European Council (Consilium): Final decision on the Stop-the-Clock regulation
https://www.consilium.europa.eu/en/press/press-releases/2025/04/14/simplification-council-gives-final-green-light-on-the-stop-the-clock-mechanism-to-boost-eu-competitiveness-and-provide-legal-certainty-to-businesses/