European Commission Proposes Sweeping Changes to CSRD and CSDDD

The European Commission’s proposed amendments to CSRD and CSDDD could significantly reduce and defer reporting obligations, potentially cutting compliance costs by €4.4 billion annually. However, they also introduce uncertainty for businesses that have already invested in ESG compliance. Read our full analysis, written by our ESG team, to understand the potential impact and next steps for your company.

The European Commission has published ‘omnibus proposals’ with the hope of “simplifying” the legislative framework on sustainability. These proposals include amendments to the Corporate Sustainability Reporting Directive[1] (CSRD) and the Corporate Sustainability Due Diligence Directive[2] (CSDDD). The European Parliament adopted the proposals at first reading with no amendments.

The proposals were signalled for a number of months following the publication of Mario Draghi’s report on the EU’s competitiveness strategy in September 2024. However, the scope of the proposals is significantly greater than what was anticipated.

The proposed amendments include a two-year deferral of the reporting requirements under the CSRD for companies that, under the current framework, are required to report in 2026 and 2027. The Commission also proposes to increase the thresholds that trigger reporting requirements on companies which, it estimates, will reduce the number of in-scope companies by 80%. The Commission also estimates that the proposed changes, including future proposed changes to the European Sustainability Reporting Standards (ESRS), will lead to cost savings of €4.4 billion a year.

CSRD

The key proposed amendments include:

CSDDD

The key proposed amendments include:

Timing

The omnibus proposals were adopted by the European Parliament in the form of two draft directives. The first focuses on the timing/deferral of reporting requirements and the second deals with the other proposed amendments to the CSRD and CSDDD. The first directive, if adopted, is required to be transposed into national law by 31 December 2025. Member States will then have a 12-month transposition period for the second directive.

The next step is for the European Council to formally adopt the directives. Both the European Council and the European Parliament are required to adopt the same final text before it can be published in the Official Journal of the European Union and enter into force.

Other changes

Although we have focused on changes to CSRD and CSDDD in this article, the omnibus proposals also include changes to the Taxonomy Regulation and Carbon Adjustment Border Adjustment Mechanism.

Despite the roll-back or simplification in the omnibus proposals, there are many other aspects of ESG regulation which remain a core focus in both the EU and Ireland. For example, the recast Energy Efficiency Directive[3] is unaffected by the proposals. We previously reported on the sustainability reporting requirements for certain data centre operators, and Article 12 is expected to be transposed shortly. Similarly, the EU and Ireland’s transition towards a more circular economy would fall under the umbrella of ‘ESG’, and existing and proposed circular economy, eco-design and waste management obligations are unaffected by the ESG rollback in the omnibus package.

Next steps

Many companies have invested significantly in preparing for and meeting their CSRD/CSDDD obligations. We expect that there will be a degree of frustration and criticism with the current uncertainty associated with the proposed shifting of goalposts on important ESG-related issues.

In an Irish context, the CSRD transposing legislation has already created a significant amount of uncertainty. We have previously reported on the misalignments between the CSRD and the Irish legislation. These misalignments have resulted in many Irish companies falling within scope unexpectedly or becoming subject to accelerated reporting timelines.

The omnibus proposals will add further uncertainty and confusion. However, if implemented as currently proposed, they will reduce the reporting requirements and consequent potential costs and liabilities for in scope companies significantly, which will likely be welcomed.

We will wait for the formal adoption of the relevant directives, but it is clear that these proposals will be another factor for in-scope companies to contend with in ensuring they are compliant with ESG legislation.

Please get in touch with our ESG team to discuss how we can help your organisation in scoping and understanding its obligations under the Regulations.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Directive 2022/2464/EU

[2] Directive 2024/1760/EU

[3] Directive 2023/1791/EU