On Feb. 26, a proposal was launched from the European Commission to greatly simplify existing legislative frameworks around sustainability reporting. Europe's objective is to reduce the administrative burden of sustainability reporting and thus treat sustainability as a strategic choice rather than a mere compliance exercise.
Mandatory sustainability reporting (CSRD) came in late 2023 with the goal of objectifying the sustainability efforts of different companies and increasing comparability. At the European level, 50,000 companies were required to report an annual sustainability report as part of their annual report.
In order to reduce the administrative burden, especially for SMEs, Europe has proposed the Omnibus Package, which would exempt 80% of these 50,000 companies from having to produce a mandatory sustainability report. In this article, we take a closer look at the implications of this European Commission proposal.
Omnibus package: 3 major implications for CSRD
1. Only companies with more than 1,000 employees must publish a mandatory sustainability report
The criteria for mandatory preparation of sustainability reports will be substantially increased, so that instead of 50,000, only 10,000 companies would have to prepare a mandatory sustainability report.
The new criteria for reporting requirements included in the Omnibus Package are :
- > 1,000 employees AND
- > 50M EUR sales or > EUR 25M balance sheet total
Thus, only companies with more than 1,000 employees will have to prepare and publish a mandatory CSRD sustainability report after the introduction of the Omnibus Package.
2. Companies still required to publish a mandatory sustainability report get more time
As a result of the newly proposed "stop the clock" mechanism, companies that were required to publish their first sustainability report in 2026 or 2027 will have to 2-year deferral get to publish this sustainability report.
3. Legal control of sustainability reporting is curtailed
According to the original CSRD legal text, a limited statutory audit (limited assurance) by an auditor would occur for the first 3 sustainability reports, then a comprehensive audit (reasonable assurance) would occur from year 4.
The Omnibus Package removes reasonable assurance as a principle for CSRD, limiting the statutory audit of sustainability reports. Its purpose is to reduce the compliance cost for reporting companies.
VSME as a sustainable solution for SMEs with large trading partners
With the publication of the Omnibus Package, the European Commission strongly emphasizes the importance of the voluntary, greatly simplified, Sustainability Reporting Standard for SMEs (VSME). This VSME standard is an important tool for SMEs that have large trading partners with whom they want or need to share sustainability information. Read in this article more about the VSME standard.
Belgian legislation provides that CSRD-compliant companies may not request more information from their SME trading partner than what is included in the texts of the VSME standards for SMEs.
Consequently, as an SME, you can answer any sustainability question from your trading partner if you can provide a limited sustainability report based on VSME standards. This can also further strengthen your professional relationship with your trading partner.
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