Leaked EU Omnibus draft cuts number of firms within CSRD scope tenfold

The EU’s flagship sustainability reporting directive, CSRD, could soon apply to just 5,000 companies instead of 50,000, according to a leaked draft of the EU Simplification Omnibus.

The document was leaked late last Friday (February 21) and has been strongly criticised by sustainability organisations. 

It seeks to reduce the scope of the Corporate Sustainability Reporting Directive (CSRD) so it only applies to companies of more than 1,000 employees and with a net turnover exceeding €450 million – instead of those with 250 employees, €40 million or more in turnover, and/or €20 million or more in total assets.

This would mean that only around 5,000 companies would have to comply with its requirements – instead of the original 50,000 – and that most of the companies meant to start reporting this year would no longer be required to do so.

In fact, some of those that started publishing CSRD-compliant reports last year (the same entities that used to report under CSRD’s predecessor, the Non-Financial Reporting Directive or NFRD) would even be able to stop, since the new CSRD’s scope would be even narrower than that of NFRD, which applied to companies with more than 500 employees.

EU Omnibus: ‘A hatchet job’

Aside from reducing the scope of the CSRD, the EU Omnibus Directive in its current form significantly weakens the Corporate Sustainability Due Diligence Directive (CSDDD), by requiring due diligence only with large and direct suppliers instead of throughout the entire value chain.

It also weakens the definition of the transition plan required as part of the law, reduces the scope of what can be defined as a “stakeholder”, and removes a duty to terminate commercial relationships with suppliers committing environmental or human rights abuses.

Richard Gardiner,  Head of EU Public Policy at the World Benchmarking Alliance, called the amendments “an absolute hatchet job for a flagship EU sustainable law” and questioned the reasons behind the lack of proper consultations and impact assessments for the EU Omnibus.

‘Devastating blow to the European Green Deal’

This is a growing concern for observers of this legislative process: WWF also criticised the fact that the draft was presented to concerned departments within the European Commission (from where the leak originated) on a Friday evening, and with “fewer than 24 hours over a weekend for Commission services to provide feedback”.

This “rushed approach” is in stark contrast with the years of evidence gathering, consultations and negotiations that shaped the original CSRD and CSDDD and highlights a “lack of transparency”, the NGO added.

"You reap what you sow, and the Commission’s deeply flawed omnibus process appears to lead towards a reckless proposal that would destroy the EU’s corporate sustainability reporting and due diligence framework – a framework carefully built over the past eight years. Von der Leyen’s repeated commitments to simplify, not deregulate, have been binned together with core parts of each targeted law in a devastating blow to the European Green Deal. The Commission ought to return to common sense. Making the CSRD scope worse than its predecessor NFRD, making the EU Taxonomy voluntary or making the CSDDD toothless would be unacceptable," said Sebastien Godinot, Senior Economist at WWF European Policy Office.

The EU is set to officially present its Omnibus Directive on Wednesday, February 26.