In a recent briefing, Paul Mertenskötter, a CSRD expert at Covington and Burling LLP; Watershed’s Head of Policy, Matt Fisher; and Watershed’s Head of CSRD, Anna Cerf explained the details of the European Commission’s omnibus proposal and its implications for companies preparing for CSRD. You can view the full 30-minute briefing here. While the briefing covered a lot of ground, it also revealed a few common questions. After combing through more than 100 audience questions, we compiled answers in a consolidated list for easy reference. Our answers here are not intended to be legal advice. They represent our best current perspective on the omnibus proposal. As we get more information, we'll update this page to add more answers and further clarify where we can.
How would you expect the ESRS to change as a result of the omnibus?
The omnibus proposal doesn’t change the ESRS directly, but it confirms that the European Commission will review the ESRS separately. That process is expected to start soon, with a deadline to finalize changes within six months of the new CSRD rules coming into force.
While we don’t yet know the exact changes, the omnibus hints at the following direction:
- Fewer required data points: The omnibus proposes cutting those seen as less relevant for general sustainability reporting.
- Reducing qualitative disclosures: The omnibus proposes focusing on hard data rather than qualitative narratives
- Alignment with global standards like ISSB: The omnibus proposes greater consistency with other EU regulations.
Despite these reductions, we expect a core set of key data points to remain, particularly those important to investors and global standards: audit-grade climate data, such as CO₂ emissions, which are very likely to stay.
During the negotiation process, what will be the impact on the companies in the countries where CSRD has already been transposed?
While negotiations on the CSRD amendments are ongoing, the current rules remain in force. This means that in countries where CSRD has already been transposed into national law, companies must continue preparing their reports according to the existing deadlines. If an agreement is reached to delay reporting deadlines, companies can only pause their reporting once the revised rules have been formally adopted at the EU level and transposed into national law by member states. Until then, they remain legally required to comply with the original CSRD timeline.
When would a US ultimate parent with EU subsidiaries need to file its first report?
Under the omnibus proposal, a US ultimate parent with EU subsidiaries would need to file its first ultimate parent level CSRD report in 2029, covering the 2028 financial year, if it meets the Article 40a threshold (i.e., at least €450 million in EU turnover). Before 2028, the US parent is not directly required to report, but its large EU subsidiaries must comply individually unless an EU intermediate parent consolidates reporting. The report itself would not be published by the US parent company directly; instead, it would be filed under one of its EU subsidiaries, which will be responsible for publishing the CSRD report on behalf of the global group.
How is “turnover generated in the EU” or “headcount in the EU” defined? Would activities outside of the EU contribute to turnover and headcount?
Your activities outside of the EU under your EU entity would count toward your turnover and employee count, but how they are included depends on your company structure. For turnover, all revenue from outside the EU but under your EU entity is included when checking if your company meets the €50M threshold for a large undertaking. For employee count, employees in the non-EU subsidiaries also count, since CSRD follows group consolidation rules.
Why is the "stop the clock" proposal likely to go through negotiations first? Can you provide some rationale for this?
The European Commission wants the “stop the clock” proposal to be approved first because it sees the reporting deadline delay as urgent. Many companies are already preparing their first CSRD reports, and without a formal delay, they would have to continue working toward the original deadlines. By prioritizing this proposal, the Commission aims to provide legal certainty quickly and avoid unnecessary compliance costs for businesses that might otherwise prepare reports they no longer need to submit on time. The Commission has limited the content of the stop the clock proposal to just deadline changes in order to speed its passage through the negotiation process. In contrast, the broader CSRD changes, such as new size thresholds, are less urgent from the Commission’s perspective because they affect future reporting cycles rather than the immediate deadlines. The changes will take longer to negotiate since they require a deeper discussion between EU lawmakers on the overall scope and long-term direction of CSRD.
Does the “stop the clock” proposal affect the non-EU parent company reporting on 2028 data in 2029?
No. The stop the clock proposal is only focused on delaying reporting deadlines for firms in wave 2 and 3 of the CSRD. Reporting deadlines for non-EU parents under article 40(a) remain unchanged.
Does the draft directive removing the reasonable assurance standard?
Yes, the draft omnibus proposal removes the plan to move from limited to reasonable assurance under CSRD. Right now, companies have to get limited assurance on their sustainability reports, with the original plan being to introduce reasonable assurance later. The omnibus proposal scraps that transition, meaning companies would only need limited assurance going forward.
What does omnibus mean for scope 3 emissions? Are they still in scope for CSRD?
Scope 3 emissions remain a key requirement under CSRD, and the omnibus proposal does not remove them from reporting obligations. The Commission is reviewing the technical reporting requirements under the CSRD (called the ESRS) through a separate process. It has been clear about its overall goals for that ESRS review, including its commitment to retain datapoints that are in global reporting standard, other EU regulations, and are important for general purpose sustainability reporting. Given that scope 3 emissions are crucial for investors and stakeholders, and appear in other global reporting standards, it’s extremely unlikely they will be removed from the ESRS.
Is there a reason EUDR is not included in this omnibus?
The Commission did not explicitly explain why it has not included the EU Deforestation Regulation in this omnibus. As far as we are aware, it has no plans to revise the EUDR, having made some amendments to reporting deadlines in December 2024. It’s possible that the Commission includes the EUDR in a separate simplification omnibus in the future.
If these proposed changes will take 6-12 months to become final, are we to advise our portfolio companies to go ahead and prepare the CSRD report as if changes won't happen?
The best way forward after the omnibus will look different for every company, and is dependent on a variety of factors such as what threshold the company falls under, how much risk they want to take should the omnibus changes not take effect, and how much time they will need for preparation.
For most companies, we would recommend that at minimum they continue to focus on the areas, such as climate metrics, that are likely to be included in any changes to the ESRS standards. This is especially true for companies who fall above the new 1000 person threshold.
It's worth advising portfolio companies to have a conversation with their own policy and legal teams to understand how the proposed changes may impact their specific organization. If you are a Watershed customer, we’re happy to have a one-on-one conversation with you to hear more about how your company is navigating these potential changes and provide insights and guidance from our policy and customer teams. If you’re not yet a Watershed customer and interested in learning more about the sustainability platform and our in-house policy team, you can request a demo and conversation here.
