Recent moves by the European Union (EU) to streamline and simplify sustainability regulations could impact your response to the Corporate Sustainability Reporting Directive (CSRD) and create significant implications for risk managers, sustainability professionals and other stakeholders across your organization.
In this Q&A, we look at what’s changing, how this could impact organizations and how your business can respond effectively and efficiently as climate and sustainability reporting requirements continue to evolve.
What is the CSRD and what are the latest EU proposals that impact it?
The CSRD is an EU regulation that requires companies to disclose information about their environmental, social and governance impacts, as well as associated risks and opportunities.
In February 2025, the EU introduced a set of legislative updates known as the ‘Omnibus’ proposals. These aim to streamline the CSRD and its associated European Sustainability Reporting Standards (ESRS), reducing the reporting burden on companies, while keeping the strong emphasis on transparency and accountability.
What’s not changing with the CSRD, regardless of the Omnibus proposals?
The core intent of the CSRD remains the same. The directive continues to emphasize transparency and accountability in environmental, social and governance reporting. Central to this is the mandatory double materiality assessment, which requires companies to report both how sustainability factors affect their business (financial materiality), and how their business activities impact people and the environment (impact materiality). Companies in scope of the CSRD will still be required to disclose sustainability-related policies, actions, metrics and targets. While there are proposed adjustments designed to reduce the administrative burden, the CSRD remains aligned with the European Green Deal, the EU’s overarching strategy to make Europe the world’s first climate-neutral continent by 2050.
This graphic illustrates the concepts of financial and impact materiality. Financial materiality (or outside-in) is how the world impacts your business. Impact materiality (or inside-out) is how your business impacts the planet and wider society.
What is the key takeaway for risk managers and sustainability professionals from the proposed changes to the CSRD?
The most important takeaway for the risk and sustainability functions is the obligation to conduct and disclose double materiality assessments remains the same. While the EU’s Omnibus proposals introduce delays for some companies and simplifications to certain disclosure requirements, it does not reduce the regulatory expectations around transparency, accountability, or sustainability-related risk management. For risk and sustainability professionals, this means you should continue to focus on integrating sustainability risks into enterprise risk management (ERM) frameworks and collaborate across departments to ensure alignment on sustainability data, metrics and governance.
What are the key changes to the timing of CSRD compliance?
In April 2025, the EU formally adopted the ‘Stop the Clock’ proposal under the Omnibus package, which delays CSRD requirements for certain companies. The aim of this extra time is to allow the EU more time to refine the scope and requirements of the CSRD.
Implementation is being rolled out in phases, or ‘waves’, based on company size, type and geographic location. These waves reflect the EU’s intention to apply sustainability reporting obligations gradually. Updated CSRD reporting waves following the ‘Stop the Clock’ proposal are as follows:
The EU is expected to update the ESRS guidance by Q4 2025, using feedback from the first reporting wave to make the standards clearer, easier to use and more consistent. From April to October, they will gather input, draft revisions, review feedback and submit final advice to the European Commission.
What companies may now be in scope for CSRD?
Under the proposed changes, a company will be subject to mandatory CSRD reporting if it meets the following criteria:
For non-EU parent companies, the proposal raises the threshold for mandatory CSRD reporting. A non-EU company would be required to report if it:
This adjustment significantly narrows the scope of the CSRD, potentially reducing the number of companies required to report by approximately 80%, according to the EU. Companies that fall below these new thresholds are encouraged to adopt the Voluntary Sustainability Reporting Standards for SMEs (VSMEs), which are being developed to provide a simplified reporting framework for smaller entities.
Do the proposed changes to CSRD mean easier reporting requirements?
If adopted, the proposed changes to the CSRD under the Omnibus package suggest a simplification of some aspects of reporting. We may expect a stronger emphasis on quantitative metrics over lengthy qualitative narratives, which may make reporting more structured and measurable. However, these changes don’t eliminate the need for strong internal systems. Risk and sustainability professionals will still need to establish governance, controls and data verification processes to support accurate, limited assurance-ready disclosures. The shift is toward streamlining, not reducing accountability.
What do the proposals mean for the development of sector-specific standards?
The Commission has decided to eliminate the development of sector-specific ESRS. Consequently, the European Financial Reporting Advisory Group (EFRAG) has paused its work on these sector-specific standards pending the outcome of legislative negotiations.
How should risk managers and sustainability teams prepare for proposed changes to CSRD?
We recommend you treat this additional time as breathing room, rather than a reason to pause. Use it to strengthen your internal processes, improve data governance and ensure your team becomes comfortable with the existing ESRS, especially ESRS E1 on climate and ESRS S1 on own workforce. This standard offers a strong foundation for identifying and managing climate risks, setting emissions targets and disclosing decarbonization strategies. Collaborating across risk, sustainability, finance and legal functions, and investing in integrated systems that support consistent, high-quality data will position your organization to respond quickly and confidently as the EU finanlizes the new rules.
Why should businesses continue to invest in sustainability reporting?
While the CSRD is a regulatory requirement, sustainability reporting can help build investor and stakeholder trust, building operational resilience through better risk identification and management. Sustainability reporting also helps your organization remain aligned with capital markets that increasingly favor sustainable businesses
What further changes can you expect on EU sustainability reporting?
Looking ahead, your organization should monitor updates from the European Commission and EFRAG. A simplified ESRS is expected in Q4 2025, which aims to improve usability, reduce unnecessary complexity and clarify reporting expectations, particularly for smaller and resource-constrained companies.
