What Happens if the Omnibus Proposal is Implemented? Two Scenarios for Companies

Sustainability reporting has been evolving ever since its inception. In recent years, much focus has been on the EU’s sustainability reporting directive, aimed at making reporting mandatory for a large number of companies. The goal was to enable the comparison of different companies’ sustainability efforts through standardized reporting. Once the directive and reporting standard were finally published, businesses eagerly began their efforts, and experts across industries trained to become sustainability specialists.

"However, in February, the EU proposed limiting the number of companies required to report and simplifying the process under the Omnibus initiative. Suddenly, it was suggested that many companies might be exempt from mandatory sustainability reporting", explains Kiviniemi.

"In early April, it was confirmed that a two-year delay would be granted. This means that companies, which were initially expected to report on this year’s data by early next year, now have two extra years to prepare."

Currently, a significant number of companies in Finland and across the EU are uncertain about how to respond to these changes or whether further adjustments are expected. Some businesses continue steadily following the CSRD and ESRS guidelines, while others have hit the brakes.

So, what should companies do in this situation, and are there actions worth taking regardless of EU regulations?

The idea was developed through various scenarios. The analysis is based on an article written by Timo Kaisanlahti, an expert from the Finnish ministry of Economic Affairs and Employment.

Scenario 1: The Proposal Remains Unchanged

In this scenario, the proposal remains unchanged.

What would this mean in practice?

Companies with 1,000 or more employees would continue developing their reporting practices. They now have two additional years from the EU to refine their reporting. However, they would anxiously await more details on how the ESRS standards for sustainability reporting will be simplified.

• Many companies of this size have already conducted materiality and GAP analyses. They, therefore, have a solid understanding of the data and practices they need to develop based on the current ESRS standards.
• If the proposal remains unchanged, core metrics like those related to climate change and workforce data would likely stay the same.
• The proposal mentions removing less relevant data points, prioritizing quantitative data, and clarifying the distinction between mandatory and voluntary data points.

What actions should companies take?

Kiviniemi suggests companies create a long-term plan and clarify their sustainability goals. What does the company aim to achieve in terms of sustainability? How ambitious is the timeline for publishing the first report? And how will the development of sustainability reporting proceed?

"The goal could be to publish the first sustainability report only when legally required in 2027. On the other hand, some companies may be ambitious and adhere to their original timeline. This ambition will dictate the pace of development efforts", notes Kiviniemi.

For companies planning to align their sustainability reporting with the ESRS this year, it is essential to continue working on clear data points and disclosure requirements during this waiting period—before the Omnibus package is potentially finalized and the new ESRS standards are published.

Even companies delaying their first sustainability report should not stop all efforts. They could use 2025 to develop workforce metrics, calculate carbon footprints, create transition plans, and assess climate risks.

Scenario 2: The Reporting Threshold is Further Lowered

The second scenario would be that the Omnibus proposal passes, but the company size is reduced.

In the current proposal, the reporting obligation is limited only to large companies that employ at least 1,000 people. However, there has been speculation on whether the threshold of 1,000 employees might be lowered further.

What would this mean in practice?

Companies with 500–1,000 employees would still be unsure about whether they will ultimately fall outside mandatory reporting requirements.

Many companies in this range are confused about how to proceed with sustainability efforts.

What actions should companies take?

"One option is to wait for the EU’s final decision on thresholds. However, another approach is to start reporting under the VSME framework", suggests Kiviniemi.

Kiviniemi reminds us that sustainability reporting will still be relevant for this size of companies due to its importance within the value chain, even without CSRD obligations.

"VSME provides a clear framework for reporting. For companies that have already completed materiality assessments, this work can directly support VSME reporting."

"If the final decision sets the threshold at, for example, 500 employees, companies would still have two years to convert their VSME reports into ESRS reports. VSME reporting, meanwhile, allows companies to refine their practices and processes to tackle the more complex ESRS framework", summarizes Kiviniemi.

Companies likely to fall outside reporting requirements under the new proposal but have already conducted materiality assessments can continue their sustainability journey with voluntary reporting.

Why Keep Advancing Sustainability Efforts?

Developing sustainability practices in companies will not solely rely on mandatory sustainability reporting. Other legislation strongly encourages initiatives like green energy adoption and more sustainable consumption. Various EU directives and regulations guide businesses toward greater sustainability.

Key regulations include:

• Deforestation Regulation: Ensuring products sold in the EU do not contribute to deforestation.
  
  
• Ecodesign Regulation: Mandating disclosure of unsold products and introducing a digital product passport for transparency.
  
  
• Packaging and Packaging Waste Regulation: Promoting sustainable and recyclable packaging.
  
  
• Forced Labor Regulation: Preventing products made using forced labor from entering the EU market.
  
  
• Pay Transparency Directive: Ensuring equal pay for equal work.
  
  
• Green Claims Directive: Requiring all environmental claims to be backed by verifiable data.

Regardless of the industry, companies can take proactive steps in sustainability development, communicate their efforts publicly, or quietly improve operations.