The Omnibus Package and CSRD: What is your destination now?

The proposed changes are significant and include reducing the number of companies in scope by 80%, and delaying implementation for Category 2 companies by two years.

The impact of these proposals on business will depend on how far each company has already progressed on their sustainability journey, and on the destination they are ultimately looking to arrive at. Here, we take a look at some of these travellers, where they might be headed next, and recognise that just pausing to catch your breath is often helpful to make sure you’re still on track.

Category 1 reporters: Already on the bus, disclosing this year

The journey so far

Category 1 reporters will have already invested significant resources and management time into the preparation and drafting of their first set of sustainability statements, and are likely to remain in scope once proposals are finalised.

Many will have begun to integrate the governance and outputs of their Double Materiality Assessment (DMA) into strategy, risk management and policy reviews and it may be challenging to row these changes back. For financial institutions in particular this will be part of a wider integration of sustainability risk expected by regulators.

It is likely that the sustainability statements have replaced, at least in part, any existing sustainability reporting and so in some format, regardless of the finalised omnibus simplification, will be core to disclosures from this point forward.

Stops? 

• For Category 1 Financial Institutions, it’s more likely they are on the “Circle Line” with no end in sight given the express intention of regulators to pursue the sustainability agenda, with climate change a particular focus.
• For Category 1 Corporates, their journey may be quicker than they thought, with the proposal to remove industry-specific standards, meaning future sustainability statements are likely to be inline (or shorter) than their first one.

Category 2 reporters: Took the early bus, avoiding traffic

The journey so far

Many Category 2 reporters, originally due to report for FY2025, had already begun the journey to CSRD compliance. Many have set up project teams and are currently in the process of conducting or finalising their DMA.

The companies who have taken a proactive approach to CSRD have already invested significant resources, training and management time, and may now be questioning the value of the effort deployed to comply with a directive that may no longer apply to them, or that may be delayed.

Stops?

If you have started your DMA process, you might want to just keep going. While the motivation for conducting the exercise may have been driven by compliance, there is value in the outputs themselves. Identifying material sustainability impacts, risks and opportunities can help inform and refine strategy, enhance risk management, and build resilience of business.

No risk was ever mitigated by ignorance, and it’s difficult to capitalise on an opportunity if you don’t recognise it. Given the choice between a sunk cost, or incremental investment to secure strategic insights, it may be worth the additional fare.

If you are just in the planning phase of your CSRD compliance project, it might be worth waiting for the next bus. The final agreement of the proposals, together with the timeline of implementation is subject to the European Parliament and Council consideration and adoption. If you have only committed limited resources at this stage, it may be worth pausing to consider your next steps.

Category 2 reporters: Those who slept in a bit

The journey so far

It’s probably true that the majority of Category 2 reporters have yet to start their journey at all. This is particularly applicable to many of the ‘small’ big companies, who were struggling with the resourcing and time to understand their obligations under CSRD. 

For those companies these proposals are likely to be welcomed, providing a reprieve from regulation many felt was onerous and was likely to impact their competitiveness. 

Stops?

While it may initially seem that this group have been vindicated for taking a wait and see approach, the fundamental risks and opportunities that business are exposed to because of climate change and wider sustainability considerations have not gone away.

Companies who have not considered sustainability in a meaningful way, or who have yet to engage management in the conversations in the way that CSRD required, may ultimately be at a disadvantage compared to their competitors who got the early bus.

These travellers may not want to board the same bus but may still want to head in the same direction - and could consider alternative forms of transport to future-proof their business. In a world changing faster than ever, it is important not to lose sight of the importance of these risks and opportunities and their link to the resilience and long-term competitiveness of a business.

Contact

If you wish to understand how you could best implement sustainability practices in your organisation, please contact Dara Kelly, Co-Lead Advisory Partner, or Shane Quinn, Advisory Director.