Reduction in scope is core to the EU’s Omnibus package for CSRD. If things proceed as expected, we’ll see an 80% reduction in in-scope companies, with many wave 1 companies falling out of scope. When the omnibus proposal was initially released, I was surprised to see that wave 2 companies were given relief under the “Stop the Clock” directive, whereas wave 1 companies were left out of the delays. Now the EU Commission has rectified that with the “Quick Fix” delegated regulation, adopted late last week. This regulation provides relief to wave 1 companies, without completely delaying all reporting obligations. A recent Norton Rose Fulbright memo discusses the regulation:
“The adopted Delegated Regulation defers by two years the additional reporting requirements that wave one undertakings would otherwise have to meet for financial years 2025 and 2026, and extends to all wave one undertakings the phase-in provisions regarding ESRS E4 (biodiversity and ecosystems), ESRS S2 (workers in the value chain), ESRS S3 (affected communities) and ESRS S4 (consumers and end-users) that currently apply only to wave one undertakings with up to 750 employees.”
It’s worth noting that the delegated regulation applies differently to companies with up to 750 employees. For those smaller wave 1 companies, they may omit scope 3 GHG emissions and all information under ESRS topical standards: E4, S1, S2, S3, and S4. The delegated regulation does require companies that omit topic areas under the exemptions to report limited, summarized information if the company deems the topic material under their double materiality assessment. In addition to these changes, we’re expecting to see EFRAG’s new exposure drafts on simplified ESRS standards in the next several weeks. Those drafts are rumored to cut ESRS data points by 66%. Ironically, first-year CSRD reporting may be the most robust we’ll see for at least several years, as Omnibus reforms continue to chip away at the disclosure law.
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