New EU ‘Omnibus’-regulation - simplification of ESG reporting directives does not mean deregulation

The European Commission's new proposal for an "Opens in a new tabomnibus" regulation on ESG reporting obligations is intended to revise and consolidate these three regulatory beacons. The aim of the regulation is to harmonize and simplify the existing regulatory requirements for sustainability reporting and to reduce the administrative burden for companies. For example, the reporting obligations under the CSRD will be limited to large companies, while small to medium-sized companies are exempted from the mandatory application of the CSRD. This means that only companies with at least 1,000 employees and an annual turnover of over EUR 50 million or a balance sheet total of at least EUR 25 million will be subject to the CSRD. The reporting obligation for companies in the second and third wave is to be postponed until 2028. Regarding the CSDDD, the draft proposes a reduction in complexity, for example by reducing the number of data points to be reported or concentrating the systematic due diligence obligations on direct business partners.  

What does this mean for treasurers and CFOs? For now, uncertainty is increasing for many companies - the proposal of the new "omnibus" package by the EU Commission is only the beginning of the regulatory process. Now, the proposal must be coordinated with the EU Parliament and EU Council and, following a final agreement, adopted and published before the new directives are transferred into national law. Therefore, it is not clear yet how extensive the new reporting obligations will be and when they will come into force. Long-term certainty is not expected before the fourth quarter of 2025.   

However, companies that are not yet required to report on the changes should make use of the time. Even if the public focus currently seems to be shifting, climate change and its consequences do not disappear. The regulatory requirements will also have to take this into account sooner or later - and may return with even greater force in the future. 

Besides regulatory obligations, ESG reportings offer real, substantial advantages. They allow a company's risk dimensions to be analyzed comprehensively. And the risks caused by climate change are increasing all the time. Whether it’s a physical risk because the only factory is in a flood zone or a transition risk because business models based on outdated technologies may no longer be relevant in the future - ESG reporting enables treasurers and CFOs to incorporate ESG risks more strongly into risk management. In addition to identifying risks, they help to drive forward the transformation in the company and thus improve its resilience.  

This is also beneficial in the relationship with banks or other financiers. Companies that proactively provide sustainability reports and take them into account in their business strategies can improve their reputation and credibility with investors and stakeholders in addition to their creditworthiness. Companies that present comprehensive and transparent ESG reports usually benefit from favorable financing conditions. Banks are also required by regulation to be aware of the ESG risks of their loan portfolios. For them, ESG criteria, in addition to traditional creditworthiness and profitability indicators, represent long-term risk and quality parameters that are necessary to assess and limit risks. 

Banks can also act as sparring partners in the sustainable alignment of companies' business models. With data-based analyses, they can provide objective assessments of companies' transformation efforts and can offer practical support. But to do this, they need a reliable database. 

This is why companies should use the coming years to prepare for the next regulatory wave. Especially for companies that are minimally below the thresholds, it is essential to implement appropriate processes and build up the know-how at an early stage. Small and medium-sized enterprises and all others should make use of the option of voluntary reporting to prepare for all eventualities - including a possible tightening of reporting obligations in the future. 

Society is transitioning to a low-carbon economy. So are our clients, and so is ING. We finance a lot of sustainable activities, but we still finance more that’s not. See how we’re progressing at Opens in a new tabing.com/climate.