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ESG Implications of an Omnibus Draft?

The European Commission plans to simplify and prioritise questionable areas of sustainable reporting. The Commission’s legislative proposal can be published as soon as on 26 February 2025, but specific details about the Omnibus Simplification Package in terms of the scope and content thereof remain unclear. While a clear announcement of the European Commission is being waited for, speculations about what the Omnibus legislation could address can be summed up as follows:

1. Removing certain companies from the reporting requirements’ applicability;
2. Postponing the CSRD’s effect, suspending new standards’ development, or reducing the number of required data points (e.g. eliminating the Green Asset Ratio under the Taxonomy Regulation); and
3. Solving interoperability problems, and correcting unclear definitions and clashing reporting deadlines.

Major Uncertainties

1. When will the bill come into force? The proposal can be published in February 2025, but the approval will depend on political negotiations.
2. Concerns exist whether the simplification could result in limited availability and comparability of ESG data and information.
3. Concerns regarding a broader impact on other pieces of legislation and a potential expansion to other regulations (such as the SFDR, REACH, or emission trading).

On the one hand, the omnibus legislation is an opportunity to simplify sustainable reporting in the EU, but on the other hand, it raises questions as to how to maintain the high level of detail of the reporting standards and the selected approaches’ suitability, and comply with the implementation timetable.

Amendment to the Accounting Act

An amendment to the Accounting Act discussed as Parliamentary Press No. 783 extends the duty to prepare sustainability reports to a wider range of entities in compliance with the CSRD Directive. As this draft amendment has been in a very early stage of the legislative process, chances are that it will be modified.

The draft contains additional phases of the gradual coming into effect of duties under the CSRD Directive. The draft amendment primarily includes the following with regard to the CSRD:

1. Second Phase: The duty will start applying to all large entities from 1 January 2025 irrespective of whether they are a public interest entity or not.
2. Third Phase: Small and medium-sized enterprises that issue securities on a regulated market will also be obliged to prepare sustainability reports from 1 January 2026.
3. Fourth Phase: From 1 January 2028, the duty will apply to non-EU entities that meet the specified criteria.

This amendment also implements a European directive, which increases thresholds for entities’ classification.

The new thresholds are as follows:

Participate in the ESMA Consultation on the Digital Marking of Sustainability Reports under the ESRS

On 13 December 2024, the European Securities and Markets Authority (ESMA) published a public consultation concerning the updated European Single Electronic Format of the Regulatory Technical Standards (ESEF RTS), which requires the concerned companies in the EU to digitalise their sustainability reports under the ESRS and publish them in compliance with Article 8 of the taxonomy regulation.

The proposal contains XBRL taxonomy, which is based on digital taxonomy developed by the EFRAG and related to the ESRS standards. The ESRS report digitalisation is required pursuant to the Corporate Sustainability Reporting Directive (CSRD).

Digitalisation’s Timetable and the Process’ Phases

Large public-interest entities (the “PIE”) and parent companies: Under the ESMA’s proposal, large PIEs or enterprises that are public companies of large groups (including third-country issuers) should start digitalising reports with the use of Inline XBRL in 2026 or 2027, whilst the sustainability reports would be publicly available in 2027 or 2028.

Other enterprises that meet the large entity criteria: The deadline for the digitalisation’s commencement would be extended by one more year for those enterprises.
 

The phased implementation will gradually extend the duty to digitally mark up the sustainability reports under the ESRS, whilst the full digitalisation goal is to be reached in 2031 or 2032.

Details of the Consultation and Deadlines

The consultation is open until 31 March 2025. More information, including details about digitally marking up reports, is available on the ESMA website (Consultation on the ESEF RTS for sustainability reporting and on the amendments to the EEAP RTS).

Please feel free to contact us if you need more information about the ESG. We will be happy to help you.

Václav Tittelbach
tittelbach@clarksonhyde.cz