EU sustainability reporting expected to become more simple

This has been on the agenda for some time, with two of the EU's largest and most powerful member states, Germany and France, calling for such changes, and the European People's Party, the largest group in the European Parliament, recently publishing a similar resolution. The whole process can be traced back to Mario Draghi's 2024 report in September, in which he identified serious threats to competitiveness as a result of overly bureaucratic EU regulations that are too burdensome for businesses.

While the latest information released in the last few days does not yet provide much certainty about what exactly the changes are and how far they will go, it is clear that the Commission's draft would consolidate the CSRD, CSDDD and EU Taxonomy regulations into a single set of rules, and that it also aims to significantly reduce administrative burdens, either by narrowing the scope of companies affected, reducing the scope of reporting and information requirements, or by delaying the entry into force of new rules and regulations.

Based on the information available, the main measures and changes are as follows:

• Redefinition of the scope of companies that qualify as SMEs and are required to undertake various sustainability measures and reporting, which could reduce the number of obligated companies or allow for simplified reporting on a larger scale
• Modification or possible suspension of the CSDDD (CS3D) implementation schedule.
• Reducing the number of data points and disclosure requirements to be reported, with greater focus on climate change / environmental protection, and reduction of weight of social and governance topics. The reduction is expected to be 25% for large enterprises and up to 35% for smaller businesses.
• Postponing the introduction of sector-specific and other ESRS standards planned for 2026.
• Simplification of the EU taxonomy methodology.

What is urgent and could be problematic is regulatory change:

In most Member States, the EU sustainability framework has already been transposed into the local legal environment and is therefore a valid and enforceable legal obligation for the companies concerned.  Its possible amendment is a lengthy process and until it is fully implemented there may be considerable legal uncertainty.

It is also important to note that in many cases the large companies concerned have already started to prepare and some are already preparing their reports. A significant number of the tens of thousands of large companies affected are likely to have already invested considerable energy and resources in preparation. They are also concerned about when and under what rules they will eventually have to comply.

The potential EU rule changes also raise interesting questions with regard to the Hungarian ESG Act, which is harmonized with the EU CSRD and CSDDD regulations in certain respects (e.g. the scope of obligated companies). If, for example, the scope of obligated entities were to change significantly at the European level, it is questionable how the Hungarian legislator would react. This issue will directly affect more than a thousand large Hungarian companies this year and next.

In any case, we will know soon: the European Commission will discuss the details of the so-called omnibus proposal in February, the details of which are expected to be published on February 26, and its possible adoption during the Polish EU Presidency.

How can Forvis Mazars help you with your sustainability reporting?

With the existing regulations and any amendments coming into force, we can help our clients understand the requirements and prepare. In a personalized consultation, our experts can help you assess what your company is required to do, by when, and how to comply.

Our consultants are happy to help should you have any questions or concerns regarding the above.