The EU Omnibus Package is shaking up sustainability reporting, bringing changes that could significantly impact companies across Europe. Laura Callaghan, Head of EMEA Advisory at Novata, joins us to break down the key updates, including the potential 80% reduction in CSRD scope, new reporting deferrals, and what these changes mean for businesses navigating the evolving ESG landscape.
She explains why sustainability reporting isn’t just an EU mandate but a growing market expectation, and how companies—whether still in scope or not—should rethink their approach to ESG data, stakeholder engagement, and long-term strategy.
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Conversation with Laura Callaghan (Transcript)
Ella Williamson: Welcome to Sustainable Intelligence, where we discuss all things sustainability for the private markets. I’m Ella Williamson and I’m thrilled to be your host. On February the 26th, 2025, the European Commission released the first omnibus package, aiming to simplify sustainability reporting requirements under the EU Green Deal.
There’s a lot to unpack here and to help us break it down, I’m joined by Laura Callaghan, Head of EMEA Advisory here at Novata. Laura is a chartered environmentalist and certified climate risk and sustainability professional. So let’s start with the basics, the Omnibus package has been positioned as a way to streamline sustainability reporting. What are the biggest changes companies need to be aware of?
Laura Callaghan: Great question, Ella. The Omnibus package is essentially the EU’s way of fine tuning sustainability reporting, and the concept was announced in late 2024, which honestly took a lot of people by surprise due to the many regulations that it’s addressing being fairly new and only recently being finalized. The reason for the omnibus is linked to the EU’s desire to boost competitiveness and reduce the reporting burden of companies. So this really involves simplifying some of the regulations and EU policies to ensure that they harness a more comprehensive and coherent manner at both the EU and member state level. It really brings a mix of clarifications or deferrals and flexibility. Most notably, a lot of adjustments to mandatory reporting timelines and also some thresholds. So it includes proposed adjustments to things like the corporate sustainability due diligence directive, the carbon border adjustment mechanism, the EU Taxonomy, and the Corporate Sustainability Reporting Directive.
And, the one last thing to note here is as it stands, the omnibus is purely a proposal. There are many more announcements due, and it’s really unclear when or how the omnibus could officially be adopted and transposed into law. Often these things take years, so we could be a long way off having any change. But we do know that the EU is really keen to push this forward as quickly as possible, so it could be a matter of months, and it’s just really something that companies should be keeping an eye out for any updates on over the next few weeks, months, and years.
Ella: Thanks for breaking that down, Laura. And I think your point about it still being a proposal is really key, but equally, the fact that things could change and be put in place very quickly is also key to keep in mind. Given that all of these changes are happening, can I ask that we zoom specifically into the CSRD? What are the key proposed changes for companies that are still in scope?
Laura: Sure, so for companies, the biggest implications with relation to the CSRD include the potential removal of a lot of companies in scope by at least 80%. So the new CSRD thresholds apply to companies with over 1000 employees and either 50 million euro turnover or 25 million euro on the balance sheet. So a huge change in terms of the companies that may be in scope for CSRD. Another implication is what’s called ‘Stop the clock’, and this sentiment has been expressed to postpone reporting by two years. So for example, those that were due to report in 2026 may instead actually be reporting in 2028 on 2027 data. We know that mid-sized companies may no longer be required to report, but they can voluntarily disclose sustainability data and things related to the IFRS or the VSME or even maintaining the CSRD could be really helpful. And I’ll go into a bit more detail on what these acronyms mean shortly. One key thing to remember for companies that may not be in scope is stakeholder expectations. And we do know a lot of investors are still asking companies to align to the CSRD and also some large suppliers or customers may also be asking for CSRD data. So it’s really important that companies understand what’s expected of them from that perspective.
One thing we definitely do know from the omnibus is the double materiality assessment is going to remain as is and I think this is gonna be a really big relief to many companies who already started to complete this process. But we do know that there is an intention for the ESRS data points to be reduced by about 25%. So that will be a change that we’re still unclear on timelines for. The very last thing to note when it comes to CSRD is the EU Taxonomy Assessment, which had been absorbed by the CSRD and is something that companies were going to be reporting on. There are some big changes expected with the EU Taxonomy in particular, reducing things like the do no significant harm criteria, and also reducing all of the objectives that companies had to focus on. And so one thing companies may want to think about is pressing pause on the EU Taxonomy piece, but certainly continuing with the CSRD as usual until the law is adopted.
Ella: Great. And for those 80% of companies that are potentially no longer in scope of the CSRD. I know that we are getting a lot of questions from clients and prospects. What should they do? How should they push forward? Should they proceed with CSRD reporting? I’d love to hear your thoughts on if and how companies should pivot towards potentially other frameworks like ISSB or VSME.
Laura: Yeah. Firstly, I think it’s really important that companies should focus on not losing momentum. It’s still all about better implementation, so it’s not necessarily a break. The extra time should be used to refine data collection processes, governance structures, and internal controls. And there are plenty of different options available for companies.
So whilst CSRD may not be mandatory for everyone, sustainability reporting isn’t just an EU-driven trend and it’s a market expectation. So it’s important that companies don’t just press the brakes on everything all in one go. We do know that investors, lenders, customers, and supply chain partners are all moving towards more data-driven ESG disclosures regardless of this omnibus change. So whatever route companies take, it’s really key to ensure the objective of the report is not lost in all of this noise around the omnibus. To your point around frameworks, the ISSB’s IFRS sustainability standard, so S1 on general sustainability and S2 on climate-related disclosures, they really provide a good alternative that aligns well with financial reporting.
So instead of having a double materiality focus on impact and financial materiality, the IFRS focus purely on financial materiality, so that’s a really good option. But it is important to remember that this is geared much more towards providing investors with a standardized set of information to inform their decision making. It doesn’t have the same objectives as the CSRD, which was to support transparency and decision making for all stakeholders. For companies outside of CSRD’s scope, or soon to be outside of CSRD’s scope, the best approach is to at least assess your stakeholder expectations. If stakeholders expect CSRD alignment, then start from there. Map key overlaps, so the ISSB and the CSRD share a lot of DNA; they’re particularly common ground on climate disclosures, materiality and financial impact, so that could help.
Really start to think about other regulations as well. So whether that be through voluntary adoption or supply chain pressures, non-CSRD companies could still need to set a good ESG and robust ESG data strategy. And then lastly, the one I really want to draw attention to is the voluntary reporting standard for SMEs. This is the VSME acronym that I was referring to earlier. This is a good option for companies that are less than 1000 full-time employees, and it’s a solid option because it can help companies to understand where they currently stand from a baseline perspective and what steps to take next. It can also help improve credibility with stakeholders that are requesting ESG information and also avoid complex frameworks as it has a bit more of a fit for purpose approach that’s tailored to SMEs. So the VSME is certainly something that we’re seeing an increase in companies asking for our help with as well.
Ella: And I love the way you talked about the DNA of different frameworks and regulations and thinking about how they actually overlap and actually looking at momentum and using this scale back as a chance to refine internal processes and further embed it into broader business strategy is so key. So keeping this in mind, how can sustainability teams, regardless if they are in or out of scope of the CSRD, how can they position this as a value driving exercise rather than just a compliance requirement?
Laura: Great question, and I think it’s so easy to get stuck in the compliance trap, but sustainability teams do really need to shift the conversation from reporting for the sake of reporting to actually using the data for strategic advantages. There’s a couple of things that I think companies could do. So for example, showcasing financial relevance is really important. Sustainability data links directly to things like risk management, cost efficiencies, and also investor confidence. So ensuring that you can collect data that helps you show efficiencies and tying this to your financial benefits, then this is a really important thing to showcase and also a really great conversation starter for the likes of your Chief Financial Officer, Chief Operational Officer as well.
Secondly, make it about performance. It’s not all about paperwork. As much as reporting can seem that way, it should be positioned as a tool for operational improvement, whether that be in things like energy savings or supply chain resilience or talent attraction. Just start thinking about that narrative that you can attune the way in which you talk about sustainability too, depending on the stakeholder that you’re talking to.
And then lastly, use the data to drive decisions. If you don’t have the data, it’s really difficult for you to actually drive any kind of change from a sustainability perspective. So once you are collecting the information, don’t let it just sit in reports. Don’t let it just sit in a platform. Actually use it to engage leadership and shape strategy. One way to frame CSRD or general sustainability reporting as well is to just not think about it being a tick box exercise. It is all about having the insights to stay competitive, especially in a world where sustainability risks and opportunities impact the bottom line.
Ella: Interesting. So it’s all about actually having that data, having it in the right place and having the right stakeholders involved. And I know that based on our interactions with the market, a lot of companies jumped ahead with their CSRD preparations. How do they keep the momentum going and ensure that sustainability stays a top priority across their organization?
Laura: Yeah, the risk here, I think, is almost like CSRD fatigue. So a lot of teams may start to lose interest because the reporting feels less overwhelming or disconnected from broader business goals. But it is really important to keep stakeholders engaged. And in our experience of companies that have tried to press pause on similar frameworks or regulations and pick them up at a later stage, they’ve actually really struggled to get that momentum back up. So starting and carrying on as usual. Or pivoting towards something else is gonna be really important sooner rather than later. But it does give you the ability to refocus on those quick wins. So start highlighting where CSRD preparation already has helped to improve things like data quality efficiency or insights. If you’re a company that didn’t have a working group in place before, maybe you’ve realized that this was a huge task for you to do by yourself, and it gives you a bit of breathing room to really think about who to engage, how to engage them, and how you can spread the load of this reporting initiative.
Also, start thinking about how you can engage leadership with forward-looking insights, so really showing them how sustainability links to financial performance, risk mitigation, and corporate strategy. If you’re a company that has already done your double materiality assessment, you should have plenty of information here to help you with this piece in particular. And then lastly, start breaking it down into phases. So instead of treating CSRD as a one-time lift, keep engagement high, keep setting clear-stage objectives for continuous improvement across all of your teams and your stakeholders because internal momentum really does depend on turning reporting into action. So if leadership sees sustainability driving strategic decisions, they’re definitely going to stay engaged.
Ella: Great advice, and if we could also potentially look at the other end of the spectrum for those companies that haven’t even started their CSRD journey yet. A, is it too late? And B, what are the top three things you would suggest that they potentially focus on to get started?
Laura: It is never too late. If you are still likely to be in scope despite the omnibus proposals or if you are a growing company who could be in scope soon it’s not too late to start, and we’re actually seeing quite a lot of stakeholders, particularly investors, push their portfolio companies to continue aligning to the CSRD, even if the thresholds aren’t met.
So if you do fall into any of these buckets, the top three priorities that I think you should be focusing on are at least, number one, conducting that double materiality assessment as soon as possible. This really does set the foundation of CSRD. It helps you understand what matters most, and it also helps you to start engaging with your internal and external stakeholders to identify those key impact risks and opportunities. Number two, set up a good governance structure, whether this be specifically to help you with data governance or whether it be for you to spread the load across different business departments. Start determining who is responsible for what, who owns what data internally, who can help you collect the information and start aligning with finance teams early as well, because they will be very familiar with what a financial audit looks like, and they can probably give you a lot of guidance and tips to help you with the best ways of governing this as well.
My third priority as well would be to get leadership buy-in now. Sustainability reporting isn’t just for ESG teams thinking about legal, finance, risk, and operations. They all have roles to play in this. So engaging them now to avoid any last minute scrambling will be really important. But, if you are a company and you’re starting to feel a bit overwhelmed by everything, take a step back and start thinking about existing disclosures or existing frameworks that you may already be aligning to. Things like the CDP, the Task Force on Climate-related Financial Disclosures, the GRI, these are all really useful foundational starting points, so if you are reporting to any existing sustainability frameworks, it’s a really good idea for you to start from there and map those to the CSRD as well.
Ella: So it’s about getting your internal processes in order, but also making sure you get that leadership buy-in now to make your journey down the road even easier. Now, we focused a lot on CSRD throughout this conversation in particular. If we can shift the conversation to look at the bigger picture, where does the omnibus package fit into the broader sustainability reporting landscape, and what should companies be preparing for next?
Laura: It’s really important to remember that the omnibus package is a refinement. It is not a reset. So it’s really looking at smoothing out CSRD implementation, but it doesn’t change the long-term direction that companies should be moving towards. Looking ahead, I think we can really start to expect even more convergence of reporting frameworks, so things like the International Sustainability Standards Board, the CSRD, even US regulations like the SEC climate rules. You can really start to see the alignment here and it’s making interoperability a key focus. So I would like to think in the future we’ll start to continue to see even more convergence on these frameworks. I think we’re probably gonna see an increase in regulatory scrutiny, particularly thinking about greenwashing. The CSRD is all about transparency. It’s all about standardization. It’s all about moving away from big, fluffy, glossy sustainability reports and helping your stakeholders really be informed and find better data.
We do know from the omnibus proposal and the announcement that was made in February that they really underscored this point around transparency and the fact that there does need to be a reduction in the amount of greenwashing claims that we’re seeing. And with that, I think we’ll probably see a little bit more scrutiny towards companies on how they are actually managing this risk.
And then lastly, more pressure from investors and supply chains with things like the Corporate Sustainability Due Diligence Directive. We do know supply chains are gonna be feeling a lot more pressure over the coming years to actually address particularly environmental and human rights related risks, and that will probably trickle down onto other companies. But even companies that are not subject to CSRD are really going to feel the ripple effects as different business partners and capital markets demand more transparency on these things. So if I summarize all of this, I think the bottom line is that sustainability reporting is becoming business as usual, and companies that embrace that strategically, not just for compliance, really will gain a competitive edge.
Ella: And that’s where every company clearly wants to be. Thank you so much for walking us through all of this in such detail. I’m completely aware that there is clearly a lot that is still in flux, but it’s really helpful to understand where things are today. To anyone listening, we’ll be keeping a close eye on any developments coming up. So please stay tuned for more insights from Laura and the wider team in future episodes. Until next time, let’s keep building sustainable intelligence together. Find out more at novata.com.
