These potential changes have already sparked intense debate, with some companies and non-governmental institutions (NGOs) strongly opposing any revisions, while others welcome the prospect of simplifying the complex framework.
As our team diligently analyses the newly published sustainability statements and first CSRD-compliant reports, we're excited to share some hands-on insights from those already reporting under CSRD, as well as perspectives on potential future developments of the Omnibus regulation shared by the European Financial Reporting Advisory Group (EFRAG) advisory team. These insights were gathered by our Advisory team.
Many companies reporting under CSRD, or considering doing so voluntarily, shared that a major motivation was to do better for customers, partners, and increased pressure from investors to take stronger action on sustainability. These stakeholders require specific data, as it contributes to their understanding of the larger value chain and is necessary for fulfilling their own reporting obligations.
Discussions with the EFRAG advisory team highlighted many of the challenges previously raised by Black Sun and our clients. They confirmed that certain areas of the European Sustainability Reporting Standards (ESRS) are "subject to interpretation" and that there is unnecessary overlap and repetition in some sections. Many attendees also voiced concerns about the difficulty of the audit process for CSRD-compliant reports in Year 1. The audit process has been challenging due to the large volume of new data being reported, with auditors adopting a cautious approach to providing assurance and indeed mixed views on what passes muster in terms of limited assurance.
One company that successfully produced a compliant CSRD report provided valuable insight from their experience. They emphasized the importance of early consideration of the ESRS, building on their prior sustainability reporting efforts, such as publishing ESG performance data alongside a dedicated sustainability report. Their initial attempt at producing a CSRD-compliant report served as a strategic starting point, allowing them to refine and expand upon existing content.
In their second report, the company refined its approach further, addressing data gaps evident via the determination of their Impacts, Risks & Opportunities (IROs). This process led to a significant shift in the company's sustainability governance. Sustainability considerations subsequently became more embedded within the business, and specifically subsumed into the Risk function, rather than being simply led by the Sustainability team. Finance also took a more prominent role in overseeing structure and compliance, which allowed the sustainability team to start focusing on driving strategic initiatives and business impact. However, two key challenges remained: ensuring all reported information met auditors’ expectations for being fully “auditable” and tackling the complex task of mapping IROs against value chains.
One of the most anticipated outcomes of the seminar was a glimpse into the future development of the CSRD and Omnibus regulation.
It is expected that the overall reporting burden will be reduced by 25%, although the specifics remain unclear. It’s uncertain whether this reduction will apply to each regulation individually—CSRD, CSDDD, and the EU Taxonomy—or across the board. However, it seems like there might be a reduction in the reporting burden, specifically for small to mid-cap companies.
Another anticipated change is the introduction of a more phased-in approach to reporting. This would give companies more time to prepare, potentially requiring them to report only on specific disclosure requirements (E1, S1, and G1) in the first year. There might also be a one-year grace period before auditors are required to audit the sustainability statement.
Despite these potential benefits, there was a shared sense of frustration in the room regarding the changes to the regulations. While many companies—particularly small to mid-cap firms—could benefit from these adjustments, frustration arises from the fact that many organizations have either already achieved compliance or are deeply engaged in adapting to the current reporting standards. The prospect that up to “25% of their efforts could become irrelevant or unnecessary” under the new guidelines has become a significant source of concern and anxiety.
Whether potential CSRD revisions will be addressed at Level 1 or Level 2 is still undecided. Level 1 changes would require approval from both the European Parliament and Council, which would lead to a more extensive legislative process. Thus, the final scope and timeline for the changes remain uncertain. It has been suggested that an announcement on simplification plans will be made on the 26th February 2025 although many suspect this deadline will not be met...
If you need help to prepare for how these changes may impact your company, your reporting or how you engage with your stakeholders please get in touch, we are here to help!
Black Sun Global is a stakeholder advisory and engagement agency that's been driving transformation and positive change for ambitious brands for more than 20 years. With deep expertise in disclosure and reporting, ESG, sustainability, and digital engagement, we reshape how organisations connect with customers, investors, employees, and the wider world.
We are trusted partners to some of the most influential global organisations, sparking innovation and sustainable performance through our strategic insights, partnerships, and proprietary technologies.
As founders of the Positive Change Group, we are on a mission to create a new kind of stakeholder relations partner. Our world-class specialists work closely with executive leadership teams to protect reputations, inspire trust, and promote responsible business practices - building resilience and long-term value in a rapidly changing world.
For more information, please visit: www.blacksun-global.com
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