Overview
In late February 2025 the European Commission announced the Omnibus Proposals, the first set of legisaltive proposals to help realise the Competitiveness Compass. The Questions and answers on simplification omnibus I and II (Q&A) summarizes the changes. Questions 5 and 6 of the Q&A summarize the proposed substantive changes to the CSRD. This DG FISMA newsletter provides a useful summary of the proposals.
The package includes, amongst other things, a proposal for a Directive amending the CSRD and the CSDDD (Omnibus II) and a proposal which postpones the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027 (so-called wave 2 and 3 companies) and which postpones the transposition deadline and the first wave of application of the CSDDD by one year to 2028 (Omnibus I).

Progress
Omnibus I, dubbed ‘stop-the-clock’ proposal, entered into force on 17 April 2025. Member states now have until 31 Dec 2025 to transpose this into national law. Ropes and Gray’s CSRD Tracker provides a snapshot of progress made by member states. Ropes and Gray say that so far 20 countries have adopted legislation implementing the pre-Omnibus CSRD (at least in part) and another six have proposed legislation. Check out the latest version of Accountancy Europe’s CSRD tracker here.

Analysis and Reactions
Reactions to and analysis of the Omnibus continue to accumulate with views diverging but on the whole more critical than supportive. On 8 May 2025 the European Central Bank (ECB) published this opinion on the European Commission's Omnibus proposal, including suggestions for amending the legal text. The ECB raises many of the concerns shared by the European Sustainable Investment Forum (Eurosif), and several of its key recommendations closely align. On the CSRD and ESRS the ECB advocates for a broader company coverage than that proposed by the Omnibus: it recommends including all companies ≥ 500 employees (rather than ≥1000) that would report against a simplified standard for mid-caps. The ECB guards against relying on voluntary reporting against the VSME as this may lead to fragmented and biased reporting, as well as legal risks and greenwashing. In the ongoing EFRAG review, the ECB considers it vital to retain most climate-related datapoints (ESRS E1) and key biodiversity indicators (ESRS E4). On the CSDDD the ECB underlines that companies must not only adopt, but implement a transition plan.
Eurosif ‘s position paper makes several recommendations including: mandatory reporting for companies with more than 250 employees while establishing a simplified reporting regime based on ESRS for mid-caps employing 250-500 employees; repurposing the sectoral standards prepared by EFRAG into voluntary guidance; and removing or adjusting the ‘value chain cap’ to enable investors and other financial institutions to request additional information from out-of-scope companies. Meantime, SMEunited and EFAA for SMEs have welcomed the Omnibus’ in particular the ‘value chain cap’.
Corporate Disclosures reported that a coalition of 90 European economists issued a joint statement, arguing that the rationale for the proposed measures are without foundation. Similarly, the Office of the UN High Commissioner for Human Rights (UNHCR) has criticized the proposals, saying the proposed changes to CSDDD shifts the burden of identifying and assessing certain impacts from businesses to others.
Interestingly the first survey of companies (1,062 across 26 countries) on the Omnibus package reveal 51% of companies to be somewhat or very dissatisfied with the Omnibus package. Companies want clarity, better guidance, and a proportionate EU reporting regulation. Read the full survey here.

Timing and Approval
Shortly after the adoption of Omnibus I (‘stop-the-clock’), the European Parliament’s Legal Affairs Committee (JURI), the committee leading on the proposal, appointed rapporteurs and commenced negotiating Omnibus II. JURI is deeply divided over which direction to take. On 13 May 2025 the JURI Committee held a public hearing on reporting obligations. In his opening presentation Professor Marcus questioned whether due process had been followed citing that no cost benefit analysis of the proposals had been done. The aforementioned ‘stop the clock’ could have been used to allow time for this to be done.
During the hearing EFRAG’s Chaira del Prete presented its approach to simplifying the ESRS - by focusing on quantitative data over narratives, cutting non-essential mandatory datapoints, providing clearer guidance on materiality to avoid unnecessary reporting, enhancing alignment with EU laws and global standards, and simplifying structure and language of the standards. Wim Bartels, a member of EFRAG’s Sustainability Reporting Board (SRB) shared early insights from the assurance of reports by Wave 1 companies - a preliminary analysis of 52 CSRD-based reports showed few qualified conclusions but half with ‘emphasis of matter’ paragraphs, reflecting the need for improved sustainability data quality. While welcoming the Commission’s plans to issue targeted guidance on sustainability assurance, in the longer term he sees a need for a dedicated EU assurance standard with the IAASB’s ISSA 5000 as a possible foundation. In conclusion Bartels stressed the importance of a level playing field for all assurance providers.
Pascal Canfin, shadow rapporteur for Renew on the JURI Committee, questioned whether the Omnibus proposal went too far and is using social media and a public survey to help him finalize his position: read more on this LinkedIn post and access the survey, which ends on 4 June 2025, here.     
On 21 May 2025 the European Parliament Committees on Economics (ECON) and the Environment (ENVI) published their proposed changes – several hundred pages worth here. The proposed changes include rasing the threshold for reporting above 1,000 employees.
On 4 June 2025 the JURI Committee is expected to present a draft report on amendments to the EU Parliament. Political groups will then have until 27 June to table amendments. From July to October intergroup negotiations will take place in the EU Parliament with a vote expected on 13 October 2025.
Meantime EU member states have been forging their positions on the Omnibus. While Italy is pushing back on the 80% reduction of the CSRD’s scope, instead suggesting a 500 employee threshold and simplified reporting, most other Member States seem to agree with the proposed 1,000 employee threshold. Member states also seem to generally agree on the CSRD ‘value chain cap’. Overall, member states appear largely aligned suggesting the EU Council will come to an agreement much more easly than the EU Parliament. During the Coreper II meeting of 22 May 2025 a document was shared that indicates the direction in which the Omnibus discussion in the Council is heading. The document appears to support the proposed CSRD scope reduction.
Once the Council and Parliament have agreed their positions Trilogue negotiations between the European Commission, Parliament and Council will take place from October to December 2025 culminating in a final vote in Parliament and Council in December 2025 or January 2026. Final approval will then be followed by national transposition and implementation.

Sustainability Assurance
Intesrestingly the Omnibus proposal maintains the limited assurance requirement, proposes no changes to assurance providers, and maintains the EC’s delegated power to adopt a limited assurance standard, However, the proposal removes the 2026 deadline for adopting a standard and suggests deleting the possibility of moving from a requirement for limited assurance to a requirement for reasonable assurance. The EC intends to issue targeted assurance guidelines by 2026. Moreover, to protect SMEs it proposes requiring assurance providers to respect the obligation that companies should not request information from value chain companies with fewer than 1,000 employees beyond what is included in the VSME.

Until the targeted assurance guidelines are issued assurance providers can consult the CEAOB guidelines on limited assurance on sustainability reporting. In addition, the European Contact Group (ECG) has published illustrative examples of limited assurance reports for engagements in accordance with the CSRD - see the unmodified illustrative report here and the modified illustrative report here. These may need adapting to align with specific jurisdictional requirements and standards.

 

We have mixed views on the Omnibus proposal. The package fails to recognize and leverage the competitive advantage to be gained from the EU leading the global sustainable transition. We welcome the simplification of the sector agnostic ESRS. We question the merits of the 1,000 employee ESRS reporting threshold: 500, like the extant NFRD, might strike a better balance. For companies employing more then 250, and up to wherever the ESRS threshold lands we suggest they be required to report on the basis of a simplified standard whose core is based on the voluntary standard for SMEs developed by EFRAG (EFRAG VSME).

 

Omnibus Implications
In late April 2025 EFRAG officially submitted its work plan to the European Commission outlining the steps it will take to fulfil the specific mandate received on 27 March 2025 to provide technical advice on the revision and simplification of the ESRS by 31 October 2025. EFRAG must also submit a final cost-benefit analysis (CBA) on the revised standards by 31 December 2025: on 26 May 2025 EFRAG issued a call to tender for the CBA with a 20 June 2025 deadline. Adoption of the revised ESRS is expected within 6 months of the Omnibus being adopted.
EFRAG has already commenced work. On 8 April EFRAG invited public input via an online questionnaire on potential revisions with a deadline of 6 May 2025 from all relevant stakeholders and the first wave of preparers who implemented the standards in their 2024 sustainability reports. GRI’s letter to EFRAG stressed that removing ESRS datapoints not aligned with the GRI Standards offers a way to achieve a 30% reduction while maintaining alignment with the sustainability reporting practices already used by most major companies in Europe. During its meeting of 21 May 2025 the EFRAG Sustainability Reporting Board (SRB) received a presentation summarizing the input received.

Wave 1 Relief from ESRS Phase In Requirements
During the JURI Committee’s public hearing of 13 May 2025 (see above) Commission representative Tom Dodd announced that the Commission will soon introduce a “quick fix” delegated act that will provide relief to Wave 1 companies from ESRS phase-in requirements. This means that Wave 1 companies preparing their second ESRS sustainability statement in FY2025 will not be required to disclose phase-in requirements such as E1-9 Anticipated financial effects from material physical and transition risks and potential climate-related opportunities. This marks a significant relief on additional ESRS reporting requirements that were scheduled to kick in this year. Read more here.

ESRS Events
On 3 June 2025 EFRAG hosted a roundtable discussion on the first year of ESRS E5 – Resource Use and Circular Economy implementation in which it share insights, best practices, and lessons learnt that will help shape the revision of ESRS under the Omnibus proposals. The previous week EFRAG hosted a roundtable discussion ‘Bridging the Gap: Aligning CDP Disclosures with the European Sustainability Reporting Standard E1’. Access the recording here.

Sustainability Reporting Standards for SMEs
Late last year EFRAG released the proposed sustainability reporting standard for voluntary use by non-listed SMEs (VSME) and submitted it to the Commission together with a CBA and basis for conclusions. Since then EFRAG has undertaken an intense campaign to raise awareness of and to help implement the standard. Summary educational videos and many translations are now available. EFRAG has also released 10 in-depth educational videos, AI-translated into 15 EU languages, providing detailed insights into the Environmental, Social and Governance disclosures and guidance within the VSMEs Basic and Comprehensive modules. View the playlist here.
To help broaden and deepen the ecosystem supporting the VSME, EFRAG has established the SME Forum – this brings together voices from preparers, users, rating agencies, platforms, and more - and expanded the VSME Community and has consulted them on proposed guidance on the standard. On 3 June 2025 EFRAG hosted the public session of the second SME Forum meeting. Key takeaways from the closed session and updates on the VSME standard and ecosystem were shared.
As part of the VSME ecosystem deliverables EFRAG has released the first version of the VSME Digital Template and accompanying VSME XBRL Taxonomy, designed to support the VSME. Access the materials here.  
The summary Report with key takeaways and Q&A, video and audio recordings (AI-translated into 15 languages), and presentation slides from EFRAG’s webinar, ‘VSME In Action: Empowering SMEs for a Sustainable Future’ of 7 April 2025  can now be accessed here. At the event DG FISMA Head of Unit Sven Genther explained that the ‘EFRAG VSME’ will be adopted, with minor changes, by the Commission as a recommended guidance in June 2025. Then, on conclusion of the legislative negotiations, the ‘Omnibus VSME’ that is proposed for voluntary use by companies employing less than 1,000 employees will be developed and, once agreed, follow the usual due process for EU delegated acts. There is concern as to whether and to what extent the ‘EFRAG VSME’ will be modified to suit larger companies not least because this standard is the proposed value chain cap for SMEs.

Connectivity
The newly published report from EFRAG’s virtual roundtable "Practical Considerations of Connecting Financial and Sustainability Reporting" of 25 April 2025 is available here. The report includes an overview of EFRAG’s research on connectivity, illustrative examples and real-world applications, and insights from eight expert panellists (preparers, users, auditors, and an enforcer).

EFRAG Update and 2024 Annual Review
The April 2025 edition of EFRAG’s Monthly Update Podcast for Sustainability Reporting is available on available on YouTube or Spotify. The pdf version of the EFRAG Update for April 2025, spanning financial and sustainability reporting, is here. EFRAG has published its Annual Review 2024 which, for the first time, is available in digital format here.

Reporting Practice

In this article Corporate Disclosures look at how materiality has been tackled by Wave 1 companies.

 

We welcome the simplification of the sector agnostic ESRS. The current standards were developed in a hurry and were over-engineered. As the VSME may serve as the basis for a standard for voluntary use by companies with 250-1,000 employees EFRAG ought to start considering what this should look like and, if it is to be the value chain cap, ensure it is not too burdensome.

IFAC
According to an updated report from the International Federation of Accountants (IFAC) and AICPA and CIMA 73% of the largest global companies sought assurance on some aspect of their sustainability disclosures in 2023, up from 69 percent the previous year and 51% in 2019. The State of Play: Sustainability Disclosure and Assurance, (Five-Year Trends and Analysis, 2019-2023) also reveals that in 2023 most of the assurance is of limited scope. Audit firms—as opposed to consultants or other service providers—continue to lead (55%) in providing assurance on sustainability disclosures by large global companies, with broad variations country to country. Audit firms’ overall share of the market declined from 58 percent in 2022, although there are mitigating factors for the drop, including the consolidation of assurance reports.
The report also notes the increased use of audit firms over the prior year in several major markets in 2023, including the United Kingdom (+5) and United States (+5).
IFAC is publicly committed to high-quality and consistent sustainability reporting and assurance and is advocating for the adoption of the IAASB’s International Standard on Sustainability Assurance (ISSA 5000) and IESSA.

SAC and PIOB
The IAASB-IESBA Stakeholder Advisory Council (SAC) met on 5-6 May 2025 in New York. View the agenda here and the full YouTube recording here. The SAC plays a vital role by providing strategic-level input and recommendations to both the IAASB and IESBA and by serving as a key forum for engaging with a diverse range of stakeholders. Key discussion topics included deregulation and its potential implications for the IAASB and IESBA’s standards, including those relating to sustainability. Read the key outcomes here.
On 28 May 2025, the PIOB announced the re-appointment of Tom Seidenstein as Chair of the IAASB for a third term, effective 1 July 2025 and ending in December 2027.

ISSA 5000
Back in January 2025 the IAASB and the IESBA launched a joint effort to support effective implementation of their landmark standards aimed at advancing trust and transparency in sustainability reporting and assurance. The standards become effective for periods starting on or after 15 December 2026, with early adoption permitted and encouraged. The IAASB believes the ISSA 5000 is scalable and adaptable to regional regulatory requirements, such as the CSRD, and can be used with any sustainability reporting framework, standard or other suitable criteria including EFRAG’s VSME, and is applicable to all assurance providers and for organizations of all sizes. On 8 May 2025 the IAASB approved the withdrawal of International Standard on Assurance Engagements (ISAE) 3410, Assurance Engagements on Greenhouse Gas Statements since it will be superceed by ISSA 5000.
A suite of implementation support for the ISSA 5000 is available here. To support effective implementation stakeholders are invited to submit implementation questions or matters for the IAASB’s consideration (emulating EFRAG’s Q&A Platform for its ESRS) - read more here. 

IESSA
In concert with the IAASB, the IESBA launched its new IESSA and other new sustainability-related provisions establish a strong ethical foundation for sustainability reporting and assurance engagements. These standards will become effective for sustainability assurance engagements on sustainability information for periods starting on or after 15 December 2026, with early adoption encouraged. Read more about the standards and implementation support in this article.

Sustainability Assurance Market
Back in March 2025 Corporate Disclosures reported, based on its own examination, that the Big Four appeared to be capturingd the majority share of the CSRD assurance market and concludes that the market concentration may be worse than the financial audit market. This EFAA for SMEs paper looks at the role of small and medium-sized accountancy practices (SMPs) in the fast emerging market for assurance on sustainability reporting. In late May 2025 EFAA for SMEs published guidance to help SMPs position themselves in the sustainability reporting and assurance market.

Sustainability Assurance in Practice
Richard Howitt interviewed six large companies about their experiences. Read his report accessible here.

European Securities and Markets Authority (ESMA) Report

ESMA published its 2024 annual report entitled “Corporate reporting enforcement and regulatory activities”. The report provides a review of activities related to corporate reporting undertaken by European national competent authorities and coordinated by ESMA in 2024. The report spans the supervision of financial reporting, the supervision of sustainability reporting, and ESEF reporting. The report includes recommendations and examples to the issuers, their audit committees and auditors on how they can improve the reporting in the future.

We support the timely global adoption and effective implementation of the ISSA 5000 and IESSA but urge close monitoring of the impact on value chain reporting and assurance and, where that impact is considered disproportionate, modifying the standards with limited scope amendments as soon as possible.

 

ISSB Update
The ISSB Update, summarising the May 2025 ISSB meeting, is now available. You can also listen to Chair Emmanuel Faber and Vice-Chair Sue Lloyd in the latest episode of the ISSB podcast in which they share insights into developments from the ISSB, including the consultation proposing targeted amendments to IFRS S2 Climate-related Disclosures, key takeaways from the May ISSB meeting; and upcoming publications and events.
Revision of IFRS S2
On 28 April 2025 the International Sustainability Standards Board (ISSB) published an Exposure Draft (ED) proposing targeted amendments to IFRS S2 Climate-related Disclosures that would provide reliefs to ease application of some of the requirements related to the disclosure of greenhouse gas (GHG) emissions. The ED, now available in many languages, is open for comment until 27 June 2025. Find out more and submit comments here. A webcast explaining the ED is available here. EFRAG has published its Draft Comment Letter (‘DCL’) on the ED. Comments on EFRAG’s DCL are requested by 19 June 2025. Read more here.
IFRS Foundation Adoption and Implementation Support
The IFRS Foundation continues to provide and enhance adoption and implementation support. It has now held ten webinars on in its sustainability disclosure series, ‘Perspectives on Sustainability Disclosure’, the most recent being ‘Episode 10 - Governance of sustainability-related risks and opportunities: structures, roles and oversight’ on 28 May 2025. Links to the slides and recording are now available.

We believe that the IFRS Foundation ought to focus on implementation of its present suite of standards and think about how best to help non-listed SMEs respond to requests for sustainability information from larger companies and finance providers. The VSME developed by EFRAG for the European Commission may have a role to play. The IASB recently updated the IFRS for SMEs, its financial reporting standard for non-publicly accountable entities.

IFAC’s GHG Emissions
IFAC and its members, professional accountancy organizations (PAOs), are working together to promote sustainability. With help from Greenly, a Certified B-Corp, IFAC is pursuing its own sustainability targets, measurements, and reporting. IFAC now boasts greater visibility of its scope 3 emissions, enhanced data quality and detailed emissions tracking, and reduced emissions through smart technology choices, optimized travel planning and hybrid working. IFAC invites stakeholders to watch its testimonial and read its case study to learn how it aligns its internal operations to complement its advocacy for sustainability reporting and assurance. IFAC says its aims “to inspire other small associations to be proactive and not let the pursuit of perfection get in the way of starting!”

PAOs
Through a combination of advocacy, education, and direct action, PAOs are making a meaningful contribution to the sustainability agenda. Read about the progress several IFAC members have made on their sustainability journeys here and read this IFAC Gateway article about how PAOs can can lead the way to net zero. IFAC has a catalogue of publicly available sustainability courses and certifications offered by PAOs on demand, for a fee or free, to help accountants gain knowledge.

SMEs
The IFAC Small Business Sustainability Checklist comes with a dedicated web page that provides material on sustainability reporting, advisory, assurance, and education and training. An online version of this checklist is coming soon. 

Revision of SMOs
On 14 April 2025 IFAC launched a public consultation on targeted revisions to its Statements of Membership Obligations (SMOs), a cornerstone of IFAC and its members’ commitment to a strong and sustainable global accountancy profession. The proposed revision includes the need for PAOs ro adopt or work toward the adoption of all IFRS Standards issued by the ISSB. Feedback can be provided via a response template form and the consultation is open until 8 August 2025. The revised SMOs are expected to take effect on 1 January 2026. Read more here.

 

IESs

In late April 2025 IFAC hosted webinars, with translation into multiple languages, on the revisions to the International Education Standards (IESs) to help stakeholders understand the changes including those to accommodate sustainability. Recordings in each language will be available in early May 2025. Read more here.

 

On 29 May 2025 the IFRS Foundation published educational material, structured as questions and answers, about the requirements in IFRS S2 related to measurement and disclosure of greenhouse gas (GHG) emissions.

We believe that the IFRS Foundation ought to focus on implementation of its present suite of standards and think about how best to help non-listed SMEs respond to requests for sustainability information from larger companies and finance providers. The VSME developed by EFRAG for the European Commission may have a role to play. The IASB recently updated the IFRS for SMEs, its financial reporting standard for non-publicly accountable entities.

IFAC
On 28 April 2025 Climate Action for Associations (CAFA) welcomed IFAC to the CAFA Collective, a growing network of professional bodies and trade associations uniting to accelerate climate action across industry and business. IFAC and its members, professional accountancy organizations (PAOs), are working together to promote sustainability. With help from Greenly IFAC is pursuing its own sustainability targets, measurements, and reporting and hopes PAOs will do the same.

PAOs
PAOs are contributing towards the sustainability agenda through a combination of advocacy, education, and direct action. Read about the progress several IFAC members have made on their sustainability journeys here and read this IFAC Gateway article about how PAOs can can lead the way to net zero. IFAC has a catalogue of publicly available sustainability courses and certifications offered by PAOs on demand, for a fee or free, to help accountants gain knowledge.

ACCA
On 14 May 2025 the ACCA hosted a hybrid event from Warsaw ‘Sustainability Education: A Key Driver for EU Business Competitiveness’. Access the recording and slides here.

SMEs
IFAC and the Edinburgh Group have launched a global survey of SMEs about sustainability information. The survey is available here. The survey seeks to help IFAC better understand the extent to which sustainability-related information is being prepared by SMEs, used by SMEs in internal decision-making, or provided to supply chains, lenders, or other stakeholders. With the data gathered IFAC will be able to better support SMEs with best practices and advocate for appropriate SME sustainability-related reporting and assurance rules and regulations. See this short video for more information. The survey is open in seven languages until 30 June 2025.
Meantime SMEunited and Eurochambres invite SMEs across the EU to participate in a survey into how SMEs access sustainable finance, how current regulations work in practice, and where improvements are needed. The survey will help shape the future of sustainable finance policy. The survey, available in all EU languages, closes on 9 June 2025.

Revision of SMOs

In April IFAC launched a public consultation on targeted revisions to its Statements of Membership Obligations (SMOs) which includes the need for PAOs ro adopt or work toward the adoption of all IFRS Standards issued by the ISSB. The consultation closes on 8 August 2025.and the revised SMOs will take effect on 1 January 2026. Read more here.

We believe the accountancy profession is taking steps in the right direction but must do more, with more urgency, to advocate for and faciliate sustainability. Sustainability is the defining public interest issue of the C21st and the accountancy profession needs to show bold leadership. Moreover, the leadership and convenors of the profession – IFAC, its regional network partners and its PAOs – must also practice what they preach if they are to be persuasive in their advocacy.

10-11 June: Reuters Sustainability Reporting Europe 2025, London
12 June: IFRS Sustainability Alliance webinar on Applying IFRS S1 and IFRS S2
23-24 June: IFRS Foundation Conference, London
30 October: IFRS Sustainability Symposium, London

6 November: Good Governance Academy 14th Colloquium