Recap
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) and this DG FISMA newsletter summarize 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).
The Commission has also said it will shortly 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.

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: some 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 appear more critical than supportive. On 17 June 2025 Reuters hosted the webinar ‘Europe’s new normal - An insight into sustainability deregulation around Europe’ that provided a good overview of the debate.
According to this Bloomberg article the EU is setting the global agenda for sustainability regulation. While the US backslides on environmental action, more global companies are modelling themselves on the EU standards. Unfortunately the Omnibus threatens this leadership. Furthermore, as this EU Politico article reveals, some EU member countries appear to have sidelined experts from formal discussions on how to reduce green rules so as to expedite the passage of legislation.
Arguably the most significant recent development was on 2 July 2025 when 198 signatories, including over 150 businesses and investors, and over 40 supporting organisations, issued a joint statement urging EU policymakers to preserve the core of the EU sustainability framework. The statement argues that retaining these key foundations of the sustainability reporting and due diligence rules is essential in properly aligning European business and finance with the EU’s economic and climate goals, to ensure future growth and competitiveness. The statement calls on EU policymakers to: maintain the principle of double materiality in reporting and retain alignment with international reporting standards; include companies with 500+ employees in the scope of CSRD; ensure that the value chain cap allows for the constructive exchange of sustainability information; maintain rish-based corporate due diligence; and safeguard the core elements of CSDDD, such as climate transition plans. These proposals are similar to those of the European Central Bank.
Some have raised concerns around due process and the lack of evidence. The study of Reporting Obligations, ‘Bad process leads to bad outcomes’, commissioned by the European Parliament’s Policy Department for Justice, Civil Liberties and Institutional Affairs at the request of the JURI Committee and presented to the JURI Committee’s public meeting on 13 May by J. Scott Marcus from CEPS (Centre for European Policy Studies) has been released. Key points made include: while there are overlaps between the CSRD, CSDDD and the Taxonomy, and real burdens on companies, the Omnibus would do very little to address them; the Commission's Omnibus process lacked public consultation, failed to undertake an impact assessment and ignored public feedback from 2023 - the ‘stop the clock’ mechanism could have been used to allow time for a cost-benefit analysis to be done; and implementation guidance is needed to address the overlaps between the CSRD, CSDDD and the Taxonomy. Many also argue that the position of right wing MEPs and their parties, that the legislation is too burdensome, is not borne out by the evidence.

 

Timing and Approval
The outcome of the Omnibus debate will be determined by an informal negotiation between the European Commission, European Council and European Parliament (‘trilogue’ since three parties as compared to the two in a dialogue!). This negotiation is expected to commence in October 2025 with the objective of finding a final agreement by the end of 2025 or in early 2026. On 1 July 2025 Denmark assumed the rotating Presidency of the Council of the European Union for six months and so will preside over the trilogue negotiations. Final approval will then be followed by national transposition and implementation.

 

Positions
As of 4 July 2025 here are the respective positions (a summary  is available here);

• European Commission – as per its proposal of 26 February 2025 that is summarized here.
• European Council – agreed its position ('negotiating mandate') on 23 June 2025, which is broadly aligned with that of the Commission, as shown here.
• European Parliament - continues to develop its position with the Legal Affairs Committee (JURI) taking the lead. The JURI Committee rapporteur Jörgen Warborn (EPP/Sweden), who prefers going further than the EC is proposing (read his views in the Financial Times here) leads the effort to agree the EP’s position. The JURI Committee, and the MEPs and their respective parties more generally, are deeply divided on the Omnibus. Pascal Canfin, shadow rapporteur for Renew on the JURI Committee, believes the Omnibus proposal goes too far and has leveraged social media to elicit public input to help shape his position, a position which is close to that of the aforementioned statement of 2 July 2025. Political groups had until 27 June 2025 to table amendments to the JURI Committees draft report. From July to October intergroup negotiations will take place in the EU Parliament with a vote expected on 13 October 2025. Only then can trilogue negotiations start.

 

Impact of Various Positions
Accountancy Europe has compiled a table showing the number of companies impacted under the CSRD definition, the European Commission's Omnibus proposal, and the European Parliament’s JURI Committee draft report by MEP Jörgen Warborn. Raising the thresholds would leave a third of EU member states with fewer than 10 companies in scope — “undermining the objective of transforming the EU into a net-zero, resource efficient and competitive economy.”

 

Sustainability Assurance
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. As reported below assurance is critical to the reliability of information disclosed.

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 the VSME with an additional module for companies with more than 250 employees, that is VSME + new module. This would essentually be an ‘ESRS for Mid-Caps’. The reporting hierarchy would then be as follows: Less than 250 employees – voluntary reporting using the VSME with no assurance 250-1,000 employees – mandatory reporting using ESRS for Mid-Caps with assurance More than 1,000 employees – mandatory reporting using ESRS with assurance.

 

ESRS Simplification
IOn 1 July 2025 EFRAG received this letter from EU Commissioner Albuquerque advising that the deadline for EFRAG delivering its technical advice on the revision and simplification of the ESRS has been moved from 31 October to 30 November. As a consequence, the EFRAG Sustainability Reporting Board (EFRAG SRB) announced on 2 July 2025 that it has decided to extend the duration of the public consultation from 30-45 days to 60 days starting at the end of July and closing at the end of September 2025. EFRAG welcomes this opportunity to give stakeholders more time to consider the Exposure Drafts. Outreach events will be organised at the end of September and start of October.
Prior to receiving the letter of 1 July 2025 EFRAG had published its Progress Report (as of 20 June 2025) providing an update of the work performed so far and of the activated levers to simplify the ESRS. EFRAG is activating six key levers aiming to reach a 50+ per cent reduction in the number of mandatory datapoints: simplification of the Double Materiality Assessment (DMA); better readability/conciseness of the sustainability statements and better inclusion in corporate reporting as a whole; critical modification of the relationship between Minimum Disclosure Requirements (MDR) and topical specifications; improved understandability, clarity and accessibility of the standards; introduction of other suggested burden-reduction reliefs; and enhanced interoperability

ESRS Reporting Practices
In their analysis of sustainability reporting practices of CSRD Wave 1 companies - spanning 304 CSRD reports based on 11,208 individual impacts, risks and opportunity (IRO) statements from companies in 21 countries across 11 sectors - Datamaran find that the minimum one needs to report to be CSRD compliant is modest and not the immense burden that some would have us believe.  

EFRAG Administrative Board
On 24 June 2025 the EFRAG Administrative Board agreed to modify its due process to allow for shorter periods of public consultation on both sustainability and financial reporting projects in certain circumstances. Watch the meeting 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. The VSME is expected to be adopted, with minor changes, by the Commission as a recommended guidance in late July 2025.
The Commission has advised that 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, however, as reported by Corporate Disclosures as to whether and to what extent the VSME will be modified to suit larger companies not least because this standard is the proposed value chain cap for SMEs. EFRAG could rework the VSME and create some incremental requirements, by way of an additional required module for companies employing 250 up to the revised ESRS reporting threshold. This would be in line with the Commission’s proposal to introduce a new mid-cap category.
Since its release EFRAG has undertaken an intense campaign to raise awareness of and to help implement the standard. Most recently EFRAG published an educational video demonstrating the use of the VSME Digital Template and the Template to XBRL Converter, further supporting the digitalisation of sustainability reporting for SMEs. Previously EFRAG has released various other implementation support material including summary educational videos, multiple translations, and 10 in-depth educational videos AI-translated into 15 EU languages.

EFRAG Update
The May 2025 edition of EFRAG’s Monthly Update Podcast for Sustainability Reporting is available on on Spotify here and the Financial Reporting one here. The pdf version of the EFRAG Update for May 2025, spanning financial and sustainability reporting, is here.

Friends of EFRAG
On 12 June 2025 EFRAG announced that 12 more companies have officially become Friends of EFRAG - Sustainability Reporting, demonstrating their commitment to the development of sustainability reporting and support to EFRAG's mission. Read more here.

EFRAG Academic Panel

The EFRAG Financial Reporting Technical Expert Group (FR TEG) has approved the updated composition of the Academic Panel, following a comprehensive selection process aimed at expanding its scope to support and cooperate on both EFRAG’s financial reporting and sustainability reporting activities.

 

We welcome the simplification of the ESRS – the current standards were developed in a hurry and were over-engineered - and congratulate EFRAG on the rapid progress it has made to date. 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 by making it much more like the VSME than the ESRS.

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. IFAC is strongly advocating for the adoption of the IAASB’s International Standard on Sustainability Assurance (ISSA 5000) and IESSA.
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.

IESSA
In concert with the IAASB, the IESBA launched its new International Ethics Standards for Sustainability Assurance (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 in this article.

Implementation Support
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. The IESBA also launched a new feedback mechanism to gather implementation insights. A submission form located here is available to collect feedback from practitioners, firms, and other stakeholders on the application of the IESSA and related ethics standards in sustainability assurance engagements.
On 11 June 2025 the staffs of the IAASB and the IESBA released two new publications to support implementation of the IAASB’s and IESBA’s global sustainability-related standards: the ISSA 5000 and the IESSA. ‘Frequently Asked Questions (FAQs) on Sustainability Assurance Engagements’, issued jointly by IAASB and IESBA Staff address practical questions about applying ISSA 5000 and IESSA together. They address the following areas: identifying relevant ethical requirements; determining group and value chain components; using the work of another practitioner; and addressing IESSA disclosure requirements in the assurance report. Access the FAQs are here.
The IESBA Staff Questions and Answers publication focuses on ethics and independence considerations for practitioners performing sustainability assurance engagements. Topics covered include: the scope of the ethics and independence standards in IESSA; independence considerations for group sustainability assurance engagements, including value chain components; independence considerations applicable to using the work of another practitioner; providing non-assurance services to a sustainability assurance client; and effective date of the IESSA. Access the Q&As here.

Sustainability Assurance Research
New reasearch reveals that firms that get assurance on their reported carbon data disclose on average a 9.5% higher Scope 1 carbon intensity and 13.7% higher absolute Scope 1 emissions compared to peers. In other words firms that do not obtain assurance on their GHG emissions systematically underestimate their carbon emissions. The study concludes: "In the ongoing discussion triggered by the omnibus proposal, about which firms fall under CSRD, policymakers must know that without assurance, firms’ reported CO2 emissions cannot be accurately compared in the cross-section."  

UK Public Consultation on ISSA 5000

An increasing number of countries are consulting relevant stakeholders on the use of ISSA 5000. On 9 June 2025 the UK Financial Reporting Council proposed a draft version of ISSA (UK) 5000, closely aligned with the IAASB’s ISSA 5000, that would apply to assurance engagements from December 2026, on a voluntary basis. The public consulation runs through to the 31 July 2025. Read this article for more details.

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 June 2025 International Sustainability Standards Board (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 discuss the launch of jurisdictional profiles, the proposed enhancements to the SASB Standards, and upoming publications and events.

Revision of IFRS S2
The comment period for the ISSB’s Exposure Draft (ED) proposing targeted amendments to IFRS S2 - that would provide reliefs to ease application of some of the requirements related to the disclosure of greenhouse gas (GHG) emissions as this webcast explains – closed on 27 June 2025. In its comment letter EFRAG said that the proposal to omit the disclosure of emissions associated with derivatives, financed emissions and insured emissions reliefs should be temporary. This position should be reviewed in light of evolution in reporting practices and relevant methodologies. 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 in its series, ‘Perspectives on Sustainability Disclosure’. 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.

Guidance on Transition Plan Disclosure
On 23 June 2025 the IFRS Foundation published a new guidance document Disclosing information about an entity’s climate-related transition, including information about transition plans, in accordance with IFRS S2. 

IFRS Foundation Conference 2025
The IFRS Foundation Conference took place on 23 and 24 June 2025. With the theme ‘Knowledge in Practice’, the conference explored how standard-setting, stakeholder perspectives and real-world application together contribute to high-quality and globally comparable financial and sustainability reporting. Read and watch the key highlights here.

ISSB Jurisdictional Profiles
Thirty-six jurisdictions have adopted or otherwise used the ISSB Standards or are in the process of finalising steps towards introducing them into their regulatory frameworks. On 12 June 2025 the IFRS Foundation published an initial set of 17 jurisdictional profiles to provide transparency to capital markets which evidences the high degree of alignment with the ISSB Standards.
On 25 June 2025 the UK Department for Business and Trade (DBT) launched a public consultation on draft UK Sustainability Reporting Standards (UK SRS), which are based on IFRS S1 and S2 with six proposed adjustments for the UK context as this Corporate Disclosures article explains.

ISSB e-Learning Modules
The IFRS Foundation has released new e-learning modules accessible through the IFRS Sustainability Knowledge Hub to support companies in getting started with understanding the ISSB Standards. The four self-paced modules, which include a mixture of written and visual content and interactive knowledge checks, are:

• Introduction to the IFRS Sustainability Disclosure Standards;
• Introduction to IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information;
• Introduction to IFRS S2 Climate-related Disclosures; and
• Integrated sustainability disclosures and organisational considerations.

At the end of each module, users have the option to sit a short, multiple-choice assessment to receive a certificate of completion. Available for free with an IFRS.org account.

IFRS Sustainability Alliance
The IFRS Foundation has established the IFRS Sustainability Alliance as the global community for sustainability standards and integrated reporting. On 11 June 2025 the IFRS Sustainability Alliance’s Asia Pacific Corporate Reporting Best Practice Knowledge Sharing Group hosted a webinar, 'Reflections from 2024 Reporting – Practitioners' Perspective: Taking steps towards IFRS S1 & IFRS S2 application'. Access the slides and the recording using the password: Sustainability2025!.

SASB Comprehensive Review
On 3 July 2025 the ISSB published two exposure drafts proposing amendments to the SASB Standards and consequential amendments to the Industry-based Guidance on Implementing IFRS S2. The proposed amendments: present a comprehensive review of nine industries that were prioritised; align some metrics in a further 41 industries; and propose updates to Industry-based Guidance on Implementing IFRS S2 (affecting 46 of 50 industries) to maintain alignment with climate-related content in the SASB Standards. This Corporate Disclosures article takes a closer look and ventures that feedback may help the ISSB decide whether to develop further sector agnostic standards to accompany S1 and S2. The SASB standards may assume more utilty in the EU if the Omnibus marks the end of sector specific ESRS.  

GRI Issues EDs
The exposure drafts for ‘Non-discrimination and Equal Opportunity’ and ‘Diversity and Inclusion’ of the GRI Topic Standard Project for Labor are available for public comment closing on 15 September 2025. Respondents are welcome to provide feedback on the exposure drafts by completing the online survey. Access the exposure drafts Non-discrimination and Equal Opportunity and Diversity and Inclusion. A summary of the project's objectives and the significant proposals can be found in the Explanatory Memorandum. Find out more in the Frequently Asked Questions.

IPSASB
On 17 June 2025 the International Public Sector Accounting Standards Board (IPSASB) announced the way forward in its project to develop urgently needed guidance for governments and public sector entities on climate-related disclosures. Responding to a record number of comments on its IPSASB SRS ED 1, Climate-related Disclosures, the Board has decided to split the project into two phases:

• Phase 1, Own Operations, will finalize the first-ever public sector sustainability reporting standard tailored for the public sector that’s already in development, focusing on how public sector entities disclose climate-related risks and opportunities to their own operations.
• Phase 2, Public Policy Programs, will develop a separate standard for those specific public sector entities responsible for delivering climate-related public policy programs and their outcomes.

 

Educational Webinar on SME Sustainability Reporting
On 27 June 2025 IFAC, UNCTAD, the OECD and the World Bank jointly hosted an educational webinar ‘Building Capacity & an Effective Sustainability Reporting Ecosystem for SMEs’. The main highlights, the recording of the full event and speakers recommendations are available on the IFAC website here.

Country Case Study: Turkey
Türkiye has moved swiftly to establish its sustainability reporting framework through the issuance of the Türkiye Sustainability Reporting Standards (TSRS), which are aligned with the ISSB's IFRS S1 and S2, developed by the Public Oversight, Accounting and Auditing Standards Authority (KGK). Read more in this IFAC article.

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, in collaboration with the Edinburgh Group (EG), has launched a pioneering online tool designed to help small- and medium-sized enterprises (SMEs) maximize the benefits of incorporating sustainability into their strategy and business operations. Developed specifically for IFAC and EG members to provide to their own members, The Small Business Sustainability Checklist is an interactive tool that provides practical steps to future-proof businesses and boost sustainability practices. It is designed to be tailored by each business according to its industry sector, lifecycle, and products and services. Read more here.

This research report by the IFAC, the Institute for Sustainable Finance (ISF) and Chartered Professional Accountants of Canada (CPA Canada) reveals that while investments in carbon credits have significant potential to boost advancement in clean technology, protect and restore nature, and reduce greenhouse gas emissions, the burgeoning voluntary carbon market (VCM) has experienced growing pains. Critics and proponents alike have raised concerns about the quality of carbon credits, the integrity of stated emissions reductions and verification, and the appropriate role of credits in corporate net zero planning. The future of the market depends on improving its integrity, and professional accountants can play an important role. Read more here.

10 July: ISSB Episode 11 Webinar Series, ‘Perspectives on Sustainability Disclosure’  
15 September: IESBA Conference 2025, Lisbon and Online
30 October: IFRS Sustainability Symposium, London
6 November: Good Governance Academy 14th Colloquium
1 December: Corporate Disclosures 2025, London