COMMISSION STAFF WORKING DOCUMENT Accompanying the documents Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements and specifying further steps
Date: 2025-02-26
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: European standard, activity report, corporate social responsibility, disclosure of information, environmental impact, large business, small and medium-sized enterprises, standard, sustainable development, trade information

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2025  SWD(2025) 80 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the documents Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements  and specifying further steps                 {COM(2025) 80} - {COM(2025) 81}  
 
 
Table of contents 

1. Introduction ............................................................................................................................ 2 
2. The EU sustainability reporting and due diligence framework ............................................. 6 
2.1. The Corporate Sustainability Reporting Directive (CSRD) ........................................... 6 

2.2. The Corporate Sustainability Due Diligence Directive (CSDDD) ................................. 8 

2.3. The EU Taxonomy ........................................................................................................ 12 

3. Main issues at stake and the ways to address them ............................................................. 15 
3.1. Issues presented on the CSRD/ESRS and proposed amendments or next steps ........... 17 

3.1.1. Stakeholder views .................................................................................................. 17 

3.1.2. Proposed amendments and next steps .................................................................... 21 

3.1.3. Estimated cost savings ........................................................................................... 27 

3.2. Issues presented on the CSDDD and proposed amendments or next steps .................. 31 

3.2.1. Stakeholder views .................................................................................................. 31 

3.2.2. Proposed amendments ........................................................................................... 35 

3.2.3. Estimated cost savings ........................................................................................... 43 

3.3. Issues presented on the EU Taxonomy Delegated Acts, draft amendments and next 
steps...................................................................................................................................... 46 

3.3.1. Stakeholder views .................................................................................................. 46 

3.3.2. Draft amendments .................................................................................................. 50 

3.3.3. Estimated cost savings ........................................................................................... 54 

3.3.4. Future work ............................................................................................................ 54 

4. Conclusions – global impact of the legislative package ...................................................... 55 

1 

 
 
 
 
 
 
1. Introduction 

The European Union has set itself the legal objective of becoming a climate-neutral and climate 
resilient  continent  by  2050  as  enshrined  in  Regulation  (EU)  2021/1119  on  the  European 
Climate Law.1 Furthermore, it has committed to deliver on the UN Sustainable Development 
Goals (SDGs) by 2030.2 These binding goals were specified in the Communications on the 
European Green Deal3 and on A Strong Social Europe for Just Transition,4 in which the 
Commission  set  the ambition  to  upgrade Europe’s  social market  economy to  achieve  a just 
transition to sustainability.  

Acting on these goals is today more important than ever. According to researchers from the 
Potsdam Institute for Climate Impact Research, 20% of global GDP is expected to shrink by 
2050 due to climate change, despite the current ambition of climate change mitigation measures 
and  the  damage  may  be  even  higher  if  the  set  emission  reduction  targets  are  not  met.5 The 
annual economic damage could reach EUR 35.6 trillion, six times the cost of limiting warming 
to 2°C.  

The EU estimates that to meet  the objectives of the European  Green Deal  and RepowerEU 
alone, additional investments of about EUR 620 billion annually between 2023 and 2030 will 
be needed, which amounts to 3.7% of the EU’s 2023 GDP. By far the greatest part of these 
investments will have to come from private funding.6 

Moreover, fighting climate change alone is not enough to address the crisis of nature loss and 
its devastating impacts. Over 50% of global GDP (USD 44 trillion) is at risk from nature loss.7 

1 Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021  establishing the 
framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 
(‘European Climate Law’), OJ L 243, 9.7.2021, p. 1. 
2 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions, Delivering on the UN’s Sustainable Development Goals – 
A comprehensive approach, SWD(2020) 400, and Communication from the Commission to the European 
Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, 
Commission Communication on the Next steps for a sustainable European future – European action for 
sustainability, 22.11.2016 
COM(2016) 739 final, available at: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52016DC0739  
3 Communication  from  the  Commission  to  the  European  Parliament,  the  European  Council,  the  Council,  the 
European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  The  European  Green  Deal, 
COM/2019/640 final, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52019DC0640. 
4 Communication form the Commission to the European Parliament, the Council, The European Economic and 
Social Committee and the Committee of the Regions, A Strong Social Europe for Just Transitions, COM(2020) 
14 final, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020DC0014.   
5 Kotz,  M.,  Levermann,  A.  &  Wenz,  L.  The  economic  commitment  of  climate  change. Nature 628,  551–557 
(2024). https://doi.org/10.1038/s41586-024-07219-0  
6 Communication from the Commission to the European Parliament and the Council, 2023 Strategic Foresight 
Report Sustainability and people's wellbeing at the heart of Europe's Open Strategic Autonomy, COM(2023) 376 
final, available at https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=COM:2023:376:FIN.  
7 According to a report published by the World Economic Forum, over half of the global GDP, USD 44 trillion, 
is potentially threatened by nature loss,  WEF, Biodiversity loss poses a fundamental risk to the global economy, 
available at: https://www.weforum.org/stories/2023/02/biodiversity-nature-loss-cop15 /.  

2 

 
 
 
However,  there  is  hope:  sustainable  development  could  create  USD  10  trillion  in  business 
opportunities, 395 million jobs by 2030, and lead to a more resilient future.8  

As  highlighted  in  his  report  on  ‘The  Future  of  European  Competitiveness’,  Mario  Draghi 
emphasised that the transition to a low-carbon, resource-efficient, and circular economy will 
also  be  essential  for  securing  the  EU's  long-term  economic  prosperity,  resilience,  and 
competitiveness.9 However, to unlock the full potential of this transition, a cohesive and well-
executed strategy will be crucial, including fostering the role of public and private finance in 
supporting the transition.  

With the Competitiveness Compass for the EU, the Commission presented this strategy for 
the next five years.10 The Compass identifies the policy changes that are needed for the EU to 
step up to the new realities and develop novel ways of working together to increase the speed 
and quality of decision-making. A pivotal point to achieve this will be the simplification of the 
regulatory environment and the reduction of burden. The Compass, therefore, sets the target of 
cutting administrative burden by at least 25% for all companies and at least 35% for small and 
medium-sized enterprises (SMEs) without undermining the respective policy goals. 

This  reflects  the  plan  for  Europe’s  sustainable  prosperity  and  competitiveness  in  the 
political guidelines for the 2024-2029 term, as presented by President von der Leyen. The 
Single Market is among the plan’s key dimensions.11  

The 2023 SME relief package  first  introduced the idea of simplifying the  EU’s regulatory 
framework for sustainability reporting and sustainable due diligence.12 The package included 
concrete proposals for adjusting existing legislation to ensure that SMEs could benefit from 
user  friendly  tools  and  information  and  knowledge  sharing  to  better  navigate  the  EU’s 
sustainable finance framework.  

Additionally,  the  Commission  launched  a  Call  for  evidence  on  the  rationalisation  of 
reporting requirements to which almost 200 stakeholders responded.13 Stakeholders mainly 

to 

risk 

fundamental 

loss  poses  a 

the  global  economy,  available  at: 

8 WEF,  Biodiversity 
https://www.weforum.org/stories/2023/02/biodiversity-nature-loss-cop15 /.  
9 M. Draghi, The future of European competitiveness, 2024, available at: https://commission.europa.eu/topics/eu-
competitiveness/draghi-report_en#paragraph_47059.  
10 Communication  from  the  Commission  to  the  European  Parliament,  the  European  council,  the  Council,  the 
European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  COM  (2025)  30  final:  A 
Competitiveness Compass for the EU. 
11  Europe’s  Choice,  Political  Guidelines  for  the  next  European  Commission  2024-2029,  available  at: 
https://commission.europa.eu/document/download/e6cd4328-673c-4e7a-8683-f63ffb2cf648_en. 
12 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social  Committee  and  the  Committee  of  the  Regions  -  SME  Relief  Package,  COM(2023)  535,  available  at: 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023DC0535.  
13 From 17 October to 1 December 2023, the Commission gathered feedback from 193 stakeholders on possible 
rationalization measures for reporting requirements. The main contributors came from business associations (84), 
companies  (35),  followed  by  public  authorities  (23)  and  non-governmental  organisations  (18).  In  terms  of 
geographical  coverage,  the  stakeholders  came  mainly  came  from  Germany  (53),  Belgium  (47),  France  (7), 

3 

 
 
 
 
called  for  simplifying  sustainability  reporting,  due  diligence  and  the  EU  Taxonomy. 14 The 
findings already fed into targeted rationalisation measures of reporting requirements towards 
the 25% burden reduction goal, achieving about EUR 5 billion savings.  

The need for simplification in the field of sustainability reporting and sustainable due diligence 
was further highlighted in the Draghi report, which underlined that excessive regulatory and 
administrative burden can hinder the competitiveness of EU companies compared to those from 
other  blocs,  which  negatively  affects  sectoral  productivity,  raises  barriers  to  entry  for  new 
companies, deters competition, and may lead to higher prices for consumers. According to the 
report, these frameworks entail a major compliance cost for companies in the EU.15  

As a result, the Commission announced in its Work programme for 202516 a simplification 
Omnibus package on sustainable finance reporting and sustainability due diligence consisting 
of amendments to the Corporate Sustainability Reporting Directive 2022/246417 (CSRD), the 
Corporate  Sustainability  Due  Diligence  Directive  2024/1760 18  (CSDDD),  the  Taxonomy 
Disclosures  Delegated  Act 19 ,  Taxonomy  Climate  Delegated  Act 20  and  the  Taxonomy 
Environmental Delegated Act21. Furthermore, the Commission will adopt a proposal to amend 

at: 

17 

The 

2024, 

2024, 

future 

available 

available 

European 

reporting, 

competitiveness, 

   M.  Draghi, 

Lithuania  (8),  the  Netherlands  (6),  Italy  (5),  and  Austria  (4).  Feedback  included  also  the  call  for  the  use  of 
digitalisation and smoother data flows, the re-use of data and standards, availability of clear and timely guidance 
and to remove overlaps and inconsistencies in the legislations, available at:  https://ec.europa.eu/info/law/better-
regulation/have-your-say/initiatives/13990-Administrative-burden-rationalisation-of-reporting-requirements_en. 
14 Similarly,  the  Fit  for  Future  Platform  suggested  to  remove  redundant,  duplicating,  or  obsolete  obligations, 
inefficient frequency of timing, as well as inadequate methods of data collection accumulated over the years, while 
maintaining the underlying policy objectives of the legislation. See  Fit for future Platform opinion: Automated 
sustainability 
at: 
October 
AWP 
https://commission.europa.eu/document/download/21c38d32-31a4-47ff-9cba-
f7b91722bc1d_en?filename=fo_2024_1_automated_sustainability_reporting_en.pdf. 
15

2024, 
of 
https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en#paragraph_47059.  
16 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social  Committee  and  the  Committee  of  the  Regions,  Commission  work  programme  2025,  Moving  forward 
together:  A  Bolder,  Simpler,  Faster  Union,  COM(2025)  45  final,  available  at:  https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=celex:52025DC0045  
17 Directive  (EU)  2022/2464  of  the  European  Parliament  and  of  the  Council  of  14  December  2022  amending 
Regulation  (EU)  No  537/2014,  Directive  2004/109/EC,  Directive  2006/43/EC  and  Directive  2013/34/EU,  as 
regards corporate sustainability reporting, OJ L 322, 16.12.2022. 
18 Directive  (EU)  2024/1760  of  the  European  Parliament  and  of  the  Council  of  13  June  2024  on  corporate 
sustainability  due  diligence  and  amending  Directive  (EU)  2019/1937  and  Regulation  (EU)  2023/2859,  OJ  L, 
2024/1760, 5.7.2024. 
19 Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 
of the European Parliament and of the Council by specifying the content and presentation of information to be 
disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally 
sustainable economic activities, and specifying the methodology to comply with that disclosure obligation, OJ L 
443, 10.12.2021, p. 9. 
20 Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 
of the European Parliament and of the Council by establishing the technical screening criteria for determining 
the conditions under which an economic activity qualifies as contributing substantially to climate change 
mitigation or climate change adaptation and for determining whether that economic activity causes no 
significant harm to any of the other environmental objectives, OJ L 442, 9.12.2021, p. 1–349. 
21 Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 supplementing Regulation (EU) 
2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for 

4 

 
 
 
 
the  Carbon  Border  Adjustment  Mechanism  (CBAM)  as  part  of  the  same  omnibus 
simplification package.22 

The aim is to square the EU’s ambition towards a sustainable transition with what companies 
can  feasibly  achieve  to  strengthen  competitiveness  and  economic  growth  by  enhancing  the 
proportionality  and  cost  effectiveness  of  such  frameworks.  The  Work  programme  was 
accompanied by the Communication “A simpler and faster Europe”, which set out the vision 
for the implementation and simplification agenda.23 

This Staff Working Document (SWD) accompanies the simplification Omnibus package and 
includes: (1) an overview of the EU sustainability reporting and due diligence framework, (2) 
a  reflection  of  the  input  and  feedback  received  from  stakeholders  during  the  consultation 
process,  (3)  an  explanation  of  the  simplification  measures  implemented  to  streamline  the 
regulatory  framework,  while  maintaining  the  objectives  of  the  legislation  and  minimizing 
unnecessary complexity, and (4) a quantification of the expected savings resulting from the 
simplification efforts. This SWD presents the rationale and benefits behind the simplification 
and burden reduction measures introduced in the proposed legislation. 

2. The EU sustainability reporting and due diligence framework 

The EU’s sustainable finance agenda aims to  support companies  and the financial sector in 
directing private funding into sustainable investment projects and technologies. 

In  the  last  five  years,  the  EU  has  made  considerable  progress  in  implementing  the  agenda, 
including through the sustainability reporting requirements set out, among others, in the CSRD 
and  the  Taxonomy  Regulation. 24 Additionally,  the  CSDDD  and  other  rules  lay  down  due 
diligence related provisions25 covering behavioural requirements, in particular with regard to 

determining the conditions under which an economic activity qualifies as contributing substantially to the 
sustainable use and protection of water and marine resources, to the transition to a circular economy, to 
pollution prevention and control, or to the protection and restoration of biodiversity and ecosystems and for 
determining whether that economic activity causes no significant harm to any of the other environmental 
objectives and amending Commission Delegated Regulation (EU) 2021/2178 as regards specific public 
disclosures for those economic activities. 
22 Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 
of the European Parliament and of the Council by establishing the technical screening criteria for determining 
the conditions under which an economic activity qualifies as contributing substantially to climate change 
mitigation or climate change adaptation and for determining whether that economic activity causes no 
significant harm to any of the other environmental objectives, OJ L 442, 9.12.2021, p. 1–349. 
23 Communication from the Commission to the European Parliament, the European Council, the Council, the 
European Economic and Social Committee and the Committee of the Regions, A simpler and faster Europe: 
Communication on implementation and simplification, 2024-2029, 11.2.2025 COM(2025) 47 final. 
24 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the 
establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088, 
OJ L 198, 22.6.2020, p. 13–43. 
25 Directive  (EU)  2024/1760  of  the  European  Parliament  and  of  the  Council  of  13  June  2024  on  corporate 
sustainability  due  diligence  and  amending  Directive  (EU)  2019/1937  and  Regulation  (EU)  2023/2859,  OJ  L, 
2024/1760, 5.7.2024. 

5 

 
 
 
the  identification,  prevention,  and  addressing  of  negative  externalities  in  a  company’s  own 
operations or in the related activities of its business partners.  

2.1. The Corporate Sustainability Reporting Directive (CSRD)  

To respond to the increased demand for corporate sustainability information and provide more 
transparency  to  stakeholders,  the  Corporate  Sustainability  Reporting  Directive  (CSRD) 
modernises and strengthens the rules concerning the disclosure of sustainability information 
by  undertakings.  The  CSRD  requires  that  large  undertakings  and  listed  SMEs  disclose 
information necessary to understand the undertaking’s impacts on sustainability matters (i.e. 
environmental,  social  and  governance),  and  information  necessary  to  understand  how 
sustainability matters affect the undertaking’s development, performance and position.  

The current provisions of the CSRD phase-in reporting requirements for different categories of 
undertakings, see Subsection 3.1.2. (f)). 

The reporting requirements that undertakings should disclose to report against the CSRD are 
specified in European Sustainability Reporting Standards26 (ESRS), which were developed in 
draft form by EFRAG and adopted by the Commission via Delegated Regulation 2023/2772.27 
The reporting of undertakings is subject to an assurance requirement and must be published 
together with the related assurance report. 

The CSRD does not regulate voluntary sustainability disclosures by SMEs outside of the scope 
of the CSRD. However, many non-listed SMEs are subject to information requests from large 
undertakings and financial institutions within their value chains. Therefore, at the request of 
the Commission, EFRAG has developed a simplified voluntary standard for SMEs that are not 
in  the  scope  of  the  CSRD. 28  The  voluntary  SME  standard  (VSME),  also  requested  by 
organisations  representing  SMEs,  will  provide  an  efficient  tool  for  smaller  companies  to 
respond to requests for sustainability information. It aims to reduce the need for those SMEs 
to  respond  to  separate  requests  for  information  from  individual  financial  institutions,  large 
undertakings and other stakeholders.  

Various stakeholders, especially smaller companies in scope and those that have not previously 
reported  sustainability  information,  have  highlighted  that  they  are  facing  challenges  in 
implementing  the  ESRS.  Several  measures  to  facilitate  the  implementation  of  the  new 
framework have already been taken, as this is a priority for the Commission. These measures 
align with the Commission’s objective to reduce the reporting burden on EU companies and 

26 Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of 
the  European  Parliament  and  of  the  Council  as  regards  sustainability  reporting  standards,  OJ  L,  2023/2772, 
22.12.2023. 
27 EFRAG was previously called the European Financial Reporting Advisory Group, but its official name is now 
just EFRAG. It is an independent private multistakeholder body, majority funded by the EU. 
28 EFRAG  developed  the  draft  simplified  voluntary  SME  standard  and  submitted  it  to  the  Commission  in 
December 2024. 

6 

 
 
 
ensure the existing legal framework is applied in the simplest, fairest and most efficient way. 
Specifically: 

• 

• 

the  Commission  has  adjusted  the  monetary  thresholds  in  the  Accounting  Directive, 
setting  the  size  of  companies  in  line  with  inflation.  This  has  reduced  the  number  of 
undertakings subject to the CSRD by about 14%.29 The Commission also proposed to 
postpone the deadline for the first set of sector-specific reporting standards by two years 
to mid-2026 and the European Parliament and Council agreed to this proposal.30 This 
gives  undertakings  more  time  to  focus  on  the  correct  application  of  the  first  set  of 
sector-agnostic standards adopted in 2023. 
the Commission has asked EFRAG to prioritise the development of practical guidance 
to support undertakings in implementing the ESRS. EFRAG has published guidance on 
value-chain  reporting 31,  on  the  materiality  assessment  process 32 and  a  list  of  ESRS 
datapoints33 in  a user-friendly  format.  In addition,  EFRAG has  established  an online 
Q&A platform for technical clarifications.34 The Commission published a first set of 
questions  and  answers  on  the  CSRD.35 To  reduce  the  need  for  undertakings  to  seek 
external legal or consultancy advice.  

•  at the Commission’s request, the Committee of European Audit Oversight Bodies has 
developed  non-binding  guidelines  to  help  statutory  auditors  and  other  assurance 
services providers in the absence of an EU standard that should be adopted by 2026.36 
the Commission has organised various stakeholder meetings and events to get feedback 
on the implementation challenges faced by undertakings when applying the ESRS. In 
May and November 2024, the Commission held two stakeholder fora, attended by over 
400  participants  in  person  and  more  than  3,000  virtually.  The  fora  provided 

• 

29 Directive (EU) 2023/2775 of 17 October 2023 amending Directive 2013/34/EU of the European Parliament 
and of the Council as regards the adjustments of the size criteria for micro, small, medium-sized and large 
undertakings or groups. 
30 Directive (EU) 2024/1306 of the European Parliament and of the Council of 29 April 2024 amending 
Directive 2013/34/EU as regards the time limits for the adoption of sustainability reporting standards for certain 
sectors and for certain third-country undertakings, OJ L 2024/1306, 8.5.2024.  
31 EFRAG, Value Chain Implementation Guidance, available at: 
https://www.efrag.org/sites/default/files/sites/webpublishing/SiteAssets/EFRAG%20IG%202%20Value%20Cha
in_final.pdf.  
32 EFRAG, Materiality Assessment Implementation Guidance, available at: 
https://www.efrag.org/sites/default/files/sites/webpublishing/SiteAssets/IG%201%20Materiality%20Assessment
_final.pdf.   
33 EFRAG, List of ESRS datapoints, available at: 
https://efrag.sharefile.com/share/view/s363afe552f8a4f3b99de63a12c2f8865/foa75419-44c9-4081-85a5-
43217a6e8732.  
34 EFRAG, ESRS Q&A Platform, available at: https://www.efrag.org/en/esrs-qa-platform.  
35 Commission  Notice  on  the  interpretation  of  certain  legal  provisions  in  Directive  2013/34/EU  (Accounting 
Directive), Directive 2006/43/EC (Audit Directive), Regulation (EU) No 537/2014 (Audit Regulation), Directive 
2004/109/EC  (Transparency  Directive),  Delegated  Regulation  (EU)  2023/2772  (first  set  of  European 
Sustainability  Reporting  Standards,  first  ESRS  delegated  act),  and  Regulation  (EU)  2019/2088  (Sustainable 
Finance Disclosures Regulation, SFDR) as regards sustainability reporting, OJ C, C/2024/6792, 13.11.2024. 
36 The Commission also published draft guidelines on Member States’ national support initiatives for consultation 
on  25  June  2024  and  will  provide  clarifications  as  regards  the  work  that  needs  to  be  performed  by  assurance 
providers in the context of a limited assurance engagement on sustainability information. 

7 

 
 
 
undertakings with information to support them in their implementation of the ESRS. A 
number of Member States also presented a set of national support initiatives at these 
events.37 

•  Additionally,  Member  States  are  receiving  support  through  several  implementation 
support initiatives designed to facilitate compliance, enhance transparency, and support 
businesses in efficiently meeting their sustainability reporting obligations. Specifically, 
in  the framework of the  2025 Technical  Support  Instrument  round, the Commission 
intends  to  launch  a  flagship  multi-country  project  entitled  "Improving  Sustainability 
Reporting for Businesses."   

2.2. The Corporate Sustainability Due Diligence Directive (CSDDD) 

The  Corporate  Sustainability  Due  Diligence  Directive  (CSDDD)  sets  out  a  corporate  due 
diligence duty to identify and prevent potential, and to bring to an end or at least minimise 
actual adverse human rights and environmental impacts. This duty covers a company’s own 
operations, the operations of its subsidiaries and its chains of activities.  

Due diligence under the CSDDD covers all direct and indirect business partners in the upstream 
part of the value chain and, to some extent, also in the downstream part. However, the Directive 
sets out a risk-based approach by allowing companies to focus on those impacts that are most 
likely  or  most  severe,  and  requires  appropriate  measures,  understood  as  measures  that  are 
reasonably available and proportionate to the circumstances. Where a company has caused or 
jointly caused an actual adverse impact, the CSDDD requires remediation. As part of their due 
diligence measures, companies are expected to integrate sustainability due diligence into their 
policies  and  risk  management  systems,  use  contractual  assurances  and  cascading,  make 
investments and provide support for their SME business partners, where relevant. Furthermore, 
companies are expected to engage with a broad range of stakeholder groups at specific steps of 
the due diligence process and set  up a notification mechanism  and a complaints procedure. 
Monitoring  the effectiveness  of the measures taken and reassessing the actual and potential 
impacts is required on an annual basis and whenever new significant risks arise.  

In  addition  to  human  rights  and  environmental  due  diligence,  the  CSDDD  also  requires 
companies  to  adopt  and  put  into  effect,  on  a  best  effort  basis,  a  transition  plan  for  climate 
change  mitigation.  The  Directive  sets  out  minimum  content  requirements  for  this  plan, 
including:  

•  aligning the business model and strategy of the company with the 1.5oC global warming 
objective  of  the  Paris  Agreement  and  with  the  EU’s  intermediate  and  2050  climate 
neutrality objectives;  

37

 ESRS 

implementation 

at  Member 
support 
https://finance.ec.europa.eu/document/download/23692f87-9484-4eef-ae40-
205b34618e93_en?filename=finance-events-240516-report-ESRS_en.pdf.  

initiatives 

State 

level, 

available 

at: 

8 

 
 
 
•  setting climate-related targets, including, where appropriate, absolute greenhouse gas 
(GHG)  emission  reduction targets  for 2030 and  for every 5 years thereafter up until 
2050, which must be based on conclusive scientific evidence; 

•  describing  actions,  investments  and  fundings  that  support  the  implementation  of  the 

transition plan.  

Under  the  Directive  a  company  has  to  communicate  to  the  public  about  its  due  diligence 
policies  and  efforts  annually.  Moreover,  it  has  to  publish  its  climate  transition  plan  and, 
subsequently,  an  annual  update  of  it  with  a  progress  report.  However,  an  undertaking  that 
reports sustainability information, including a transition plan, under the CSRD (which is likely 
to  be  the  case  for  all  EU  companies  within  the  scope  of  the  CSDDD)  is  deemed  to  have 
complied with the CSDDD obligation in this regard. 

According to the current rules, Member States should transpose the CSDDD by 26 July 2026. 
The Directive only covers very large companies: those that have more than 1000 employees 
and a net worldwide turnover of more than EUR 450 million (for EU companies) or generated 
more than EUR 450 million turnover in the EU (for non-EU companies), or are ultimate parent 
companies  of  groups  that  reach  these  thresholds  on  a  consolidated  basis. 38  Entry  into 
application is envisaged in three phases, as follows: 

•  as from 26 July 2027, the rules would start applying only to the largest EU companies, 
i.e.  those  that  have  more  than  5000  employees  and  report  a  net  annual  (worldwide) 
turnover of more than EUR 1.5 billion, as well as to non-EU companies that generate 
more than EUR 1.5 billion net turnover in the EU; 

•  as from 26 July 2028, EU companies with more than 3000 employees and more than 
EUR  900  million  net  turnover,  as  well  as  non-EU  companies  generating  such  net 
turnover in the EU would need to comply with the new framework; and 

•  as from 26 July 2029, all other companies falling under the general scope would have 

to start applying the (national rules transposing the) Directive. 

After  the  phased  implementation,  the  CSDDD  is  estimated  to  apply  to  approximately  6000 
large EU companies and 900 non-EU companies.39   

The Directive includes several safeguards for SMEs. For instance, large companies must adapt 
their  purchasing  practices,  avoid  unfair  contract  clauses  and  cover  the  cost  of  third-party 
verification for SME business partners. They also need to provide proportionate support and 
invest in their value chain to help SMEs comply with the requirements.  

38 The Directive also covers franchisor and licensor companies or their ultimate parent companies with a network 
of a comparable size. 
39 Estimates for EU companies are based on extracts from the Orbis database of Moody’s Analytics (formerly 
Bureau van Dijk) and the figure for non-EU companies is calculated using an model construed for this purpose 
by the Commission, as explained in the Commission Staff Working Document on the Follow-up to the second 
opinion  of  the  Regulatory  Scrutiny  Board  accompanying  the  proposal  for  the  CSDDD,  SWD/2022/39,  p.13, 
available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD%3A2022%3A0039%3AFIN  

9 

 
 
 
It  should  be  recalled  that  similar  requirements  regarding  sustainable  value  chains  and  due 
diligence  have  been  developed  for  specific  risks,  commodities  or  sectors  in  other  EU  legal 
instruments. For instance, the Conflict Minerals Regulation40 requires EU importers of gold, 
tungsten, tin, and tantalum to ensure they import these minerals and metals from responsible 
sources  and  meet  international  responsible  sourcing  standards,  set  by  the  Organisation  for 
Economic Co-operation and Development (OECD). The Deforestation Regulation41 requires 
operators  and  traders  to  ensure  that  their  products  are  deforestation-free.  The  Battery 
Regulation42 sets due diligence rules for operators who must verify the source of raw materials 
used for batteries placed on the market.  The Regulation on prohibiting products made with 
forced labour on the Union market43 includes provisions related to business efforts to identify, 
prevent,  and  address  forced  labour  in  their  operations  and  supply  chains,  without  creating 
additional due diligence obligations for economic operators.  

The CSDDD complements these specific laws. It also translates into mandatory requirements 
the existing international voluntary frameworks on responsible business conduct.44 In addition, 
the CSDDD seeks to  prevent  further fragmentation of the single market  as  certain  Member 
States have started to adopt their own supply chain or sustainability due diligence laws.  

Previously,  the EU had  focused on preventing human rights  abuses, harmful emissions and 
environmental harm within its own borders. For adverse impacts happening outside the EU, it 
relied  on  its  external  action,  including  diplomatic  efforts  and  trade  policy  (e.g.  the  General 
System  of  Preferences  or  sustainability  chapters  in  free  trade  agreements).  Corporate  due 
diligence legislation engages the business sector (large EU companies and non-EU companies 
with significant turnover in the EU) in addressing their harmful impacts, including those caused 
in  third  countries  in  the  company’s  value  chain  where  negative  externalities  have  been 
produced.  

In  terms  of  economic  effects,  this  paradigm  shift  may  have  an  impact  on  the  EU’s  relative 
competitiveness.  So far,  geopolitical  actors outside the EU have mostly  not  (yet) taken this 
approach and continue allowing their companies to operate without being held accountable for 
the  harm  they  cause  to  the  environment,  the  climate,  or  local  communities,  although  larger 

40 Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply 
chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating 
from conflict-affected and high-risk areas, OJ L 130, 19.5.2017, p. 1–20. 
41 Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making 
available on the Union market and the export from the Union of certain commodities and products associated with 
deforestation and forest degradation and repealing Regulation (EU) No 995/2010; OJ L 150, 9.6.2023, p. 206–
247. 
42 Regulation (EU) 2023/1542 of the European Parliament and of the Council of 12 July 2023 concerning batteries 
and  waste  batteries,  amending  Directive  2008/98/EC  and Regulation  (EU) 2019/1020  and  repealing  Directive 
2006/66/EC, OJ L 191, 28.7.2023, p. 1–117. 
43 Regulation (EU) 2024/3015 of the European Parliament and of the Council of 27 November 2024 on prohibiting 
products made with forced labour on the Union market and amending Directive (EU) 2019/1937 (OJ L, 2024/3015, 
12.12.2024). 
44 Notably the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational 
Enterprises, which is elaborated further in the Due Diligence Guidance for Responsible Business Conduct and in 
sectoral guidance documents. 

10 

 
 
 
companies  in  particular  might  carry  out  due  diligence  on  a  voluntary  basis  in  line  with  the 
international standards.  

However, in the mid to longer term, exercising environmental and human rights due diligence 
across  the  entire  value  chain  and  lifecycle  of  products  and  services  may  bring  substantial 
potential benefits to companies, including in the form of efficiency gains. It helps them better 
manage their dependencies and risks related to supply chains and sustainability that could result 
in  reputational  damage,  sudden  collapses  of  supply  chains,  deteriorating  operating 
environments, production halts, regulatory and legal actions. Economic evidence shows that 
integrating  sustainability  factors  into  business  operations  improves  financial  performance, 
innovation and firm value.45 

The CSDDD contains various elements that aim to keep the regulatory burden of businesses 
proportionate  both  for  the  companies  directly  under  its  scope  and  for  their  SME  business 
partners that are indirectly impacted: 

• 
• 

• 

the Directive’s scope covers only very large companies;  
the Directive includes various limitations and safeguards to avoid unnecessary burdens. 
For  example,  the  Directive  takes  a  risk-based  approach  and  companies  in  scope  are 
allowed to prioritise addressing the impacts according to their likelihood and severity. 
Costs can be shared via industry and multi-stakeholder initiatives and reduced by using 
modern (e.g. digital) technologies; and 
to facilitate the implementation efforts and reduce the compliance burden on companies, 
the  Commission  will  issue  a  large  set  of  guidelines  and  set  up  a  single  helpdesk  to 
provide support to companies in scope (also involving, where relevant, national bodies), 
in line with the Directive’s requirements.  

Regarding  enforcement,  the  EU  network  of  supervisory  authorities  is  there  to  coordinate 
oversight practices to enhance the uniform application of the Directive, which supports a level 
playing field and can further reduce complexities and compliance costs for companies. 

2.3. The EU Taxonomy 

The EU Taxonomy provides a classification system of environmentally sustainable economic 
activities. It helps address the risk of greenwashing and supports investors in directing their 
capital towards the activities needed for the green transition. 

45 See  for  instance  Friede,  G.,  Busch,  T.,  &  Bassen,  A.  (2015).  ESG  and  financial  performance:  aggregated 
evidence from more than 2000 empirical studies. https://doi.org/10.1080/20430795.2015.1118917, and Whelan, 
T.,  Atz,  U.,  Van  Holt,  T.,  and  Clark,  C.  (2021).  ESG  AND  FINANCIAL  PERFORMANCE:  Uncovering  the 
Relationship  by  Aggregating  Evidence  from  1,000  Plus  Studies  Published  between  2015  –  2020, 
https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU-RAM_ESG-Paper_2021%20Rev_0.pdf.  

11 

 
 
 
The EU Taxonomy can also serve as a tool for financial and non-financial undertakings to plan 
and communicate on their business strategies, transition planning, as well as their investing and 
lending activities for the transition to a low-carbon economy. This is in particular important as 
corporates  and  financial  sector  actors  will  face  growing  challenges  due  to  the  critical 
emergence of stranded assets resulting from climate change and environmental degradation. 
As certain assets are increasingly likely to be deemed outdated, highly polluting or vulnerable 
to the physical effects of climate change, they will risk unanticipated or premature write-downs, 
downward re-valuations, or conversions to liabilities. Economic activities that qualify under 
the EU Taxonomy can avoid this by increasing corporations bargaining power or attractiveness 
when negotiating credits or issuing green bonds whose proceeds are allocated to EU Taxonomy 
aligned projects. 

By virtue of Article 8 of the Taxonomy Regulation undertakings reporting under the CSRD 
also publish information about the eligibility and alignment of their economic activities with 
technical  screening  criteria  laid  down  in  the  Taxonomy  Climate  and  Environmental 
Delegated Acts. The Taxonomy Disclosures Delegated Act sets out the reporting obligations 
laid  down  in  Article  8  of  the  EU  Taxonomy.  It  specifies  key  performance  indicators  for 
financial and non-financial undertakings. While non-financial undertakings have to report on 
the  Taxonomy-alignment  of  their  turnover,  capital  and  operational  expenditure  (turnover, 
CapEx and OpEx KPIs), financial undertakings report on the percentage of their investments 
and  their  assets  under  management  that  are  aligned  with  the  EU  Taxonomy,  or  in  case  of 
(re-)insurance undertakings also an underwriting Key Performance Indicator (KPI). As regards 
credit institutions, the key metric in this assessment is the Green Asset Ratio (GAR), which 
measures  the  proportion  of  Taxonomy-aligned  assets  to  total  covered  assets  in  a  credit 
institution’s current (GAR stock) and future portfolio (GAR flow).  

To  avoid  undue  burdens  on  SMEs  to  demonstrate  Taxonomy-alignment  to  their  credit 
institutions, loans to SMEs were excluded from the GAR, regardless of their environmental 
credentials,  as per the Taxonomy  Disclosures  Delegated  Act.  However,  as companies often 
compile information from other operators in their value chain, SMEs have increasingly been 
asked to check their Taxonomy-alignment.  

In 2021, the Taxonomy Climate Delegated Act introduced technical screening criteria for 101 
economic activities that could make a substantial contribution to climate change mitigation or 
adaptation. For climate change mitigation, economic activities represent over two thirds of the 
EU’s  GHG  emissions.  The  scope  of  activities  was  further  increased  in  2023  through  the 
Taxonomy Environmental Delegated Act that defined criteria for economic activities falling 
under the other four environmental objectives of the EU Taxonomy.46 As of today, the scope 

46  The  six  environmental  objectives  of  the  EU  Taxonomy  are:  climate  change  mitigation,  climate  change 
adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, 
pollution prevention and control and the protection and restoration of biodiversity and ecosystems respectively. 

12 

 
 
 
of economic activities that are eligible under the EU Taxonomy has reached a total of 151, 
spanning over 16 different sectors.47 

To support stakeholders in their implementation efforts, the Commission has been providing 
regular guidance on the interpretation and application of certain criteria and disclosures. So far, 
it has published six Commission notices48. Furthermore, the Commission has launched a series 
of online tools and guides on the EU Taxonomy Navigator website to help users navigate the 
criteria and fill their reporting templates. These should save stakeholders time and resources 
when assessing and reporting their Taxonomy alignment.49 

The results of the first two years of Taxonomy alignment disclosures show that Taxonomy-
aligned turnover grew by 25% between financial years 2022 and 2023, reaching a total of EUR 
760 billion in 2023.50 The sectors that reported the highest share of Taxonomy-aligned turnover 
in financial year 2023 were manufacturing (36%), electricity supply (33%) and construction 
(9%). For the 2023 financial year, 2180 companies disclosed a total of EUR 1527 billion of 
capital expenditure, of which EUR 848 billion (56%) was Taxonomy eligible CapEx, and EUR 
250  billion  (16%)  was  Taxonomy  aligned  CapEx.  This  represents  a  34%  increase  of 
Taxonomy-aligned CapEx from financial year 2022 to 2023. 

Financial  undertakings  started  to  disclose  their  Taxonomy-alignment  figures  in  2024.  The 
results show that credit institutions have reported on average low numbers for the GAR (stock) 
and GAR (flow).51 

Corporates or financial institutions may decide on a voluntary basis to issue bonds that partially 
or fully allocate proceeds to Taxonomy-aligned projects by using the European Green Bonds 
Standard  (EuGBS),  with  85%  allocation  of  proceeds  to  Taxonomy-aligned  projects.  Also, 
financial  products  that  promote  or  pursue  a  certain  level  of  sustainability  may  report  any 

47 This number includes the total of economic activities in the EU Taxonomy Climate Delegated Act of 2021, 
Complementary Climate Delegated Act of 2022, the amendments to the Taxonomy Climate Delegated Act and 
the  EU  Taxonomy  Environmental  Delegated  Act  of  2023.  The  number  takes  into  account  overlaps  between 
environmental objectives, i.e. an activity that makes a substantial contribution to more than one environmental 
objective is counted only once. The net number of activities included in the Taxonomy (not taking into account 
overlaps) is 242.  
48  See    Commission  Notices  C/2022/6937,  C/2023/6747,  C/2023/6756,  C/2023/3719,  C/2023/305  and 
C/2024/7494.      See  EU  Taxonomy  Navigator  for  a  full  list  of  Commission  notices,  available  at: 
https://ec.europa.eu/sustainable-finance-taxonomy/.  
49 EU Taxonomy Navigator, available at: https://ec.europa.eu/sustainable-finance-taxonomy/.  
50 The data has been extracted from Bloomberg and Orbis databases. 
51 For instance, the EY Taxonomy Barometer shows that in 2024, credit institutions have reported for their current 
Taxonomy-aligned  assets  relative  to  their  total  covered  assets  an  average  1.77%  for  GAR  (stock)  based  on 
turnover and 2.01% for GAR (stock) on CapEx. For the inflow of new Taxonomy aligned assets relative to total 
covered assets, the report shows that banks have reported on average a 1.90% for GAR (flow) based on turnover 
and  3.02%  for  GAR  (flow)  based  on  CapEx.  EY  (2024):  Taxonomy  Barometer,  pp.  14-15,  available  at: 
https://www.ey.com/content/dam/ey-unified-site/ey-com/en-gl/insights/assurance/documents/ey-gl-eu-
taxonomy-barometer-09-2024.pdf.  

13 

 
 
  
 
 
potential  Taxonomy-alignment  under  Articles  8  or  9  of  the  Sustainable  Finance  Disclosure 
Regulation 2019/208845 (SFDR).   

Additionally, there are a range of voluntary initiatives that use elements of the EU Taxonomy 
such as   the Green Economy Transition Approach (GET) 2021-2025 of the European Bank for 
Reconstruction  and  Development,  which  considers  the  EU  Taxonomy  as  a  relevant 
methodology in designing their financial instruments. 

Finally,  in  light  of  global  taxonomy  developments,  the  EU  has  been  a  driving  force  in 
promoting principles to strengthen the taxonomies’ international interoperability with the aim 
of increasing a voluntary use of the EU Taxonomy and reducing administrative burden related 
to its international application. As such, it has actively engaged with its partners, notably in the 
G20  Sustainable  Finance  Working  Group  and  the  International  Platform  on  Sustainable 
Finance.  The  EU  Taxonomy  also  remains  a  model  from  which  many  jurisdictions  take 
inspiration when developing and refining their taxonomies.  

3. Main issues at stake and the ways to address them  

The EU sustainability framework has shown a positive impact for the green transition, long-
term competitiveness and resilience of supply chains. By channelling an increasing amount of 
capital  towards  green  innovations  and  technologies,  it  can  boost  the  competitiveness  of 
Europe’s industry and secure our open strategic autonomy. Nonetheless, it has also introduced 
compliance challenges, at least in the short to medium term. 

Compliance with the new legal requirements requires businesses to invest time, resources, and 
skills. It includes dealing with different sets of rules that for instance vary in scope, definitions, 
criteria, obligations, timelines, as well as enforcement and supervision mechanisms. 

The ECB, in its Occasional paper 367 of January 2025, explained that the rapid and sequential 
introduction of parallel disclosure obligations has created a complex regulatory framework that 
may  deter,  rather  than  incentivise,  the  provision  of  sustainable  finance. 52  The  European 
Supervisory  Authorities  shared  this  view,  highlighting  that  although  the  supervision  of 
sustainable finance has risen the framework’s complexity has posed challenges in data quality, 
usability  and  consistency. 53  This  prevents  financial  institutions  from  fully  addressing 

to 

funding 

52 ECB Occasional Paper Series 367, Investing in Europe’s green future Green investment needs, outlook and 
at: 
obstacles 
https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op367~16f0cba571.en.pdf?3adc49c9eaf43bb95bf51eb5c4df36d
3.  
53 EIOPA, Advice to the European Commission on greenwashing risks and the supervision of sustainable finance 
at: 
04 
policies, 
https://www.eiopa.europa.eu/document/download/c5d52866-1c3f-4913-9e20-
5a5f40135efa_en?filename=Final%20Report%20-%20EIOPA%20advice%20to%20the%20European%20Com
mission%20on%20greenwashing.pdf.  

EIOPA-BoS-24-159, 

available 

available 

2024, 

June 

gap, 

and 

42, 

the 

37 

p. 

5, 

14 

 
 
 
 
greenwashing  risks54 and  delineating  the  sustainability  profile  of  their  products,  as  well  as 
communicating about it clearly.55 

Stakeholders from the industry sector, including a number of the main EU and national business 
associations,  further  suggest  that  they  are  asked  to  comply  with  varying  obligations  of 
comparable stringency under different rules. Where reporting is at stake, they claim that they 
are  faced  with  complex  requirements  and  that  they  would  benefit  from  more  clarity  and 
consistency across the different sustainability reporting rules. The access to robust and reliable 
data and a potential trickle-down effect on companies outside the formal scope of such rules 
are also reported as a source of administrative burden. 

On  the  top  of  the  many consultation  activities  carried  out  by  the  Commission  and  reported 
above  and  in  details  in  the  next  section,  the  Commission  organised  a  Reality  Check  on 
Sustainability  Reporting  and  a  Roundtable  on  Simplification  in  early  February  with 
representatives of industry and civil society. Overall, stakeholders expressed support for the 
overarching objectives of the CSRD, the CSDDD and the EU Taxonomy, but highlighted a 
need  for  simplification  and  harmonisation  in  their  implementation.  While  most      suggested 
pausing the application of existing legislation to focus on simplification, some saw merits in 
maintaining  the  rules  and  achieve  simplification  by  means  of  implementation  guidelines. 
Representatives of civil society pointed out that companies that have already made efforts to 
comply should not be put at a disadvantage. They highlighted the demand for ESG products 
and disclosure from end-investors and customers. Representatives from a wide range of sectors 
like  energy,  construction,  finance,  and  manufacturing  voiced  concerns  over  perceived 
extensive and costly  reporting requirements,  as  well as  redundant and  complex obligations. 
They  recommended  to  further  consider  interoperability  of  European  standards  with 
international  ones,  as  well  as  to  limit  value  chain  requirements.  SMEs  pointed  out  that  the 
lighter reporting regime for them should not be undermined by more extensive requests along 
the supply chain or by financial institutions. Stakeholders also called for clear guidance for 
assurance  processes  or  harmonised  definitions.  Several  stakeholders  questioned  the  EU 
Taxonomy's  effectiveness,  suggesting  its  reporting  be  made  entirely  voluntary  or  that  the 
DNSH  criteria  be  removed  or  significantly  simplified,  while  others  pointed  to  the  EU’s 
responsibility  as  a  front-runner  in  sustainable  finance,  being  the  first  of  many  jurisdictions 
globally that issued a Taxonomy. 

Some business  associations and non-governmental organisations call on the Commission  to 
strive for a balance between simplification and preserving the integrity and ambition of the 
sustainable finance legislation in order to continue to serve the core EU goals on the European 

54  EBA,  Greenwashing  monitoring  and  supervision  final  report,  EBA/REP/2024/09,  available  at: 
https://www.eba.europa.eu/sites/default/files/2024-05/a12e5087-8fd2-451f-8005-
6d45dc838ffd/Report%20on%20greenwashing%20monitoring%20and%20supervision.pdf.  
55 ESMA, Opinion Sustainable Investments: Facilitating the investor journey, ESMA36-1079078717-2587, 24 
July  2024,  p.17,  available  at:  https://www.esma.europa.eu/sites/default/files/2024-07/ESMA36-1079078717-
2587_Opinion_on_the_functioning_of_the_Sustainable_Finance_Framework.pdf. 

15 

 
 
 
Green  Deal.  Some  stakeholders  argued  against  penalizing  early  adopters  and  sustainability 
leaders who have already invested in meeting the requirements. 

The Commission proposes, as a part of the Omnibus simplification package, amendments of 
certain requirements set out in:  

• 
• 
• 

the CSRD;  
the CSDDD; and 
the  Taxonomy  Disclosures  Delegated  Act,  and  the  Climate  and  Environmental 
Delegated Acts.  

The following Sub-sections outline the main issues presented on these legal acts. The feedback 
was gathered through various stakeholder consultations organised by the Commission, as well 
as  from  positions  shared  by  EU  bodies,  Member  States  and  financial  and  non-financial 
organisations, including the main business associations. 

The sub-sections also provide for an overview of the proposed amendments to the legal texts 
to address these issues and to streamline and ease compliance with the new sustainable finance 
framework. These sub-sections also present associated estimated cost savings for companies.  

3.1. Issues presented on the CSRD/ESRS and proposed amendments or next steps 

3.1.1. Stakeholder views  

The Commission has organised consultations and events to gather the views of stakeholders 
and civil society regarding the application of the sustainability reporting requirements in the 
CSRD  and  the  ESRS.  As  a  result  of  these  outreaches,  the  Commission  received  extensive 
feedback from  financial and non-financial sector stakeholders requesting a simplification of 
the  sustainability  disclosure  requirements  in  the  CSRD  and  the  ESRS,  a  well  as  providing 
concrete solutions on how to achieve this. The main feedback was provided during the Call for 
Evidence  and  the  Simplification  Roundtable  events,  mentioned  above.  The  feedback  from 
those events has been analysed in depth and is summarised below.    

a)  Adjusting the scope of the CSRD and limiting trickle-down effects on SMEs and 

smaller companies in the value chain 

Many businesses  and industry associations have suggested that the Commission revises the 
CSRD to  reduce the scope to  large  undertakings. Some suggested revising the scope of the 
CSRD so that the threshold is consistent with that of the CSDDD (1000 employees and EUR 
450 million turnover). For others this means revising scope to undertakings with more than 500 
employees and that value chain  reporting  be limited to  counterparties in  the first  tier of the 
value chain. As regards limiting the value chain, companies note that it is difficult to report on 
enterprises without direct customer or supplier relationships.  

16 

 
 
Other business and industry groups have suggested introducing new categories of small, large 
and  very  large  midcap  companies  specifically  for  CSRD  purposes  to  introduce  a  more 
proportionate  regime  for  smaller  companies.  They  suggest  that  these  categories  could  be 
defined  based  on  employee  or  other  size  criteria.  By  way  of  example,  stakeholders  in  the 
insurance industry explain that under the current Accounting Directive size criteria (turnover 
> EUR 50 million, balance sheet > EUR 25 million, employees > 250), 99.71% of insurers in 
a referenced Member State, including small regional insurers, are disproportionately classified 
as  "large".  These  suggestions  have  been  partly  inspired  by  the  Draghi  Report 56 ,  and 
stakeholders  have  asked  the  Commission  to  introduce  a  new  "small  mid-cap"  category, 
allowing  simplified  CSRD  reporting  and  reduced  audit  intensity  for  this  new  category  of 
company.  This  is  in  line  with  the  Letta  report,  which  underlined  that  recognising  mid-caps 
distinctly from large corporations in EU law will enable more suitable rules, fostering their 
growth and equitable participation in the single market, especially during crises.57 Stakeholders 
have  also  suggested  that  new  categories  of  companies  should  be  allowed  to  use  a  less 
demanding  set  of  sustainability  reporting  standards,  which  can  be  gradually  phased-in  if 
deemed necessary.  

Other  stakeholders  do  not  suggest  revising  the  scope  of  the  CSRD  but  ask  to  simplify  the 
sustainability disclosure requirements in the ESRS for undertakings with fewer than 750 or 500 
employees and either a EUR 50 million turnover or EUR 25 million on the balance sheet. To 
this end, they suggest that the Commission should adopt the ESRS for Listed SMEs (ESRS 
LSME)  as  the  “reference  standard”  for  the  largest  listed  and  non-listed  undertakings  in  the 
scope of the directive and adopt a simplified version of the LSME standard for the smallest of 
these companies.  

b)  Reviewing the European Sustainability Reporting standards  

Many business representatives stated that some of the sustainability disclosure requirements in 
the ESRS are overly complex or redundant, and called for a revision of the ESRS to reduce the 
number and complexity of the disclosure requirements. They suggested that reporting certain 
indicators  in  the  ESRS  offers  little  additional  value  for  the  decision-making  process  of  the 
company as regards its sustainability strategy and that this information is also of little relevance 
to investors, financial institutions and other stakeholders.  

56 The Draghi report mentions that EU rules impose a proportionally higher burden on SMEs and small mid-cap 
companies (SMCs) than on larger companies, and that the EU lacks a framework to assess these costs. The report 
recommends  that  the  Commission  extend  current  mitigation  measures  for  SMEs  to  include  small  mid-cap 
companies, thereby enhancing proportionality in EU legislation for these businesses. It also observes that the EU 
lacks a commonly agreed definition of small mid-caps and readily available statistical data. M. Draghi, The future 
of European competitiveness, 2024, available at: https://commission.europa.eu/topics/eu-competitiveness/draghi-
report_en#paragraph_47059. 
57

at: 
https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf, p.107.   

available 

market, 

Much 

Letta, 

2024, 

more 

than 

 E. 

a 

17 

 
 
 
A  number  of  stakeholders  asked  the  Commission  to  simplify  and  provide  clarity  on  the 
application  of  the  double  materiality  principle  as  regards  the  materiality  assessment  to  be 
carried  out  under  the  ESRS.  Furthermore,  stakeholders  stressed  that  the  complexity  of  the 
double  materiality  assessment  may  lead  companies  to  considering  non-strategic  topics  as 
material,  thereby  defeating  its  purpose.  They  advocated  that  additional  guidance  should 
emphasise  that  the  double  materiality  assessment  is  strategic,  and  shifting  the  focus  from 
inherent to residual risk or/and impact. 

Some  stakeholders  stressed  that  any  potential  review  of  the  ESRS  should  be  based  on  the 
experience of their first application in practice. Any review or revision of the ESRS should take 
into account feedback from companies regarding their first experiences in applying the ESRS. 
Stakeholders further called on EFRAG to prioritise refining definitions and interpretations to 
ensure a consistent application of the general ESRS across all sectors, allowing companies time 
for  implementation.  Financial  sector  stakeholders  in  particular  asked  that  EFRAG  clarify  a 
practical  and  proportionate  approach  for  assessing  materiality  in  the  financial  sector  value 
chain. 

Several stakeholders recognise the efforts of the Commission and EFRAG in ensuring a very 
high  degree  of  interoperability  between  the  ESRS  and  international  standards,  such  as  the 
International  Sustainability  Standards  Board  (ISSB)  and  Global  Reporting  Initiative  (GRI) 
standards  but  they  also  recommend  further  improving  the  interoperability  of  European 
standards  with  international  ones.  Certain  stakeholders  highlighted  the  importance  of  “true 
interoperability” and not only “referencing” some of the disclosures contained in the ESRS to 
others  contained  in  the  ISSB  standards.  To  ensure  ‘true’  interoperability,  ESRS  sector 
standards would need to be drafted to be interoperable “by design” with ISSB standards from 
the  outset  of  standard-setting,  rather  than  as  a  retrofitting  effort.  ISSB’s  Sustainability 
Accounting Standards Board (SASB) standards were recommended by these stakeholders as 
the main reference in drafting sectorial ESRS concerning financial materiality. 

c)  Reviewing the development of sector-specific standards 

Some stakeholders requested that the Commission freezes work on sector-specific standards 
until the existing sector-agnostic ESRS standards have been simplified and fully implemented. 
Other  stakeholders  suggested  that,  instead  of  adding  to  the  sector-agnostic  requirements, 
sector-specific  standards  should  first  and  foremost  be  designed  to  help  apply  the  sector-
agnostic ESRS, by highlighting the information that is presumed to be relevant and material 
for a given sector. Stakeholders also emphasised that sector-specific ESRS should take into 
account, to the greatest extent possible, existing global standards and classifications. 

Many stakeholders argued that the requirement for the Commission to adopt sector-specific 
reporting  standards  be  deleted  from  the  CSRD  entirely.  They  highlighted  that  existing 
sustainability  disclosure  frameworks,  such  as  SASB,  already  provide  guidance  for  sector-

18 

 
 
specific  issues,  and  these  have  been  incorporated  into  the  ISSB’s  International  Financial 
Reporting Standard S2 (IFRS) standard.  

d)  Postponing CSRD reporting requirements 

Some stakeholders suggested pausing the application of the reporting requirements under the 
CSRD in order to focus on simplification. They argued that a postponement of the reporting 
requirements  of  the  CSRD  would  give  the  Commission  the  opportunity  to  simplify  the 
framework while allowing companies more time to prepare for any impending changes.  

Other stakeholders saw strong merits in maintaining the rules and argued for the importance of 
legal  certainty  and  regulatory  stability  for  companies.  They  also  highlighted  that 
implementation  guidelines  should  be  used  to  clarify  and  simplify  certain  parts  of  the 
sustainability reporting framework, instead of a postponement or change to the existing rules. 
Further  feedback  recommended  a  phased  introduction  of  compliance  with  the  reporting 
requirements, allowing companies to adjust without compromising on strategic priorities. 

e)  Streamlining auditing requirements 

Many  stakeholders  noted  that  uncertainty  surrounding  the  limited  assurance  requirement, 
particularly  concerning the extent of the auditor’s role in  providing sustainability  assurance 
and checking the results of the double materiality assessment, are creating a situation of over-
compliance  and  increased  burden.  Stakeholders  noted  that  despite  the  limited  assurance 
requirement,  the  external  audit  of  sustainability  data  is  costly  and  complex  due  to 
underdeveloped market skills compared to financial audits. In this context, certain stakeholders 
called for a suspension of the limited assurance requirement. Certain stakeholders also called 
for the reasonable assurance requirement to be postponed for an additional three years to allow 
market practices to mature. 

Stakeholders  also  urged  the  Commission  to  quickly  adopt  guidelines  and/or  standards  for 
limited assurance in order to clarify the requirements. Other stakeholders requested to make 
audit requirements proportionate to the nature of the data, in particular regarding qualitative 
data that are likely to remain unchanged during more than one reporting period.  

Some stakeholders suggested to delay the obligation for auditing sustainability data by one year 
for large undertakings with fewer than 750 employees, while others called on the Commission 
to remove the requirement for limited assurance of sustainability reporting completely. Some 
stakeholders suggested keeping the limited assurance requirement in the CSRD intact, while 
removing the empowerment for the Commission to move to a standard of reasonable assurance 
in the future. 

19 

 
 
f)  Improving the links with other EU legislation 

As regards links with related EU legislation, some stakeholders asked that interlinkages with 
other  legislation,  such  as  the  SFDR,  should  be  subject  to  the  Commission’s  simplification 
efforts as well. Stakeholders suggested that when companies report comprehensively according 
to the CSRD the necessary sustainability information is available to meet the information needs 
of investors and banks, and that other legislation concerning the EU Green Deal, particularly 
as regards reporting, sustainability and due diligence, should refer to this. Stakeholders also 
called  on  the  Commission  to  ensure  that  information  is  reported  only  once  to  ensure  that 
disclosure requirements which are already covered by other EU legislation are not duplicated 
in the ESRS, and that consistent definitions are used across legislations, such as those for value 
chain, double materiality, and independence of directors.  

g)  Developing more guidance and communication material 

Stakeholders requested that the Commission and EFRAG increase their efforts as regards the 
provision of guidance and interpretation materials on the application of the ESRS. Stakeholders 
also asked the Commission to introduce flexibility and to recognise reasonable effort in data 
collection, for example by not requiring the publication of estimates when data is not available. 
Stakeholders also requested that the Commission and EFRAG should aim at simplifying how 
the requirements are communicated to companies via guidance and interpretation materials. It 
was also suggested that the Commission provide resources and guidance to support businesses 
in maintaining compliance while remaining competitive.  

As  regards  the  reporting  of  climate  transition  plans,  some  stakeholders  propose  to  improve 
legal certainty by amending the CSRD to define the concept of “compatibility” between each 
company’s climate objectives and the ambition of limiting global warming to 1.5oC.  

Other  stakeholders  asked  that  the  issuance  of  new  implementation  guidance  or  Q&As  by 
EFRAG  be  limited  until  the  initial  years  of  ESRS  implementation  have  provided  a  clearer 
understanding  of  which  disclosure  requirements  require  further  attention.  Stakeholders  also 
recommended that all standards should undergo field testing before their mandatory application. 
Any new standards or amendments to existing standards should only take effect after a period 
of  24  to  36  months  following  their  publication.  Standards  should  also  be  reviewed  and 
digitalisation  requirements  adapted  to  incorporate  advancing  technologies,  such  as  artificial 
intelligence. Certain stakeholders have also noted that the late release of European Commission 
FAQs and EFRAG Q&A guidelines creates uncertainty, adversely affects year-end reporting 
and increases company costs. They recommend that the Commission and EFRAG implement 
an annual blackout period by June 30th, after which no new guidelines should be released. 

20 

 
 
3.1.2. Proposed amendments and next steps 

In  light  of  the  proposed  simplification  agenda  and  to  address  the  main  issues  identified  by 
stakeholder  feedback,  the  Commission  proposes  amendments  to  certain  provisions  of  the 
CSRD and Directive 2013/34/EU. The proposed amendments are guided by the key objectives 
of  administrative  burden  reduction,  regulatory  simplification  and  enhancing  European 
competitiveness,  as  well  as  ensuring  cost-effective  delivery  of  the  policy  objectives  of  the 
European Green Deal and the Sustainable Finance Strategy. 

h)  Reduction  in  scope  of  undertakings  subject  to  the  sustainability  reporting 

requirements under Directive 2013/34/EU  

To  respond  to  concerns  from  some  stakeholders  regarding  the  burden  on  smaller  large 
companies in the scope of the CSRD and to extend greater proportionality to these companies, 
whilst  allowing  them  to  boost  their  competitiveness  and  participate  in  the  transition  to  a 
sustainable economy, the Commission proposes that the new threshold to define the scope of 
Directive 2013/34/EU should be large undertakings with more than 1000 employees. This is in 
contrast to the current situation, where the threshold for undertakings to fall within scope of 
the CSRD is large undertakings as defined in Article 3, paragraph 4, of that Directive and listed 
SMEs. 

The proposed criteria will result in a significant reduction of undertakings in the scope of the 
CSRD  (about  80%)  and  also  aligns  more  closely  with  the  scope  of  the  CSDDD,  ensuring 
greater coherence between these two pieces of legislation.  Undertakings subject  to  both the 
CSRD and the CSDDD are not required by the CSDDD to report any additional information to 
what they are required to report under the CSRD. The proposed modifications will not take out 
of  the  CSRD  scope  any  undertakings  that  are  subject  to  the  CSDDD,  meaning  that  this 
consistency between the two pieces of legislation is maintained. 

To ensure that market demand for sustainability information from smaller large companies may 
still be met, the Commission proposes that undertakings not subject to mandatory sustainability 
reporting requirements may choose to report voluntarily on the basis of simplified reporting 
standards, which will be provided by the Commission. The Commission proposes that these 
proportionate and simplified standards for voluntary use would be based on the VSME standard 
developed by EFRAG.  

The proposed amendments to the scope of the CSRD intend to alleviate the reporting burden 
on companies, whilst also maintaining the policy objectives of the CSRD. These objectives can 
be realised by exempting undertakings with fewer than 1000 employees from the mandatory 
sustainability reporting requirements, while simultaneously offering them a simplified standard 
for voluntary reporting. The undertakings that remain in scope (large undertakings with more 
than 1000 employees) will still be required to report against the first set of the ESRS, although 
these  standards  themselves  will  be  revised  and  simplified  (point  d  below).  This  means  that 

21 

 
 
 
 
 
undertakings  with  generally  the  highest  sustainability  impacts  and  largest  proportion  of 
turnover in the scope of the CSRD will still be required to report against the comprehensive 
first set of the ESRS.  

i)  Trickle-down effect  

The Commission Communication on ‘A Competitiveness Compass for the EU’ specifies that 
one of the aims pursued by the Omnibus simplification package will be to address the trickle-
down effect to prevent smaller undertakings along the supply chains from being subjected in 
practice to excessive reporting requests. Additionally, the Commission committed in the ‘SME 
Relief Package’ to explore new solutions to facilitate SME’s access to sustainable/transition 
finance. 

The CSRD requires listed SMEs to report sustainability information and gives them the option 
to use a set of simplified sustainability reporting standards for this purpose. EFRAG is working 
on  a  draft  simplified  standard  for  Listed  SMEs  (LSME)  to  report  against.  However,  at  the 
request  of  the  Commission,  EFRAG  has  submitted  a  sustainability  reporting  standard  for 
voluntary use by SMEs that are not in scope of the reporting requirements (VSME standard). 
The objective of the VSME standard is to help  address the so-called trickle-down effect by 
providing  SMEs  with  a  simple,  widely  recognised  tool  through  which  they  can  provide 
sustainability information to banks, large undertakings and other stakeholders that may demand 
such information. In accordance with the Omnibus proposal, the Commission will adopt the 
draft VSME standard as a Delegated Act.  

The CSRD requires undertakings to report value-chain information to the extent necessary for 
understanding their sustainability-related impacts, risks and opportunities. To limit the trickle-
down effect on SMEs, the CSRD establishes a so-called value-chain cap, which states that the 
ESRS  may  not  contain  reporting  requirements  that  would  require  undertakings  to  obtain 
information from SMEs in their value chain that exceeds the information to be disclosed under 
the proportionate standard for listed SMEs (LSME). Given the objective of limiting trickle-
down effects on SMEs, the Commission proposes that the voluntary SME standard (VSME) 
act as a value chain cap for undertakings under the scope of the CSRD, instead of the current 
LSME standard.  In the context of the omnibus proposal, the VSME standard will act as a cap 
on the first set of ESRS as well as a cap on the reporting undertakings themselves, defining the 
legal limit of the information that undertakings under the scope of the CSRD can request from 
companies not in scope. 

Additional  protection  from  trickle-down  effects  on  smaller  large  companies  will  also  be 
ensured as the Commission proposes that the VSME standard will not only act as the value 
chain cap for SMEs, but it will also protect all undertakings with less than 1000 employees 
from excessive sustainability information requests. Undertakings which respect the value chain 
cap will be deemed to be compliant with the obligations to report value chain information under 
the first set of the ESRS.  

22 

 
 
To  further  strengthen  the  value-chain  cap,  the  Commission  proposes  that  auditors  and 
assurance providers must take into consideration the VSME standard as the value chain cap for 
all  undertakings  not  subject  to  mandatory  sustainability  reporting  requirements  under  the 
CSRD when carrying out an assurance engagement. This will help to ensure that auditors and 
assurance providers understand that undertakings reporting against the ESRS do not need to 
request information from undertakings in their value chains which are not subject to the CSRD 
that goes beyond the VSME standard to fulfil their reporting obligations.  

j)  Link  to  the  EU  Taxonomy  for  voluntary  and  partial  reporting  by  certain 

undertakings 

Articles 19a and 29a of Directive 2013/34/EU (Accounting Directive) require undertakings in 
scope of that Directive to report sustainability information, including on their eligibility and 
alignment with the EU Taxonomy, to be published as part of the management report. To align 
with the change of scope of the Accounting Directive (as outlined in Section 3.1.2. (a) in this 
Staff  Working  Document),  as  well  as  to  respond  to  concerns  of  stakeholders  regarding  the 
difficulty  to  meet  the  technical  screening  criteria  of  the  EU  Taxonomy  Climate  and 
Environmental  Delegated  Acts,  additional  provisions  were  inserted  into  the  Accounting 
Directive, as described below.  

Voluntary Taxonomy reporting for certain undertakings: the insertion of Articles 19b and 
Art.  29aa  into  the  Accounting  Directive  aims  to  reduce  the  reporting  burden  of  large 
undertakings  and  parent  undertakings  of  large  groups  which  on  their  balance  sheet  do  not 
exceed a net turnover of EUR 450 million and that do not have economic activities that align 
with the EU Taxonomy, or may consider that the costs of the reporting outweigh the benefits, 
and therefore do not wish to report. These undertakings may eliminate any compliance costs 
with  the respective  Taxonomy  reporting rules. Undertakings that choose  to  report that their 
activities are Taxonomy-aligned are expected to disclose their turnover and CapEx KPIs and 
may choose to disclose their OpEx KPIs.  

Reporting of partial Taxonomy-alignment for certain  undertakings: the introduction of 
Articles 19b and 29aa into the Accounting Directive allows undertakings which do not exceed 
a net turnover of EUR 450 million to demonstrate their progress towards sustainability targets 
and  receive  recognition  for  existing  efforts.  This  applies  to  large  undertakings  or  parent 
undertakings  of  a  large  group  that  claim  that  their  activities  are  associated  with  economic 
activities  which  fulfil  only  certain  requirements  of  Articles  3  and  9  of  the  Taxonomy 
Regulation.  By  doing  so,  these  undertakings  can  enhance  their  financing  for  transition 
opportunities,  showcasing  their  commitment  to  sustainability  and  progress  towards  meeting 
Taxonomy alignment. Undertakings should include in their management report information on 
how and to what extent their activities are associated with economic activities that are partially 
Taxonomy aligned. For these activities, the undertaking is expected to disclose their turnover 
and  CapEx  KPIs  and  may  choose  to  disclose  their  OpEx  KPIs.  The  information  on  partial 
alignment of economic activities with the EU Taxonomy may be a useful indication to investors, 

23 

 
 
financial  markets  or  policymakers  and  other  third  parties  about  the  current  environmental 
performance of the activities concerned.  

A corresponding change has equally been introduced in the draft amendments to the Taxonomy 
Disclosures  Delegated  Act  for  large  undertakings  subject  to  Article  19a  of  the  Accounting 
Directive, whose net turnover exceeds EUR 450 million, as outlined in Sub-section 3.3.2.a.  

The  proposal  also  mandates  the  Commission  to  develop  delegated  acts  to  ensure 
standardisation in terms of the content and presentation of the respective information. 

k)  Sector-specific standards 

The  CSRD  states  that  the  Commission  shall  adopt  sector-specific  reporting  standards  to 
complement the sector-agnostic ESRS adopted in July 2023. While sector-specific standards 
are intended to foster comparability between companies operating in specific sectors, and to 
provide additional guidance to undertakings  about material sustainability matters in  a given 
sector,  many  companies  and  business  associations  have  expressed  concerns  that  the  sector-
specific  standards  would  result  in  an  increased  amount  of  disclosure  requirements  and 
additional reporting burden.  

In light of these concerns and to alleviate reporting burden on undertakings in the CSRD, the 
Commission proposes to delete the empowerment for the Commission to adopt sector-specific 
standards.  The  Commission  considers  it  important  that  undertakings  be  able  to  properly 
implement  the first  set  of sector-agnostic ESRS, including  the provision  which requires  the 
disclosure of entity-specific information. Should undertakings require additional guidance to 
report on sustainability matters common to the sector in which they operate, they may have 
recourse to existing international sustainability reporting standards and sectoral sustainability 
reporting initiatives.  

l) 

 Revision of the ESRS  

As  part  of  the  simplification  effort  which  the  Commission  has  committed  to  in  the 
Competitiveness Compass and to enhance the coherence of the sustainable finance framework 
and respond to stakeholder concerns, the Commission will revise the first set of the ESRS. The 
Commission will aim to adopt the revised ESRS Delegated Act as soon as possible, and at the 
latest six months after the entry into force of the proposed amendments to the CSRD reporting 
framework (point f below). 

This revision of the ESRS is expected to, amongst other things, substantially reduce the number 
of  ESRS  datapoints  by  removing  those  deemed  least  important  for  general  purpose 
sustainability reporting, without undermining interoperability with global reporting standards. 
The  revision  will  clarify  provisions  that  are  deemed  to  be  unclear.  It  will  seek  to  improve 
consistency with other pieces of EU legislation where the modifications to the ESRS are the 
most appropriate means of achieving that. It will provide clearer instructions on how to apply 

24 

 
 
the materiality principle, to ensure that undertakings only report material information and to 
reduce the risk that assurance service providers inadvertently encourage undertakings to report 
information  that  is  not  necessary  or  to  dedicate  excessive  resources  to  the  materiality 
assessment  process.  To  the  extent  possible  the  revision  of  the  ESRS  should  simplify  the 
structure and presentation of the standards. It will further enhance the already very high degree 
of interoperability with global sustainability reporting standards. It should also make any other 
modifications  that  may  be  considered  necessary  considering  the  experience  of  the  first 
application of the ESRS. 

The  proposed  revision  of  the  ESRS  will  reduce  burden  for  all  undertakings  subject  to  the 
reporting requirements and at the same time contributes to alleviating the trickle-down effect 
on SMEs and smaller large companies that are not in the CSRD scope.  

m)  Audit and assurance of sustainability reporting 

The CSRD requires that undertakings must publish their sustainability  information  together 
with the opinion of a statutory auditor or, if the Member States allows an independent assurance 
service provider. The CSRD currently requires limited assurance of sustainability reporting in 
the  first  instance  and  envisages  that  this  could  in  the  future  become  a  requirement  for 
reasonable assurance under certain conditions. To limit the burden on undertakings associated 
with  acquiring  audit  and  assurance  engagements  on  their  sustainability  reporting,  the 
Commission proposes that the possibility of moving from a requirement for limited assurance 
to a requirement for reasonable assurance is removed from the CSRD. This will prevent an 
increase  in  costs  of  assurance  for  undertakings  in  scope  and  give  greater  predictability  to 
companies in scope on their future reporting costs.  

The CSRD also  requires the Commission  to  adopt  standards for sustainability assurance by 
means of delegated acts. Under the new proposal, instead of an obligation for the Commission 
to  adopt  standards for sustainability assurance by 2026, the Commission will issue targeted 
assurance  guidelines  by  2026.  This  will  allow  the  Commission  to  more  quickly  address 
emerging  issues  in  the  field  of  sustainability  assurance  that  may  be  generating  unnecessary 
burden on undertakings that are subject to the reporting requirements.   

Additionally,  the  Commission  has  proposed  that  audit  and  assurance  providers  take  into 
consideration  the  VSME  standard  as  the  value  chain  cap  when  carrying  out  an  assurance 
engagement. This will help to clarify the parameters of data collection and limited assurance 
provision for the purposes of reporting value-chain information under ESRS.  

Finally,  revisions  to  the  first  set  of  the  ESRS  will,  amongst  other  things,  clarify  disclosure 
requirements  and  the  application  of  the  materiality  assessment  process.  This  will  provide 
additional clarity to undertakings and audit and assurance providers regarding the boundaries 
of the information which is required to comply with the ESRS. 

25 

 
 
 
 
n)  Postponement of reporting requirements  

The current provisions of the CSRD phase-in reporting requirements for different categories of 
undertakings as follows: 

•  wave  1  includes  large  public  interest  entities  with  more  than  500  employees,  which 

must report for the first time in 2025 for financial year 2024; 

•  wave 2 includes all other large undertakings, which must report for the first  time in 

2026 for financial year 2025; 

•  wave  3  includes  SMEs  with  securities  listed  on  EU  regulated  markets,  which  must 
report in 2027 for financial year 2026, with the possibility to opt out for a further two 
years. 

The  Commission  proposes  to  postpone  by  two  years  the  entry  into  application  of  reporting 
requirements for wave 2 and wave 3 companies, in order to avoid that undertakings come into 
scope and then fall out of scope again, having already incurred certain costs.  

3.1.3. Estimated cost savings 

Of the proposed measures described above, this section presents quantitative evidence of the 
impact of the reduction of the CSRD scope and the future ESRS simplification.  

The proposed measures to reduce the scope of the CSRD and simplify the required reporting 
for undertakings remaining in scope will generate significant cost savings. In preparation of 
the proposal, and to assess the impact of different options and their burden reduction impact, 
the  Commission  services  generated  an  estimation  of  the  current  reporting  population  (total 
CSRD) and estimations of the updated population with respect to different scope adjustment 
variants. 

The  calculations  are  based  on  data  obtained  from  Orbis,  the  commercial  data  provider  of 
financial and business information. The legal definition of the CSRD is difficult to map exactly 
against the data available in Orbis, which causes the numbers herein to be based on certain 
assumptions. 58  Beyond  that,  while  Orbis  is  a  leading  provider  of  financial  and  business 

58 Using the relevant size criteria as defined in the Accounting Directive Article 29 and Article 19, the estimated 
CSRD population includes undertakings that meet those criteria either at entity or group level. This includes: large 
EU undertakings; EU SMEs that are listed on EU regulated markets; large non-EU undertakings that are listed on 
EU regulated markets; non-EU SMEs that are listed on EU regulated markets; large EU undertakings (non-LLCs) 
that have above 500 employees that are i) listed on an EU regulated market; and/or ii) credit institutions; and/or 
iii) insurance companies; and large non-EU undertakings (non-LLCs) that have above 500 employees and are 
listed on EU regulated markets. The calculations focus on the CSRD requirements and do not account for any 
national implementation differences. 
The current CSRD population is calculated as all companies that meet the relevant size criteria to be subjected to 
reporting in either of the three years 2021, 2022, and 2023 (i.e. a company is large if in any of those years it is 
large). This is partly done to fill data gaps on financial information, and also to give a more stable indication of 
the numbers. Many different simulations were conducted to assess different options for the revised scope and size 
thresholds. Those simulations are based on counting all companies that meet the size thresholds in the most recent 
year for which data is completely available (no earlier than 2021). 

26 

 
 
 
information, standard limitations apply to the completeness and quality of the data available. 
In practical terms, this means the estimates provided below reflect a best effort approximation 
of  the  actual  numbers;  providing  a  fully  accurate  count  of  the  current  CSRD  population  is 
generally considered impossible, also considering that national implementation can differ from 
the scope of the CSRD requirement. 

The  CSRD  allows,  with  some  exceptions,  an  undertaking  that  is  a  subsidiary  of  another 
undertaking not to report if its parent reports on a consolidated basis for the group as a whole. 
Two  sets  of  estimates  are  therefore  provided:  the  lower  bound  estimates  assume  that  all 
subsidiaries that may do so use this exemption.  The upper bound estimates reflect  the total 
number  of  undertakings  that  are  legally  in  scope  without  considering  the  effects  of  the 
subsidiary exemption.  

Based on this approach, as summarised in Table 1, the CSRD reporting population has been 
estimated  to  be  in  the  range  of  30  673  undertakings  (lower  bound,  assuming  all  relevant 
subsidiaries make use of the exemption and do not report, leaving the reporting to the ultimate 
parent) and 76 556 undertakings (upper bound, assuming all relevant subsidiaries report and 
do not make use of the subsidiary exemption).   

Assuming that 30% of subsidiaries report and do not make use of the exemption, the number 
of undertakings that publish a sustainability statement in accordance with the CSRD/the ESRS 
would be about 45 000. This number is similar to the estimated number of CSRD companies 
in the 2022 cost-benefit assessment accompanying the first set of the ESRS, as prepared by 
CEPS  and  Milieu  for  EFRAG, which  informed  the  Commission  services  assessment  in  the 
adoption process of the ESRS.59 

Turning to the burden reduction impact of the proposed changes (see Table 1), based on the 
dataset  of  undertakings  currently  in  scope,  it  was  estimated  that  18  -  25%  of  undertakings 
remain in full scope of the CSRD (i.e. they are  undertakings that are large according to the 
current Accounting Directive size criteria and in addition have more than 1000 employees). 
Between 22 984 undertakings (lower bound) and 62 849 undertakings (upper bound) would be 
fully  exempted  from  CSRD  reporting  (because  they  have  less  than  1000  employees).  This 
corresponds to a 75 - 82% reduction in the number of undertakings in scope of the CSRD. 
Again, assuming that 30% of subsidiaries report and not make use of the subsidiary exemption, 
some 35 000 out of the 45 000 companies would be exempted from CSRD reporting, and 10 

59 The study reported just over 49 000 firms in scope, but this was based on size thresholds before the revisions 
of the Accounting Directive that increased those thresholds. The study also estimated the total incremental cost 
of CSRD reporting to be EUR 1.9 billion per year, in addition to audit costs for limited assurance amounting to 
EUR 2.6 - 3.9 billion per year, plus higher one-off costs for setting up the reporting. EFRAG, Cost-benefit analysis 
of  the  First  Set  of  draft  ESRS  prepared  by  CEPS  and  Milieu,  2022,  available  at:  https://cdn.ceps.eu/wp-
content/uploads/2022/11/Cost-benefit-analysis-of-the-First-Set-of-draft-European-Sustainability-Reporting-
Standards.pdf. 

27 

 
 
 
000 remain in scope. That is, some 80% of companies would be descoped (after some rounding). 
Those estimates are used in the subsequent estimations of total cost savings.  

Table 1: Number of undertakings benefiting from reduced scope 

Lower bound  

Upper bound  

(exemption used, subsidiaries do not report) 

(exemption not used, subsidiaries report) 

#  of  undertakings 
scope 
30 673 

in 

%  of  current 
scope 
100% 

#  of  undertakings 
scope 
76 556 

in 

%  of  current 
scope 
100% 

7 689 

25% 

13 707 

22 984 

75% 

62 849 

18% 

82% 

CSRD 

Current 
scope 
Proposed new scope 

Remaining 
in  full 
scope  (large,  >1000 
employees)  
Fully exempted from 
CSRD reporting 

Source: DG FISMA calculations based on Orbis. 

The  costs  of  CSRD  reporting,  and  hence  the  cost  savings  to  be  realised  from  the  proposed 
measures,  are  more  difficult  to  estimate,  as  also  discussed  in  previous  studies.  Also,  what 
matters  for  the  assessment  of  the  regulatory  burden  are  the  incremental  costs  that  can  be 
attributed to the rules (and not counting the costs that firms would incur anyway as part of good 
business practice and their own commitments on sustainability), but  these incremental costs 
are particularly difficult to assess. Some stakeholders have noted that they incur higher costs 
than the average cost estimates used below, which are taken from earlier assessments used by 
the  Commission  services.  The  variation  in  costs  between  undertakings  is  indeed  large, 
depending on their size and activities. The costs (and corresponding cost savings) for many 
undertakings will be significant, but the earlier estimates are reused here for consistency and 
comparability and, importantly, to be conservative and avoid overestimating the benefits (i.e. 
cost savings) of the proposed measures. 

Using the average cost estimates for large non-listed firms, as reported in the CEPS and Milieu 
study  for  EFRAG,60 the  total  incremental  reporting  cost  savings  for  exempted  undertakings 
(see Table 1) would be about EUR 1.2 billion per year. In addition, these undertakings would 
save total audit costs around EUR 2 billion per year. There will also be the savings of one-off 
costs to set up and implement the reporting and assurance processes, which using the same 
source of average cost data would amount to EUR 1.6 billion.  

In addition to the proposed changes in the scope of the CSRD, further cost savings would arise 
for undertakings that remain in full scope if reporting under the ESRS were simplified for those 
undertakings.  For  example,  assuming  a  reduction  in  data  points  in  the  future  ESRS  that 
translates into a 25% reduction in costs, and assuming average reporting costs for this group 

60 The average cost estimates used are EUR 33 640 (EUR 56 350) for annual incremental reporting (audit) costs, 
and EUR 30 200 (EUR 16 900) for the one-off reporting (audit) costs. 

28 

 
 
 
  
 
that are somewhat higher than for the exempted companies, this would translate into further 
reporting cost savings of EUR 0.2 billion per year. Additional audit cost savings from such 
simplified reporting could amount to EUR 0.3 billion using the same approach.61  

Thus, based on these estimations, total recurring cost savings of the changes in CSRD scope 
and future ESRS modifications could be about EUR 1.3 billion per year for incremental CSRD 
reporting costs and EUR 2.3 billion per year for audit costs (or EUR 3.6 billion in total). 

Beyond the cost savings regarding CSRD/ESRS reporting, there would be the cost savings that 
the  CSRD  scope  changes  would  bring  to  taxonomy  reporting  (because  the  scope  of 
undertakings required to report on their taxonomy alignment is defined by the CSRD scope). 
Undertakings with less than 1 000 employees would be exempted from taxonomy reporting as 
a result of the reduction in the scope of the CSRD. As per above, some 35 000 undertakings 
(of  the  45  000  undertakings  under  the  current  CSRD  scope)  would  be  exempted  by  the 
proposed CSRD scope reduction and hence from the requirement to report on their taxonomy 
alignment. In addition, undertakings with more than 1 000 employees but less than EUR 450 
turnover  would  benefit  from  voluntary  taxonomy  reporting  –  i.e.  there  is  no  regulatory 
requirement for them to report and the regulatory burden can be avoided. Estimations show 
that this applies to some 3 000 undertakings. In the subsequent calculations, it is assumed that 
these undertakings do not report voluntarily and hence save costs.    

The costs of taxonomy reporting have previously been estimated, in particular in the impact 
assessment accompanying the Disclosures Delegated Act.62  Subject to significant uncertainty, 
the average incremental recurring costs were estimated at EUR 20 000 – 50 000 per year, plus 
one-off costs of EUR 40 000 – 125 000 per undertaking.63 Input received from stakeholders 
since this assessment suggests that the Taxonomy-related costs may well be higher than the 
estimates reported here, also on average. However, the approach taken in this estimation is to 
ensure consistency and comparability with the earlier assessment and to be conservative and 
avoid  overestimating  the  benefit  (cost  savings).  Costs  vary  significantly  between  firms, 
depending  also  on  the  complexity  of  the  undertaking’s  activities,  with  some  companies 
incurring significantly higher costs but also some companies facing no or little costs as they 
have no Taxonomy-eligible activities.  

61 Average recurring reporting (audit) costs are assumed to be a bit higher for this group of companies and set at 
EUR 65 000 (EUR 120 000) per year to ensure consistency with other results reported earlier. These are 
conservative estimates to ensure consistency with earlier results, as cost savings in this group of firms (i.e. more 
than 1000 employees) could be higher. 
62 Commission Staff Working Document Impact Assessment Report Accompanying the document Commission 
Delegated Regulation (EU) .../... supplementing Regulation (EU) 2020/852 of the European Parliament and of 
the Council by establishing the technical screening criteria for determining the conditions under which an 
economic activity qualifies as contributing substantially to climate change mitigation or climate change 
adaptation and for determining whether that  economic activity causes no significant harm to any of the other 
environmental objectives, SWD/2021/0152 final, available at: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52021SC0152&qid=1739185453213  SWD/2021/0152 final, available at: 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021SC0152&qid=1739185453213.  
63 For the subsequent calculations, we use the mid-point. I.e. EUR 35 000 for recurring reporting costs and EUR 
82 500 for one-off costs. 

29 

 
 
 
Applying these average cost estimates to the estimated number of undertakings that would be 
exempted  from  taxonomy  reporting  under  the  new  scope  translates  into  total  recurrent  cost 
savings of about EUR 0.8 billion per year.64 In addition to recurring cost savings, there would 
also be one-off cost savings for those undertakings that are not yet reporting or have not yet 
prepared  to  report  under  the  EU  Taxonomy.  Assuming  that  half  of  the  undertakings  with 
taxonomy-eligible activities that are proposed to be exempted from the reporting scope have 
not yet incurred the implementation costs, this would amount to total one-off cost savings of 
EUR 0.9 billion. Note that other Taxonomy-related cost savings are estimated in Section 3.3.3. 

Overall,  the  combined  cost  savings  resulting  from  the  proposed  changes  to  the  CSRD 
scope  (including  the  exemptions  this  would  bring  for  Taxonomy  reporting),  plus  the 
modifications of the future ESRS, have been estimated to amount to EUR 4.4 billion per 
year.  

3.2. Issues presented on the CSDDD and proposed amendments or next steps 

Various suggestions for clarifying and simplifying the due diligence obligations have emerged 
through stakeholders’ recent position papers and consultations, including the Reality Check 
Roundtable on Sustainability Reporting and the Roundtable on Simplification that took 
place  on  5  and  6  February  2025,  respectively.  The  Commission  has  analysed  the  feedback 
received, bearing in mind the objectives of the CSDDD to mitigate human and environmental 
harm in business value chains and make companies contribute to  climate change mitigation 
efforts.  

3.2.1. Stakeholder views 

In line with the significant interest from a very broad range of stakeholders that accompanied 
through recent years the development of the CSDDD proposal and the legislative negotiations 
that  led  to  the  adoption  of  the  Directive  in  2024,  the  announcement  of  the  Commission’s 
intention  to  reduce  businesses’  burden  and  in  particular  to  launch  an  Omnibus  initiative  to 
simplify  sustainability  legislation  generated  significant  public  interest  and  numerous 
interventions by stakeholders. These took the form of public statements, position papers and 
policy proposals expressing different views on the CSDDD – some calling for postponement, 

64 This is calculated by taking the mid-point estimate of the average costs per firm and apply this to the number 
of companies that would be exempted under the new scope. Section 3.1.3 discussed the ranges (lower and upper 
bound) and then focused on the estimate obtained by assuming that 30% of subsidiaries report and do not make 
use of the exemption. So as in section 3.1.3, of the about 45 000 companies currently in scope, some 35 000 are 
estimated to be exempted from CSRD scope (i.e. 80%, after some rounding), and an additional 3 000 companies 
would benefit from voluntary reporting (i.e. 38 000 in total).  As in the previous impact assessment accompanying 
the DA, it is furthermore assumed that taxonomy reporting costs (and hence cost savings) would only accrue for 
companies that actually have taxonomy eligible activities, and that this applies to 60% of the companies (i.e. we 
assuming  that  cost  savings  accrue  to  60%  of  the  38  000  companies  that  would  be  exempted).  Again,  these 
estimations are done to ensure consistency with previous results and to be conservative so as to not overestimate 
the benefits (i.e. cost savings) of the proposed changes.  

30 

 
 
 
specific changes or thorough reassessment, others, on the contrary, for preserving the legal text 
and focusing on supporting implementation. 

In  November  2024,  25  business  associations  signed  a  joint  statement,  welcoming  the 
Commission’s intention regarding administrative burden relief and simplification, and calling 
for a postponement  of the CSDDD, a comprehensive competitiveness  assessment, and the 
timely  issuing  of  guidelines  and  other  supportive  measures  by  the  Commission. 65 
Subsequently,  several  stakeholders  –  including,  in  particular,  some  industry  associations 
representing the entire spectrum of businesses 66 and companies – have called for amending 
the CSDDD. These stakeholders have put forward several proposals to ensure that businesses 
can adapt effectively and meet the obligations with reduced burden. They point to excessive 
requirements, making due diligence too complex and imposing legal risks on companies, raised 
concerns regarding the scope of CSDDD and its effects on investment in the EU, and called 
for mitigation of excessive civil liability risks.  

A number of companies have also opposed reopening the legal text, stressing, that companies 
have  already  invested  in  preparing  for  the  new  requirements.67 Impact  investor  associations 
also  opposed  reopening  the  CSDDD.  In  their  view,  this  would  risk  creating  regulatory 
uncertainty  and  ultimately  jeopardising  the  goal  to  reorient  capital  in  support  of  the  EU’s 
sustainability objectives.   

Civil society, including human rights and environmental organisations, and trade unions have 
also called against the reopening of the CSDDD and asked instead for further interpretative 
xmeasures and guidance.68 

Moreover, a number of researchers have also argued against reopening the Directive, rejecting 
the argument that that the CSDDD harms competitiveness.69 

The following points outline the changes proposed by various stakeholders, and the next sub-
section  list  the  retained  options,  indicating  the  considerations  behind  each  of  them  and 
summarising the expected impacts, in particular on the burden of companies.  

65 Joint statement of 5 November 2024, available e.g. at: 
https://www.businesseurope.eu/sites/buseur/files/media/position_papers/legal/2024-11-
05_joint_trade_association_statement_towards_eu_due_diligence_that_works_for_all_0.pdf.   
66 Including for instance the German business associations BDI, the Italian Confindustria, the French Medef, and 
others, also including international ones. 
67 Including for instance, the multi-stakeholder Ethical Trading Initiative and Global Network Initiative, and 28 
Finnish companies and CSOs signing an open letter on 5 February 2025, available at: 
https://finnwatch.org/images/Lausunnot/Kansalaisjarjestojen_ja_yritysten_yhteinen_kannanotto_Euroopan_kom
issiolle_omnibus-hankkeesta.pdf.  
68
https://media.business-
humanrights.org/media/documents/05.02.25_CSO_input_EC_Roundtable_Consultation_on_Simplification.pdf 
and 
by 
at: https://corporatejustice.org/publications/joint-statement-on-omnibus/.  
69 See open letter “Deregulation Will Not Help Europe Build Its Strategic Autonomy”, dated 5 February 2025, 
available  at:  https://www.euractiv.fr/section/economie/opinion/la-deregulation-naidera-pas-leurope-a-batir-son-
autonomie-strategique/.  

multi-stakeholder 

stakeholders, 

stakeholders, 

statement 

available 

available 

signed 

signed 

letter 

open 

joint 

 See 

170 

150 

at: 

by 

a 

31 

 
 
 
o)  Delaying application of the CSDDD 

A number of stakeholders, including 25 business associations, called on the Commission to 
postpone the implementation of the CSDDD by two years. They argue that this would allow 
businesses more preparation time and give the Commission time to launch a comprehensive 
competitiveness assessment and provide implementation guidance before application.  

This view was not shared by other stakeholders, who called for maintaining the application 
calendar and issuing timely guidelines. 

p)  Extending the scope of maximum harmonisation to more CSDDD provisions 

Extending the scope of the maximum harmonization provision included in Article 4 CSDDD 
was proposed by a number of business associations with a view to guarantee a fully uniform 
transposition in Member States.  

Other stakeholders shared the concerns as regards different application levels and ‘gold plating’ 
across Member States, proposing to turn the CSDDD into a Regulation.  

q)  Limiting  the  value  chain  covered  by  due  diligence  to  tier  1  (direct)  business 

partners  

Given the complexity of global supply chains, some business associations proposed to limit 
due diligence requirements to tier 1, unless there is "reasonable knowledge" of violations at 
other  levels  of  the  supply  chain.  Some  stakeholders  also  asked  the  Commission  to  limit 
business partners subject to due diligence solely to direct partners.  

SMEs have advocated for limiting the trickle-down effect on business partners, for instance by 
creating  a  “value  chain  cut-off”  and  establishing  a  presumption  of  compliance  with 
environmental and human rights standards in the EU. 

r)  Deletion  of  last  resort  rules  on  suspension  and  termination  of  business 

relationships  

Certain  business  associations  also  advocated  for  deleting  the  obligations  to  suspend  or 
terminate business relations in case of severe adverse impacts that the company has not been 
able  to  improve  through  due  diligence,  claiming  for  instance  dependencies  on  certain 
inputs/suppliers or lack of leverage. 

s)  Simplifying the definition of “stakeholders” and stakeholder engagement 

A few stakeholders noted that the stakeholder engagement process could be simplified through 
changes in the consultation process and by narrowing the definition of “stakeholders”. 

32 

 
 
t)  Deletion of the minimum cap for financial penalties 

Some  business  associations  also  proposed  removing  turnover-based  financial  penalties  and 
objected to the minimum fines cap of 5% of global turnover, considering it as too high.  

u)  Deletion of civil liability provisions 

Some stakeholders also called for a deletion or modification of the civil liability provisions in 
Article 29 CSDDD, suggesting instead to rely on national law. 

v)  Limiting access to justice to the directly affected victims  

Some national business associations proposed to limit access to justice to the directly affected 
victims, removing the possibility for victims to authorise NGOs to represent them in damages 
cases (representative action), which they saw as creating a risk of excessive litigation. 

w)  Deleting the review clause regarding financial services 

A few business associations asked for removing the review clause requiring the Commission 
to assess the need for a possible inclusion of financial services in due diligence, with a tailored 
regime, and the impact of such an approach. 

x)  Streamlining  transition  plans  for  climate  change  mitigation  and  eliminating 

inconsistencies across relevant pieces of EU law  

Some business associations and individual companies have asked for aligning transition plan 
requirements  under  the  CSDDD  and  other  EU  sustainability  rules,  namely  the  CSRD,  for 
removing any inconsistencies in definitions and further clarifying certain concepts. Others, in 
particular  from  the  oil  and  gas  industry,  called  for  the  deletion  of  Article  22  CSDDD  on 
combatting climate change. Some credit institutions asked for more flexibility in working with 
clients that do not meet the transition plan requirements. Some stakeholders asked for relaxing 
the requirements regarding the implementation duty of the transition plan and strengthening its 
best effort nature so that companies are not made responsible for factors that are out of their 
control.    

3.2.2. Proposed amendments  

Taking  into  account  the  feedback  received  from  stakeholders,  the  Commission  proposes 
amendments to certain provisions of the CSDDD as outlined in the following points. 

a)  Postponing the transposition and application of the Directive (Article 37 CSDDD) 
and accelerating the adoption of Commission guidelines (Article 19(3) CSDDD) 

The Commission proposes to delay, by one year, the transposition deadline for Member States 
(from July 2026 to July 2027) and the date of application of the CSDDD for the first wave of 

33 

 
 
companies that would start to apply the rules (from July 2027 to July 2028). At the same time, 
the Commission is advancing to July 2026 the adoption of the general guidelines which it is 
required to adopt under the Directive and will be working on the rest of the guidelines so that 
they become available in the shortest possible timeframe.  

The CSDDD provides for a broad set of implementing guidelines with specific deadlines for 
adoption.  These  guidelines  are  not  meant  to  interpret  the  rules  but  rather  to  help  with  their 
application  by  companies.  However,  having  the  general  guidelines  in  place  well  before  the 
rules start applying would allow companies to draw on a set of corporate best practices in the 
most  cost-efficient  ways  in  which  due  diligence  can  be  implemented.  Therefore,  the 
simultaneous postponement of the date of application and the acceleration of the adoption of 
the Commission general guidelines aim to give sufficient time for all companies to familiarise 
themselves with these guidelines and to prepare for the implementation of the CSDDD.   

Delaying  application  of  the  CSDDD  with  a  view  to  allow  companies  to  develop  their  risk 
management systems in light of the general guidelines will substantially reduce uncertainty for 
companies. In particular, it will reduce legal costs as companies may otherwise need to turn to 
a legal counsel or advisory services to implement the CSDDD properly. By offering companies 
a  single  set  of  best  practice  guidance,  the  guidelines  will  reduce  possible  fragmentation  in 
implementation in different parts of the industry, which also contributes to legal certainty and 
reduces operational costs.  

b)  Extending  the  scope  of  maximum  harmonisation  to  more  CSDDD  provisions 

(Article 4 CSDDD) 

Maximum harmonisation prevents Member States from introducing provisions within the field 
covered by the Directive that would go beyond its requirements. The idea was already debated 
during the legislative process, which concluded on the introduction of Article 4 regarding a 
partial  maximum  harmonisation  clause.  This  clause  covers  some  of  the  core  due  diligence 
obligations  regarding  identification,  prevention  and  mitigation  of  adverse  impacts,  with  a 
clause to review the level of harmonisation by 2030.  

The amendments proposed extend the scope of maximum harmonisation to several additional 
provisions of the Directive that regulate the core aspects of the due diligence process. These 
include, in particular, the identification duty, the duties to address adverse impacts that have 
been or should have been and the duty to provide a complaints procedure and a notification 
mechanism.  

However, the proposed amendments also recognise that there are legal limits of what can be 
harmonised  fully  in  a  cross-sectoral  framework  directive.  This  is  in  particular  because  the 
CSDDD  deals  with  social  and  environmental  protection  and  sets  out  a  general  process  to 
implement companies’ duty of care with regard to adverse impacts linked to business activities, 
while specific products, processes and situations are already today regulated in more detail or 

34 

 
 
differently at EU or national level. While ensuring a level playing field in the single market is 
an  objective  of  the  Directive,  extending  maximum  harmonisation  further  than  what  is  now 
proposed would involve risk. It could undermine human rights (including labour rights) and 
environmental standards, including existing ones and those that may be developed in the future 
to address emerging risks linked to new products and services or, for instance, to strengthen 
labour  rights.  Where  Member  States  consider  it  necessary  to  address  such  risks  or  raise 
standards to regulate how the duty of care applies in specific circumstances, they should not be 
prevented from doing so, in particular in areas where the Union has limited competences. 

The proposed amendments aim to increase the level playing field in the EU by ensuring that 
companies face fewer additional procedural rules (gold-plating) and less variations of the rules 
in the different Member States. In addition, the amendments could further reduce the overall 
compliance costs of company groups that are active in several Member States, although it is 
difficult to estimate by how much at the current stage of transposition. 

c)  Limiting the chain of activities covered by due diligence obligations in the normal 

course to tier 1 (direct) business partners, with exceptions 

The proposal limits due diligence obligations to direct (tier 1) business partners in the ‘chain 
of activities’ in a way that relieves companies from the obligation to pro-actively assess actual 
or potential adverse impacts at the level of indirect business partners (i.e. those beyond the first 
tier) in the absence of specific circumstances. The proposal requires them to do an assessment 
beyond tier 1 only where they have plausible information suggesting that there are actual or 
potential adverse impacts in the chain beyond tier 1.  

A strict limitation to tier 1 would have a detrimental effect on the effectiveness of due diligence 
since the main risks to human rights and the environment most often occur farther upstream 
(and  downstream)  in  the  value  chain  (for  instance  upstream  at  the  stage  of  raw  material 
sourcing  or  at  initial  manufacturing  stages,  or  downstream  at  the  transport  stage). 70  Such 
limitation  would  also  significantly  reduce  the  positive  impacts  on  resilience,  competitive 
advantages from better value chain engagement, addressing real impacts, reducing reputational 
risks,  achieving  synergies  and  efficiencies  in  the  value  chain  through  human  rights  and 
environment-friendly production processes and investments. A full limitation to tier 1 would 
also  lead to  a risk of  circumvention, with  a negative effect  on the level  playing field in the 
single  market,  and  which  would  require  additional  supervisory  efforts  to  assess  whether 
business relationships are structured in an abusive manner or with the aim to circumvent due 
diligence  obligations.  The  proposal  aims  to  correct  this.  An  outright  limitation  could  also 
increase the burden of many European SMEs as they are often first-tier value chain suppliers 
of the companies in scope of the Directive, while they may be low-risk themselves and would 

70 See e.g. the ILO Report on Ending child labour, forced labour and human trafficking in global supply chains, 
2019, and OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected 
and High-Risk Areas, both referred to in the Impact Assessment accompanying the CSDDD proposal, Annex 13 
(p. 189). 

35 

 
 
 
therefore not bear too much burden under the risk-based approach of the CSDDD as currently 
in  force.  Furthermore,  under  the  current  CSDDD,  large  companies  are  required  to  provide 
investment and support for SME value chain partners going through the sustainability transition 
where necessary. Limitation to tier 1 reduces such support to a significant extent.  

The  proposed  approach  therefore  makes  tier-1  due  diligence  the  rule,  but  with  necessary 
exceptions. Following the initial value chain mapping, in-scope companies will only have to 
carry out an in-depth assessment with respect to direct partners. However, such an in-depth 
assessment is also required where the company has plausible information on adverse impacts 
at the level of indirect partners. In case that assessment confirms the existence of an adverse 
impact, a proper due diligence needs to be carried out. As value chain partners are often SMEs, 
they will then also benefit from investments andcapacity building from the in-scope company, 
which the Directive  requires  it to  provide,  where necessary, in  a targeted and proportionate 
way.  

Focusing  the  due  diligence  obligations  on  direct  business  partners  significantly  reduces  the 
material  scope  and  the  possible  burden  for  companies  in  scope  as  well  as  the  trickle-down 
effect on business partners, in particular SMEs and small mid-caps both in the EU and beyond. 
At the same time, the actual burden reduction is likely to be more limited than the nominal one, 
as we expect that companies that already carry out due diligence beyond tier 1 voluntarily, in 
line with the UN and OECD voluntary frameworks on which the CSDDD builds, will continue 
to do so.71 In addition, many companies already have social and/or environmental information 
gathering and risk management processes in place that extend beyond tier 1, as a consequence 
of sustainability reporting but also because they are needed to comply for instance with health 
and safety requirements  of products, or with social and environmental law.72 These systems 
would need to be operated even if the general sustainability due diligence obligations did not 
extend beyond direct business partners.  

Another  countervailing  factor  may  be  that  companies  might  be  less  able  to  carry  out  a 
structured risk analysis and proper risk management, as their actions may be more driven by 
media reports and information gathered through complaints. Also, where the company does 
not have specific information about adverse impacts at the level of indirect relationships, it will 
have to rely more on contractual cascading. This may increase the trickle-down effect on SMEs 
compared to the CSDDD as in force, in particular on low-risk EU SMEs which are often direct 
contractors. To mitigate this effect, the proposal provides that the in-scope company should 
also comply with the rules on SME support (although not the rules on investments and capacity 
building which may still leave the SME worse off).    

71 See  references  in  the Impact  Assessment  accompanying  the  CSDDD  proposal,  Annex 4,  Commission  Staff 
Working  Document  Impact  Assessment  Report  on  Corporate  Sustainability  Due  Diligence  and  amending 
Directive (EU) 2019/1937, 23.2.2022 SWD(2022) 42 final, p. 42-44. 
72See  references  in  the  Impact  Assessment  accompanying  the  CSDDD  proposal,  Annex  4,  Commission  Staff 
Working  Document  Impact  Assessment  Report  on  Corporate  Sustainability  Due  Diligence  and  amending 
Directive (EU) 2019/1937, 23.2.2022 SWD(2022) 42 final, p. 63. 

36 

 
 
 
d)  Limiting  information  requests  vis-à-vis  SME  and  SMC  business  partners  for 

mapping adverse impacts (‘SME shield’) (Article 8 CSDDD) 

In the context of mapping the value chain for the purposes of identifying adverse impacts, large 
companies under the scope of the Directive should limit the information they request from their 
SME and SMC (small midcap companies with not more than 500 employees) direct business 
partners to the information specified in the voluntary sustainability reporting standards (VSME 
standard) referred to in Article 29a of the CSRD, unless they need additional information to 
carry out the mapping and they cannot obtain that information in any other reasonable way. 

This  element  of the proposal  is  expected to  limit the  trickle-down effect  of the CSDDD on 
SMEs and SMCs with respect to the stage of impact identification, i.e. to reduce the indirect 
compliance costs of such value chain business partners. 

e)  Deleting  the  obligation  of  the  last  resort  measure  to  terminate  the  business 

relationship (Article 10(6) and Article 11(7) CSDDD) 

The Directive as in force requires companies to disengage and terminate a business relationship 
as a last resort, after all other due diligence steps have been exhausted and failed, and if the 
impact is severe. The proposed amendments remove the obligation to terminate the business 
relationship but do not remove the obligation to suspend it. This is likely to reduce burdens in 
those cases where the adverse impact is ultimately eliminated, as the contractual relationship 
remains  intact  during  suspension  and  the  company  therefore  would  not  have  to  look  for 
alternative suppliers, while still leaving substantial leverage in the hands of companies to obtain 
the necessary improvements in business practices from their partners.  

f)  Simplifying the notion of ‘stakeholder’ (Article 3(1)(n) CSDDD) and limiting the 
stages of the due diligence process which require stakeholder engagement (Article 
13 CSDDD) 

First, the proposed amendments clarify the notion of ‘stakeholder’ by simplifying the definition 
and limiting it to workers, their representatives, and individuals and communities whose rights 
or interests are or could be “directly” affected by the products, services and operations of the 
company, its subsidiaries and its business partners. Secondly, the proposed amendments clarify 
that companies are only required to engage with “relevant” stakeholders at each specific stage 
of the due diligence process (which may be different e.g. at the initial assessment stage and 
when designing a remediation measure) and further limit the stages at which companies are 
required to engage with relevant stakeholders. 

The broad definition in the CSDDD was counterbalanced by defining specific limited stages in 
the due diligence process when companies have to engage their stakeholders. The proposed 
clarifications set out a simplified and clearer set of rules and ensure that companies in scope do 
not feel obliged to consult with all conceivable stakeholder groups, including ones that are not 
relevant for the due diligence action at stake. In addition, they limit from the outset the types 

37 

 
 
of  stakeholders  that  need  to  be  consulted  in  any  event.  While  this  reduces  burdens,  these 
benefits may be mitigated by companies losing some of the value of stakeholder engagement, 
which means the overall burden reduction is difficult to assess. Meaningful engagement with 
all  relevant  stakeholders  not  only  contributes  to  more  effective  harm  identification  and 
mitigation, but also enables the company to build trust, enhance its reputation, and ultimately 
strengthen its long-term viability. For example, companies may find it useful to also consult 
NGOs  that  may  have  valuable  information  about  adverse  environmental  impacts.  The 
envisaged changes do not stand in the way of such wider outreach. 

g)  Reducing frequency of periodic assessments and possible updating of due diligence 

policy and measures (Article 15 CSDDD) 

The proposal extends the frequency of the periodic assessments – when a company needs to 
evaluate the implementation, the adequacy and the effectiveness of its due diligence measures 
– and the frequency of updating, if necessary, its due diligence policy and appropriate measures 
from 1 to 5 years. At the same time, the proposal recognises that business relationships, and 
the  related  risks  and  impacts,  may  evolve  over  time  (which  could  be  the  case  when  new 
business  lines  or  production  locations  are  opened,  when  new  products  or  services  are 
introduced,  new  business  relationships  are  established  or  acquisitions  take  place,  etc.), 
sometimes  even  within  short  timeframes.  Also,  the  measures  taken  to  address  potential  or 
actual  impacts  may  prove  to  be  inadequate  or  ineffective  even  before  the  next  regular 
assessment. The company should update its assessment in such situations. 

By prolonging the intervals between two regular periodic assessments and updates from 1 year 
to 5 years, the related average annually recurring costs (the majority of which will arise every 
5  years)  could  be  in  theory  reduced  by  up  to  80%.  If  we  take  the  combined  effect  of  the 
Omnibus  proposal  into  account,  i.e.  that  the  identification  and  monitoring  process  will  be 
significantly  reduced  to  cover  mainly  tier  1  impacts,  with  impacts  at  the  level  of  indirect 
business  relationships  identified  and  measures  monitored  only  on  the  basis  of  concrete 
information  pointing  to  adverse  impacts,  the  additional  burden  reduction  stemming  from 
moving from 1 to 5 years will be smaller in absolute terms. In addition, this element of the 
proposal will reduce burdens not just for in-scope companies but also for their business partners, 
often SMEs, which may receive (extensive) information requests as part of these monitoring 
exercises.  At  the  same  time,  monitoring  fulfils  an  important  function  of  making  sure  that 
measures  taken  to  address  impacts  actually  work.  Loosening  this  periodic  control  could 
increase the risk of fines (and liability under national law), so companies will in any case need 
to judge, on the basis of their risk mapping, whether a more intensive monitoring is in their 
interest. The requirement related to re-assessments on a needs’ basis – which preserves a higher 
degree of alignment with the international frameworks – somewhat reduces this risk; it also 
lowers the automatic burden reduction effect to some extent but permits a monitoring regime 
more tailored to the circumstances of each company in scope. Furthermore, the extent of cost 
savings will also depend on whether the same impact identification and assessment needs arise 
for reporting purposes under the CSRD.  

38 

 
 
h)  Deleting the ‘put into effect’ requirement of the climate plan and aligning it with 

the reporting regime  

With a view to ensure more legal clarity and alignment of the CSDDD with the sustainability 
reporting regime, the proposal introduces a modification by eliminating the requirement to ‘put 
into  effect’  the  transition  plan  for  climate  change  mitigation.  In  line  with  the  CSRD 
requirements, the proposal makes clear that the plan should include implementation actions, 
beyond key actions to reach the climate targets. This change will provide further clarity for 
businesses.  

i)  Deleting the 5% of turnover as a minimum cap for pecuniary penalties (Article 

27(4) CSDDD) 

The proposed amendments take a new approach to ensure a level playing field in the EU with 
respect to pecuniary penalties that supervisory authorities may impose for infringing the due 
diligence  obligations.  Instead  of  setting  an  absolute  lower  limit  for  any  fines  cap  (i.e.,  a 
maximum amount for any fine) – in case a Member State opts for such a limit – in transposition 
laws, it establishes a general principle according to which Member States must not set a cap 
that  would  prevent  supervisory  authorities  from  imposing  penalties  in  accordance  with  the 
factors and principles set out in Article 27(1) and (2) of the Directive. In addition, with a view 
to ensure a level playing field in line with the harmonisation objective, the Commission will 
develop, in collaboration with the Member States, guidelines on imposing fines. 

This change is not expected to have any direct impact on companies’ administrative burden. It 
still brings benefits to businesses as it helps ensure a level playing field in the EU market by 
reinforcing a harmonised approach across the EU in supervisory practices regarding fines. It 
also gives greater legal security to businesses which are exposed to high potential fines in a 
new compliance field.  

j)  Removing EU-level civil liability and deleting certain access to justice facilitations 

(Article 29 CSDDD) 

The proposed amendments remove the specific, EU-wide liability regime as set out in Article 
29(1)  CSDDD  as  well  as  the  requirement  for  Member  States  to  allow  for  victims  to  be 
represented by civil society associations before courts.  

The harmonized liability regime in Article 29(1) CSDDD had been introduced considering that 
some companies had already been brought to court based on existing national liability laws for 
their failure to address human rights and environmental violations in their value chains. The 
CSDDD  introduced  a  number  of  limitations  on  the  application  of  civil  liability  (e.g.  fault 
requirement, no liability for adverse impacts caused only by business partners,). The proposed 
deletion of this EU-wide regime responds to the calls to leave the regulation of the specific 
liability  conditions,  including  as  regards  causality  and  fault,  for  national  law  and  thus  limit 
liability risks. It leaves companies under the applicable liability regimes of the Member States. 

39 

 
 
This  will  reduce  risks  for  companies  within  national  jurisdictions  that  have  more  limitative 
liability  regimes  in  terms  of  the  applicable  conditions  than  those  set  out  in  Article  29(1) 
CSDDD. But the overall risk reduction will depend on the possible increase of liability risks in 
other jurisdictions with conditions more favourable to the victim (e.g., strict liability without a 
fault requirement).  

Access  to  justice  provisions  is  meant  to  facilitate  effective  access  to  justice  in  practice, 
especially in situations where the victim may be in a very disadvantaged position (far away, 
facing complex legal issues, not having expertise, etc.). The Directive requires Member States 
to allow for the representation of the victim by a trade union or non-governmental human rights 
or environmental organisation in accordance with national law. The proposed removal of this 
requirement may reduce the burden of companies as they may be subject to court actions from 
fewer  claimants.  On  the  other  hand,  court  cases  may  also  become  more  fragmented,  with 
different victims suing companies individually rather than through bundled procedures. It is, 
therefore, difficult to estimate the burden reduction impact.   

Furthermore,  the  requirement  for  Member  States  to  ensure  that  the  liability  rules  are  of 
overriding mandatory application in cases where the law applicable to claims to that effect is 
not the national law of the Member State is deleted. This deletion does not mean that Member 
States would not be able to require mandatory application at national level.     It is difficult to 
estimate the overall impact of this provision.   

k)  Deleting  the  review  clause  regarding  financial  services  and  the  investment 

activities of regulated financial undertakings (Article 36(1) CSDDD) 

A review clause in Article 36(1) CSDDD requires the Commission to submit – no later than 
26 July 2026 – a report to the European Parliament and to the Council on the necessity for 
additional sustainability due diligence rules tailored to regulated financial undertakings with 
respect  to  the  provision  of  financial  services  and  investment  activities.  The  report  should 
include the options for such due diligence requirements as well as their impacts, and should be 
accompanied by a legislative proposal, if appropriate. This review clause was introduced by 
the  co-legislators  together  with  the  exemption  of  the  downstream  value  chains  of  financial 
sector  companies  from  the  due  diligence  regime,  given  the  financial  sector’s  specificities, 
recognising that the financial sector can play a pivotal role in supporting and underpinning the 
sustainability  transition of the real  economy.  The Draghi  report also  emphasises the role of 
private finance in supporting the transition. 

However, as the deadline set does not leave any time to take into account the experience with 
the newly established, general  due diligence framework, it is  proposed to delete the  review 
clause.  In any case, the  Commission  retains the  right  of initiative to  propose dedicated due 
diligence rules  for the financial sector, if  and when appropriate,  following  better  regulation 
principles. 

40 

 
 
There is no expected change in regulatory burden from removing the review clause on finance 
but  there  is  a  likely  gain  in  legal  security  for  financial  firms  taking  investment  decisions 
building long-term links with companies. 

3.2.3. Estimated cost savings 

Compliance costs under the CSDDD as currently in force (baseline): 

The substantive compliance costs that businesses under the personal scope of the CSDDD 
would face comprise, first of all, procedural costs: the costs of setting up and operating due 
diligence processes and procedures (including, among others, the cost of initial data gathering, 
analyses  and  verification  needed  for  mapping  and  impact  identification,  and  the  cost  of 
subsequent  tracking  of  developments  and  effectiveness).  The  impact  assessment  only 
calculated these costs and did not estimate the transition costs, which constitute the other main 
component  of  substantive  compliance  costs,  as  these  are  rather  to  be  understood  as  the 
investments needed to comply with the duty of harm mitigation and to transition the company 
and its value chains to operating sustainably (which could involve reorganising value chains, 
developing  production  processes,  facilities,  innovative  products  and  services,  etc.).  Such 
investments  can  become  profitable  in  the  long  term,  but  often  also  already  in  the  short  to 
medium run (and sooner or later companies would face part of these expenditures even in the 
absence of the CSDDD). With respect to reporting to the public, which imply administrative 
costs, the impact assessment did not calculate any incremental costs under the CSDDD for EU 
companies  as  it  took  into  account  that  EU  companies  under  the  scope  would  already  be 
publishing sustainability information in accordance with the CSRD. 

The table below presents estimations for the total average, annually recurring compliance 
(procedural)  costs  and  initial  one-off  costs  (which  would  typically  spread  across  several 
years) for the personal scope of the Directive as adopted and currently in force (baseline 
scenario)73: approximately EUR 320 million annual and EUR 90 million initial costs. These 
figures  are  based,  first  of  all,  on  the  average  firm-level  cost  calculated  in  the  Impact 
Assessment accompanying the CSDDD proposal for very large companies74. However, those 
figures overestimate the actual total costs for the following reasons: 

•  The  impact  assessment  used  firm-level  figures  that  reflect  the  cost  of  “full”  due 
diligence obligations, while the Directive was adopted with a  risk-based approach. 
This reduced the compliance costs substantially as the company can prioritise impacts 

73 The number of EU companies covered by the personal scope of the Directive as adopted is estimated to reach 
about 6 000, which is less than half of the scope of the initial Commission proposal (12 800), mainly due to the 
substantially higher size thresholds. 
74 EUR  52 200  recurrent  and  EUR  14 800  one-off  costs  for  most  of  the  large  companies  covered,  and  EUR 
643 000 recurrent and EUR 190 000 one-off costs for the largest 300 companies that have more than EUR 5 billion 
turnover a year. Calculations avoided double counting of the costs that companies would already be facing to meet 
their reporting requirements under the CSDDD. 

41 

 
 
 
and  focus  first  on  the  most  important  ones  and  thus  also  spread  costs  over  a  longer 
period.  Accordingly,  the  so  called  “targeted”  due  diligence  figures  from  the  impact 
assessment  could  be  more  realistic  to  use  for  the  average  costs:  resulting  in  25% 
reduction of the costs.  

•  These company-level costs do not account for the efficiency gains resulting from the 
“group  effect”:  the  Directive,  as  adopted,  allows  for  burden  reductions  by  sharing 
resources and information within company groups and by parent companies taking over 
certain due diligence obligations from their subsidiaries. It seems reasonable to assume 
that about 40% of the companies in scope will benefit from such burden reductions75 
(while assuming, to remain cautions, that none of the benefitting subsidiaries are among 
the top 300 EU companies76), and that their procedural costs (which is not shifted to 
their parent companies) will be reduced by at least 50%.77 

Direct incremental procedural 
compliance costs 

Top 300 large 
EU 
companies 

Subsidiaries 
of EU 
companies 
(40%) 
2400 

Other EU 
companies 
in scope 
(60%) 
3300 

300 

Number of companies: 
Per company costs  
adjusted to risk-based approach (-25%) and group effect (-50%, for subsidiaries): 
  annual (in EUR) 
  one-off (in EUR) 
Total for all companies  
under CSDDD as in force:  
  annual (in EUR) 
  one-off (in EUR) 

145 million 
43 million 

47 million 
13 million 

480 000 
140 000 

19 500 
5 500 

130 million 
37 million 

39 000 
11 000 

Total 

6000 

- 
- 

≈ 320 million 
≈   90 million 

Costs savings under the proposal: 

A number of elements of this proposal aim to reduce the regulatory burden of companies, 
both the direct and the indirect compliance costs. Based on the qualitative assessment of the 
expected costs savings in the previous sub-section, for the companies in scope, there are two 
main changes proposed that have the potential to substantially lower the implied substantive 
compliance costs:  

•  With  the reduction of due diligence obligations in the value chain beyond tier 1 
(direct) business partners, whereby full due diligence with respect to adverse impacts 

75 37% of large EU companies are subsidiaries of other EU companies and this ratio is higher in the case of larger 
companies (see CEPS’ Study on the Non-Financial Reporting Directive, prepared for the European Commission 
to  support  the  review  of  the  NFRD,  November  2020,  p.  35).  The  Netherlands-based  Centre  for  Research  on 
Multinational Corporations, SOMO, has recently found that companies under the scope of the CSDDD belong to 
only  about  3400  EU-based  company  groups  (https://www.somo.nl/csddd-datahub-reveals-law-covers-fewer-
than-3400-eu-based-corporate-groups/). Subsidiaries often belong to a group with dozens of other subsidiaries, 
and their value chains often overlap. 
76 For the top 300 companies, the impact assessment calculated with more than 10 times higher firm-level costs. 
77 Cost reductions at the subsidiary deriving from cost sharing will not increase the costs incurred by the parent 
company but the shifting of some tasks to the parent company will do so to some extent. 

42 

 
 
 
arising at the level of indirect business partners needs to be conducted only in cases 
where  the  company  has  plausible  information  about  the  existence  or  risks  of  such 
impacts, the related one-off as well as the recurring costs can significantly decrease, 
in particular due to the fact that supply chains often get complex beyond tier 1. It seems 
to be a reasonable assumption that the effect of this change on the one-off and average 
annual  recurring  costs  will  be  double  the  effect  of  introducing  the  risk-based  due 
diligence, i.e. the costs will be reduced by an additional 50%.  

•  With the decrease of the required frequency of periodic assessments and monitoring 
from every year to every 5 years, the related average annual costs can in theory be 
reduced by up to 80% (one-off costs will not decrease). Collecting and assessing data 
on impacts and on the effectiveness of the due diligence measures taken constitute a 
major part of all regularly recurring costs and other on-going costs could also become 
proportionately  lower.  However,  in  reality  the  reduction  will  be  lower  than  this 
percentage due to the requirement to do a partial ad hoc reassessment in certain cases, 
for instance whenever there are reasonable grounds to believe that new risks may arise 
or that the measures taken are no longer adequate. It seems to be reasonable to assume 
that costs savings would hypothetically be realized only during the first 1 or 2 years of 
the extended monitoring cycle, i.e. the annual incremental costs would be half to one-
third of those under the CSDDD as currently in force – on average, we will calculate 
with a 60% reduction.  

These two elements will decrease in particular the procedural costs (while transition costs, i.e. 
the costs of adjusting business practices to mitigate adverse impacts may also be affected). As 
explained in the previous sub-section, the cost savings owing to the less regular monitoring 
will  be  lower  in  absolute  terms  if  this  measure  is  combined  with  the  reduction  of  the  due 
diligence duties beyond tier 1.  

The following table calculates with a combined effect of these two changes and shows (i) the 
new incremental compliance cost estimations under the CSDDD if amended according to this 
proposal,  and  (ii)  the  estimated  aggregated  costs  savings  attributable  to  the  proposed 
amendments. Also accounting for the cumulative inflation (about 25%) since the collection of 
the data we relied on, the total burden reduction for companies under the scope amount to 
approximately  EUR  320  million  annual  cost  savings  and  EUR  60  million  initial  costs 
savings. 

Direct incremental procedural 
compliance costs (in EUR) 
  annual 
  one-off 

under the CSDDD 
as in force 

under the CSDDD 
if amended 

400 million 
115 million 

80 million 
55 million 

Total costs 
savings 
320 million 
60 million 

Regarding indirect costs that will be incurred by business partners in the value chains, many 
of the direct and indirect suppliers of in-scope companies are SMEs, and the Directive already 
contains some safeguards to prevent the shifting of the compliance burden onto them. An 

43 

 
 
additional important source of burden reduction for SMEs and SMCs is the ‘SME shield’, i.e. 
the  limitation  for  in-scope  companies  regarding  information  requests.  Furthermore,  cost 
sharing through joint industry initiatives and multi-stakeholder initiatives, as well as through 
the use of modern technologies, will also reduce the indirect compliance costs. Finally, EU 
and national support measures and funds could be mobilised to diminish the burden implied 
indirectly by the due diligence obligations. 

At any rate, the current proposal also aims to reduce further the indirect costs that smaller 
companies will bear. The largest reductions in such burdens will come from those elements 
that also imply a decrease in the direct compliance costs: less frequent periodic assessments 
and  limitation  of  general  due  diligence  steps  to  tier  1  business  partners.  As  regards 
limitation to tier 1, the reduction of the trickle-down effect on SME value chain partners arises 
from  the  fact  that,  where  the  company  does  not  have  reasonable  knowledge  about  possible 
adverse impacts, it will not carry out full due diligence, thus it may not check SME business 
partners at all. At the same time, these SME will not benefit from investments and capacity 
building either. In addition, even in these situations the company is required to use contractual 
cascading which may create some burden on SME business partners without them benefiting 
in return from investments and other forms of support. 

3.3. Issues presented on the EU Taxonomy Delegated Acts, draft amendments and next 
steps. 

3.3.1. Stakeholder views 

Over  the  past  two  years,  the  Commission  has  collected  feedback  from  financial  and  non-
financial  sector  stakeholders,  the  Platform  on  Sustainable  Finance,  Member  States  Expert 
Groups  and  the  European  Supervisory  Authorities  regarding  the  implementation  of  the  EU 
Taxonomy.78 The main challenges for its implementation listed were:   

a)  the  reporting  requirements  set  out  in  the  EU  Taxonomy  Disclosures  Delegated  Act, 
including  on  operational  expenditures  (OpEx),  the  Green  Asset  Ratio  (GAR),  the 
reporting templates and links with the CSRD; 

b)  the application of the DNSH criteria in the EU Taxonomy Climate and Environmental 

Delegated Acts. 

The text below outlines the issues presented by stakeholders for both categories.  

78 It should be noted that, the European Markets and Securities Authority (ESMA) has stated in its opinion on 
sustainable  investments,  that  the EU  Taxonomy should  become  the  sole,  common  reference  point  for  the 
assessment  of  sustainability  and  should  be  embedded  in  all  Sustainable  Finance  legislation. ESMA, Opinion 
Sustainable  Investments:  Facilitating  the  investor  journey,  ESMA36-1079078717-2587, 24  July  2024,  p. 17, 
available 
at: https://www.esma.europa.eu/sites/default/files/2024-07/ESMA36-1079078717-
2587_Opinion_on_the_functioning_of_the_Sustainable_Finance_Framework.pdf.  

44 

 
 
 
a)   Reporting requirements set out in the EU Taxonomy Disclosures Delegated Act 

The feedback received through the Commission’s Call for evidence on the rationalisation of 
reporting  requirements  in  2023  showed  that  stakeholders  repeatedly  mentioned  that  the 
implementation  of  the  EU  Taxonomy  technical  screening  criteria  binds  a  large  amount  of 
human and financial resources and is associated with a high burden for companies.79 

Recent industry feedback confirmed the main concerns identified in the Call for evidence and 
emphasised the need to improve the EU Taxonomy’s usefulness, usability, and effectiveness 
in supporting sustainable investments. 

To  reduce  the  reporting  burden,  some  stakeholders  suggested  making  EU  Taxonomy 
reporting  voluntary  or  introducing  more  proportionality  in  Taxonomy  reporting.  For 
instance,  they  proposed  to  limit  Taxonomy  reporting  to  only  the  core  business  activities, 
introduce the IFRS9 principle of “undue cost and effort” or define materiality thresholds for 
activities as to when technical screening criteria (or the DNSH criteria specifically) should be 
reported.  

Others proposed to review and adapt reporting indicators. In particular, the utility of the OpEx 
Key Performance Indicator (KPI) and the Green Asset Ratio (GAR) were put into question. 
Financial undertakings notably asked for an exclusion of SMEs, local governments general 
lending and non-EU exposures from the GAR denominator, or for a more comprehensive 
metric  comprising  not  only  Taxonomy-aligned,  but  also  other  sustainability-related 
assets. Banks further requested an exemption from checking DNSH and minimum safeguards 
for retail exposures and local governments. In addition, they suggested removing or simplifying 
the  trading  book  and  fees  and  commissions  KPI  for  banks.  Similarly,  some  (re-)insurance 
companies asked for a revision of the underwriting non-life (re-)insurance KPI, arguing for a 
use of the (re)insurers’ Taxonomy-eligible activities as the denominator rather than the total 
premiums.  

Certain  financial  and  non-financial  undertakings  further  requested  simplifications  and 
reductions  in  the  reporting  templates  set  out  in  Annexes  to  the  Taxonomy  Disclosures 
Delegated Act, in particular concerning the templates on gas and nuclear activities. 

Some non-financial undertakings repeated the findings of the Draghi report, which highlighted 
that  SMEs  are  affected  by  disclosure  requests  from  financial  undertakings  and  other 
companies. They, therefore, proposed to extend the EU Taxonomy to SMEs that are affected 
by this trickle-down effect through a simplified approach and tools (e.g. software solutions) 
that would allow for efficient and uniform calculation of sustainability scores.  

79 European  Commission,  Call  for  evidence  -  Rationalisation  of  reporting  requirements,  2023,  available  at: 
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13990-Administrative-burden-
rationalisation-of-reporting-requirements_en. 

45 

 
 
  
 
 
Another  set  of  suggestions  concerned  the  application  and  review  of  the  reporting  timeline. 
Stakeholders called for a postponement of the reporting requirements by one to two years to 
give  businesses  more  time  to  adapt,  as  well  as  to  eliminate  the  review  requirements  of 
Taxonomy-aligned activities in the future, i.e. grandfathering.  

Finally,  stakeholders  underlined 
the  need  for  a  stronger  connection  between  and 
interoperability of sustainable finance legislation, e.g. by merging the reporting or aligning 
the materiality assessment with the CSRD, developing a common definition of environmentally 
sustainable activities in the EU Taxonomy  and the SFDR, introducing a coherent definition 
and boundaries for transition finance and by working towards a single global reporting standard 
for Taxonomies together with ISSB and International Organization of Securities Commissions 
(IOSCO).  

b)  The  application  of  the  DNSH  criteria 

in  the  Taxonomy  Climate  and 

Environmental Delegated Acts 

After the first two years of reporting, evidence shows that companies have increasingly started 
using the EU Taxonomy to plan and report on their green investments. From  financial year 
2022 to financial year 2023, the total amount of Taxonomy-aligned CapEx increased by 34%, 
reaching a total volume of EUR 250 billion in financial year 2023.80 This figure has mainly 
been driven by the power and the car manufacturing sectors, which account for over 70% of 
total Taxonomy-aligned CapEx. 

Despite these positive developments, the gap between Taxonomy alignment and Taxonomy 
eligibility remains high. The figures show that the Taxonomy-aligned CapEx in relation to total 
CapEx was at 16%, whereas 56% of total CapEx was Taxonomy-eligible. The gap between the 
eligibility  and  alignment  was  most  significant  in  the  transport  sector  (56%),  followed  by 
construction, infrastructure and real estate (47%) and the health, biotechnology and chemicals 
sector (32%).81 The primary cause for non-alignment was failure to comply with the DNSH 
criteria.  This  is  in  line with  recent  industry  feedback,  which  highlights  the  need  for  further 
clarifications of terminologies, as well as for a revision of the DNSH criteria that are currently 
too burdensome to prove compliance.  

The Commission collected feedback on the implementation of the DNSH criteria from several 
sources,  such  as  meetings  with  stakeholders,  the Platform  on  Sustainable Finance,  Member 
States and through the EU Taxonomy Stakeholder Request Mechanism (SRM).82  

80 Platform on Sustainable Finance: Framework for Monitoring Capital Flows to Sustainable Investments: Final 
 report, forthcoming. 
81  EY,  Taxonomy  Barometer,  available  at:  https://www.ey.com/content/dam/ey-unified-site/ey-com/en-
gl/insights/assurance/documents/ey-gl-eu-taxonomy-barometer-09-2024.pdf. 
82 An  online  tool  that  allows  stakeholders  to  submit  their  feedback  on  new  activities  for  the  Taxonomy  and 
suggestions to change existing criteria in the Taxonomy. 

46 

 
 
 
 
The feedback showed that implementing the DNSH requirements is often highly complex and 
leads to time-consuming data preparation for companies. Stakeholders acknowledge that some 
uncertainties  have  already  been  addressed  by  the  Commission  through  Frequently  Asked 
Questions. However, they stress that certain uncertainties remain.83  

Several  private  sector  organisations  stressed  that  complexity,  data  availability  and 
interpretation of the DNSH criteria constitute the top three challenges for the uptake of the EU 
Taxonomy among financial institutions. Bearing in mind the complexity of the criteria, they 
requested a mechanism allowing for automatic compliance in case of application of relevant 
sectoral EU legislation or a consistency of the DNSH criteria with existing regulation. This 
was  further  supported  by  the  feedback  received  through  the  Call  for  evidence  on  the 
rationalisation of reporting requirements in 2023, where respondents called for a safe harbour 
approach  to  DNSH  reporting. 84One  stakeholder  suggested  to  waive  the  DNSH  criteria  for 
SMEs. 

As regards specific DNSH criteria that have proven difficult to implement, stakeholders have 
in  particular  pointed  to  the  generic  DNSH  criteria  for  pollution  prevention  and  control 
regarding use and presence of chemicals (Appendix C to the relevant Annexes to the Taxonomy 
Climate  and  Environmental  Delegated  Acts).  Despite  the  revisions  of  certain  Appendix  C 
provisions  in  2023,  a  large  number  of  industry  stakeholders  have  expressed  their  concerns 
regarding  the  disproportionate  and  burdensome  process  for  assessing  their  alignment  with 
Appendix  C, thereby  requesting further simplification measures. According to  the feedback 
received  through  the  SRM,  Appendix  C  sets  provisions  that  are  disproportionate  to  the 
environmental objective of pollution prevention and control and the definition of “significant 
harm”  laid  down  in  the  Taxonomy  Regulation.  Stakeholders  also  claimed  that  certain 
provisions are far beyond compliance with existing relevant regulatory requirements under EU 
legislation,  such  as  REACH  Regulation.85 The  sectors  and  activities  for  which  Appendix  C 
poses  implementation  issues  are  often  critical  for  the  green  transition,  including  the 
manufacturing of solar PV, batteries, variable speed drivers, and heat pumps, among others. 
To facilitate the compliance with Appendix C and reduce excessive administrative burdens, 
stakeholders  requested  to  align  Appendix  C  provisions  with  existing  relevant  EU 

83 SFB,  Sustainable  Finance  Advisory  Committee  publishes  its  compendium  for  the  20th  legislative  period, 
Funding our tomorrow – How private capital makes the difference for Germany’s transformation, 2025, available 
at:  https://sustainable-finance-beirat.de/wp-content/uploads/2021/02/210224_SFB_Report_PressRelease.pdf.   
84 European  Commission,  Call  for  evidence  -  Rationalisation  of  reporting  requirements,  2023,  available  at: 
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13990-Administrative-burden-
rationalisation-of-reporting-requirements_en. 
85  Regulation  (EC)  No  1907/2006  of  the  European  Parliament  and  of  the  Council  of  18  December  2006  
concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH),  establishing a 
European  Chemicals  Agency,  amending  Directive  1999/45/EC  and  repealing  Council    Regulation  (EEC)  No 
793/93 and Commission Regulation (EC) No 1488/94 as well as Council  Directive 76/769/EEC and Commission 
Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC, OJ L 396, 30.12.2006, p. 1.  

47 

 
 
 
environmental  law,  including  by  allowing  the  application  of  certain  exemptions  enshrined 
under EU secondary legislation that are referenced in Appendix C (e.g. RoHS Directive).86    

3.3.2. Draft amendments  

As outlined in Section 3.1.2. (a) of this Staff Working Document, the scope of undertakings 
having to report on sustainability information, including the eligibility and alignment with the 
EU Taxonomy, was changed. With the new scope of the CSRD, undertakings with less than 
1000 employees or with less than EUR 450 million net turnover are excluded from the reporting 
requirements. Nevertheless, as explained in Section 3.1.2. (c) of this SWD, the insertion of the 
new Articles 19b and 29aa requires undertakings or groups with a net turnover not exceeding 
EUR 450 000 000 that claim Taxonomy-alignment or partial Taxonomy-alignment to report 
on the turnover and CapEx KPIs, and may choose to disclose their OpEx KPIs 

On  top  of  the  changes  in  scope  of  reporting  undertakings,  the  Commission  proposes 
amendments  to  the  Taxonomy  Disclosures,  Climate  and  Environmental  Delegated  Acts  to 
respond to the feedback received from stakeholders outlined above. These amendments are part 
of a draft Delegated Act, which will be published on the ’Have your say’ portal for a four-week 
feedback  period.  In  accordance  with  Articles  20  and  24  of  the  Taxonomy  Regulation,  the 
Commission  will  also  consult  the  Platform  on  Sustainable  Finance  and  the  Member  States 
Expert  Group  on  this  draft.  Following  the  consultations,  the  Commission  will  assess  the 
feedback received and explain how it took it into account  in  the Explanatory memorandum 
accompanying the Delegated Act.  

c)  Draft amendments to the Taxonomy Disclosures Delegated Act  

The  draft  amendments  to  the  Taxonomy  Disclosures  Delegated  Act  provide  further 
flexibility to undertakings in scope for the reporting on their Taxonomy alignment. In particular, 
the amendments to Articles 2, 3, 4, 5 and 6 to Delegated Regulation 2021/2178 aim to give 
non-financial  undertakings,  asset  managers,  credit  institutions,  investment  firms,  as  well  as 
insurance  and  reinsurance  undertakings  the  flexibility  to  assess  Taxonomy-eligibility  and 
Taxonomy-alignment only for activities that are financially material for their business. A lack 
of materiality will be assumed if the cumulative value of activities is below 10% of the KPIs’ 
denominators. Through the introduction of this de minimis threshold large undertakings in 
the  scope  with  a  variety  of  activities  will  be  able  to  focus  their  in-depth  assessments  of 
Taxonomy alignment only on those activities that are material for their revenues, capital  or 
operational expenditures. For financial undertakings, this rule would permit them not to assess 
10% of their assets financing while focusing the assessment on the material assets Undertakings 
should  report  separately  non-material  activities  at  aggregated  and  individual  levels.  This  is 
important to provide investors and the public with a complete overview of which activities are 
considered  as  non-material.  In  addition,  it  should  be  avoided  that,  within  the  non-material 

86 Directive 2011/65/EU of the European Parliament and of the Council of 8 June 2011 on the restriction of the 
use of certain hazardous substances in electrical and electronic equipment, OJ L 174, 1.7.2011, p. 88.  

48 

 
 
 
activities,  undertakings  include  harmful  activities  that  would  contradict  the  spirit  of  the 
Taxonomy Regulation. This ensures a more proportionate reporting exercise focused on core 
business  activities  while  avoiding  unnecessary  costs  for  the  assessment  of  non-material 
activities. 

The draft amendments furthermore introduce the option to additionally report on their activities 
which fulfil only certain requirements of Articles 3 and 9 of the Taxonomy Regulation (partial 
Taxonomy-alignment) for large undertakings referred to in Article 19a(1) of the Accounting 
Directive, which have a net turnover exceeding EUR 450 million. Such reporting on partial 
alignment would provide additional flexibility and foster a gradual environmental transition of 
activities overtime, in line with the aim to scale up transition finance. 

In  addition,  the  draft  amendments  exclude  from  the  denominator  of  the  KPIs  applied  by 
financial  institutions  those  from  their  exposures  that  relate  to  undertakings  which  are  not 
subject to the CSRD. This exclusion applies until the revision of the Disclosures Delegated Act. 
Also, the application of the Trading Book KPI and the Fees and Commissions KPI for certain 
financial institutions is postponed until 2027.Moreover, the draft amendments to Annexes II, 
IV, VI, VIII and X to the Disclosures Delegated Regulation present a significant simplification 
of  the  reporting  templates  for  Taxonomy  alignment  of  companies,  asset  managers,  credit 
institutions,  investment  firms,  and  insurance  and  reinsurance  companies.  In  specific,  the 
templates are amended by removing the requirements related to:  

• 
reporting in separate rows the portions of activity aligning with different objectives, 
•  separately reporting on DNSH and minimum safeguards, any contribution to multiple 

objectives, 
reporting explicit information for non-aligned activities, and 
reporting separately on fossil gas and nuclear activities. 

• 
• 

49 

 
 
 
Figure  1:  Old  template  for  turnover  Taxonomy  reporting  for  non-financial  undertakings,  as  included  in  the  Taxonomy 
Disclosures Delegated Act 

Figure  2:  New  template  for  turnover  Taxonomy  reporting  of  non-financial  undertakings,  as  proposed  with  the  Omnibus 
simplification package 

The Commission calculated that the simplification of templates described under the third bullet 
point alone will result in a reduction of reported data points for non-financial companies (in 
the case of one Taxonomy-aligned activity) from 78 to 27, which is a 66% reduction.  

50 

 
 
 
 
In the case of credit institutions, the simplification of templates will result in a reduction of 
reported  data  points  of  89%  (from  8472  to  953,  where  the  remaining  data  points  include: 
Summary data, Assets for GAR, Sector information, GAR stock, GAR flow, FinGuar, AuM, 
Fees  and  commissions  and  Trading  book  data).  Similarly,  the  reporting  templates  of  other 
financial undertakings will be considerably reduced. 

Furthermore, the suppression of the separate and duplicative templates on the performance and 
exposures to the fossil gas and nuclear activities will result in a tangible reduction of reported 
data points. These templates were considered burdensome by reporting entities, especially in 
cases of limited exposures to those sectors where many data points needed to be filled with ‘0’. 

d)  Draft amendments to the Taxonomy Climate and Environmental Delegated Acts 

The  draft  amendments  to  the  Taxonomy  Climate  and  Environmental  Delegated  Acts 
address  implementation  issues  arising  from  compliance  with  Appendix  C  to  clarify  the 
application of certain exemptions from EU environmental legislation referenced in the criteria.  
The  Delegated  Act  subject  to  public  consultation  includes  two  alternative  options  to  gather 
feedback on from stakeholders:  

•  Option 1 repeals the provision of the additional paragraph after point (f) of Appendix 
C concerning substances (on their own, in mixtures, or in an article) meeting the criteria 
laid down in Article 57 of Regulation (EC) No 1907/2006 and that were identified in 
accordance with Article 59(1) of that Regulation; or 

•  Option 2 replaces the provision of the additional paragraph after point (f) of Appendix 
C concerning substances (on their own, in mixtures, or in an article) meeting the criteria 
laid down in Article 57 of Regulation (EC) No 1907/2006 and identified in accordance 
with Article 59(1) of that Regulation.The new paragraph that is proposed reduces the 
scope  to  only  the  substances  having  a  ‘harmonised  classification’  under  Regulation 
(EC) No 1272/2008  on the classification,  labelling  and  packaging  of substances  and 
mixtures (CLP Regulation)87 and to reduce the obligation on the industry to only verify 
existence of an alternative substance. This alternative option would deliver a reduction 
of burden  as the maximum number of substances to be covered would be limited to 
approximately 1 400 substances. 

Both options are intended to enhance the usability, legal clarity and consistency of Appendix 
C. Clarifying the application of certain exemptions enshrined in EU environmental law that are 
referenced in Appendix C will provide better alignment with the existing EU acquis and, hence, 
avoid  unnecessary  burdens  on  reporting  entities  assessing  their  alignment  with  those 
provisions. The repeal (Option 1) or replacement (Option 2) of the additional paragraph after 
point (f) of Appendix C will result in a significant reduction of burden and costs of compliance 
on  reporting  entities.  The  additional  paragraph  after  point  (f)  requires  reporting  entities  to 

87 Regulation (EC) No 1272/2008 of the European Parliament and of the Council of 16 December 2008 on 
classification, labelling and packaging of substances and mixtures, amending and repealing Directives 
67/548/EEC and 1999/45/EC, and amending Regulation (EC) No 1907/2006, OJ L 353, 31.12.2008, p. 1–1355. 

51 

 
 
 
assess  the  use  and  presence  of  substances  that  have  been  self-classified  according  to  the 
Classification, Labelling and Packaging (CLP) Regulation88 and that do not have a so-called 
“harmonised  classification”.  The  European  Chemical  Agency’s  Classification  &  Labelling 
database  includes  approximately  10  000  substances  without  harmonised  classification. 
Repealing (Option 1) or replacing of (Option 2) the additional paragraph after point (f) will 
substantially  reduce  the  number  of  substances  to  be  assessed  by  limiting  the  alignment 
assessment  of  reporting  entities  to  substances  that  have  a  harmonised  classification  and  are 
included in the candidate list of substances of very high concern for authorisation published by 
the  European  Chemicals  Agency,  in  accordance  with  Article  59(10)  of  the  REACH 
Regulation.89 

3.3.3. Estimated cost savings 

The proposal would deliver significant savings also for Taxonomy reporting. The bulk of these 
cost savings stem from the reduction in the CSRD scope, as a result of which the majority of 
undertakings would no longer be required to report on their Taxonomy alignment. The cost 
savings of the scope reduction were estimated in Section 3.1.3 above.  

This section presents estimates of the cost savings of the draft amendments to the Taxonomy 
Delegated Acts that would reduce reporting costs for undertakings remaining in the scope. All 
undertakings  remaining  in  scope  would  benefit  from  the  simplification  of  the  reporting 
templates and from the materiality provision that exempts them from assessing their activities 
that  are  not  financially  material.  Assuming  that  these  changes  reduce  average  Taxonomy 
reporting costs by 25% and applying this to the estimated number of undertakings required to 
report  on  their  Taxonomy  alignment  (as  set  out  in  Section  3.1.3),90 the  proposed  change  is 
estimated to  generate total  recurrent  cost  savings of  about  EUR  0.1 billion per year for the 
undertakings  remaining  in  scope.  Overall,  based  on  these  assumptions,  and  looking  at  the 
impact  only  of  the  taxonomy-related  simplifications  (simplified  template  and  de  minimis 
provision), the total recurrent cost savings of the proposed measures would amount to cost 
savings  of  about  EUR  0.1  billion  per  year.  This  is  excluding  the  Taxonomy-related  cost 
savings  of  about  EUR  0.8  billion  that  result  from  the  scope  reduction  which  exempts  the 
majority of undertakings from Taxonomy reporting.  

88   Regulation  (EC)  No  1272/2008  of  the  European  Parliament  and  of  the  Council  of  16  December  2008  on 
classification,  labelling  and  packaging  of  substances  and  mixtures,  amending  and  repealing  Directives 
67/548/EEC and 1999/45/EC, and amending Regulation (EC) No 1907/2006, OJ L 353, 31.12.2008, p. 1. 
89 Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning 
the  Registration,  Evaluation,  Authorisation  and  Restriction  of  Chemicals  (REACH),  establishing  a  European 
Chemicals  Agency,  amending  Directive  1999/45/EC  and  repealing  Council  Regulation  (EEC)  No  793/93  and 
Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 
91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC,OJ L 396, 30.12.2006, p. 1. 
90 The average reporting cost is again assumed to be the mid-point of the costs from the previous impact 
assessment (EUR 35 000), and the number of companies required to report mandatorily on their taxonomy 
alignment is estimated at about 7 000 (based on the assumptions in section 3.1.3). In addition, we assume that 
only 80% of these companies have some taxonomy-eligible activities and hence would avoid costs (benefit from 
the simplifications).  

52 

 
 
 
3.3.4. Future work 

The burden reduction and simplification measures referred to above should be prioritised and 
distinguished from the ongoing reviews of the Taxonomy Disclosures Delegated Act, as well 
as the Taxonomy Climate and Environmental Delegated Acts, which require more time and 
policy assessment and that will be tabled separately.  

The future review of the Disclosures Delegated Act will consider options for more substantive 
changes in the current reporting framework, in particular on the issues related to the current 
GAR.  

Moreover, the Commission is committed to review the Taxonomy Climate and Environmental 
Delegated  Acts  to  simplify  the  technical  screening  criteria  included  in  the  Delegated  Acts, 
ensure  coherence,  reflect  policy  and  technological  developments  and  better  reflect 
documentation that can be used to show compliance with the criteria.  

Regarding the simplification of the technical screening criteria, the Commission will aim to 
assess  whether  there  is  a  sufficiently  material  risk  of  significant  harm  to  a  specific 
environmental objective from the given activity (taking into account the requirements of the 
Taxonomy Regulation and a risk-based application of the precautionary principle). Where there 
is not a material risk of significant harm, the Commission will propose to not include DNSH 
criteria for that environmental objective (i.e. marking the corresponding field for the DNSH 
for  this  objective  as  ‘not  applicable’  in  the  Taxonomy  Delegated  Acts).  Where  the  DNSH 
criteria are considered material for a given objective, the Commission will assess the existing 
criteria from the point of view of their clarity, the availability of evidence/data to demonstrate 
compliance, the cost of gathering this evidence/data and the applicability of the criteria in the 
international context. Where the DNSH criteria of an activity are too complex to implement 
taking into account the aspects outlined above, they will be simplified. Lastly, the review would 
aim at aligning the DNSH criteria with existing EU legislation, where applicable and relevant. 

4. Conclusions – global impact of the legislative package 

The  measures  presented  in  this  Omnibus  simplification  package  adjust  the  scope  and  adapt 
certain requirements laid down in the Accounting Directive including the CSRD, the CSDDD, 
and the Taxonomy Disclosures, Climate and Environmental Delegated Acts. In particular, the 
changes  align  the  size  of  the  reporting  undertakings  and  reduces  the  burden  of  potential 
duplicative reporting requirements, i.e. undertakings subject to both the CSRD and the CSDDD 
are not required by the CSDDD to report any information additional to what they are required 
to  report  under  the  CSRD.  In  addition,  the  measures  ensure  that  reporting  or  due  diligence 
obligations for large  undertakings  do not  burden  SMEs in  their value chains. The proposed 
provisions on the EU Taxonomy reporting, on the one hand, reduce the reporting burden on 
certain  undertakings by  making the reporting of  Taxonomy-alignment optional,  and, on the 

53 

 
 
other hand, put a stronger emphasis on transition finance by introducing the option of reporting 
on partial Taxonomy-alignment for all undertakings.    

As outlined in Sub-sections 3.1.3., 3.2.3. and 3.3.3. of this SWD, the proposed measures for 
this Omnibus simplification package are likely to lead to significant savings for financial and 
non-financial  undertakings  in  relation  to  each  act  concerned.  Based  on  the  estimations 
presented in this document: 

•  As regards the proposed amendments to the CSRD/ESRS, total annual cost savings of 
the changes in the CSRD scope and future modifications to the ESRS could be about 
EUR 4.4 billion. This includes annual cost savings resulting from the exemptions from 
taxonomy reporting as a result of the reduced CSRD scope (EUR 0.8 billion).   

On top of those recurrent savings, there would be the one-off cost savings in relation to 
setting up the reporting and assurance processes that would be avoided for exempted 
firms (i.e. about EUR 1.6 billion in relation to CSRD/ESRS and EUR 0.9 billion for 
taxonomy). 

The proposed changes have been estimated to result in  a reduction in the number of 
undertakings in scope of the CSRD of about 80%.  

•  Additional  costs  savings  are  expected  from  the  changes  to  the  CSDDD.  For  the 
companies in the scope this could amount to approximately EUR 0.32 billion recurrent 
costs  per  year  and  EUR  60  million  of  savings  in  initial  costs,  owing  mainly  to  the 
decreased frequency of periodic monitoring and the reduced due diligence obligations 
beyond tier-1 business partners. 

These amendments are expected also to decrease the indirect costs that will be incurred 
by  business  partners  in  the  value  chains.  In  addition,  the  safeguards  included  in  the 
CSDDD for SMEs to prevent the shifting of the compliance burden on them will now 
be significantly reinforced by the ‘SME shield’, allowing for costs savings for SME 
and smaller midcap business partners. 

•  As  regards  the  proposed  changes  to  taxonomy  reporting  (including  the  template 
simplification and the de minimis provision), the total recurrent cost savings could be 
about EUR 0.1 billion per year.  

These estimated figures for some of the main proposed measures give an indication of the order 
of magnitude of savings that these amendments can generate, despite applying to only a small 
share of the EU’s enterprise population.  

Beyond  the  monetary  impact,  there  are  additional  benefits  that  cannot  be  quantified.  These 
largely concern clearer, more coherent and simpler legal obligations and more predictable legal 

54 

 
 
 
  
risks for undertakings in scope of the legislation subject to this Omnibus simplification package. 
The Commission Services will monitor and assess the effects of this simplification package.  

55