CSRD and Sustainability Reporting | Balancing Simplification and Ambition

Over the past few months, phrases like "EU Omnibus," "simplification package," "stop-the-clock," "content directive", and "quick-fix" have dominated industry conversations, making what was intended to be introduced in the spirit of simplification, not so simple to follow.

The Omnibus Simplification Package was intended to align with recommendations of the Draghi report on European Competitiveness, through the EU’s efforts to streamline and simplify intertwined regulations, including the CSRD, the EU Taxonomy, and the planned Corporate Sustainability Due Diligence Directive (CS3D). The European Commission indicated that these measures would eliminate duplication, reduce compliance costs, and create a more efficient reporting system, while also supporting sustainable competitiveness, all of which would be broadly welcomed and indeed needed.

Sustainability has grown from a regulatory necessity into a strategic imperative, with sustainable finance as the engine to drive the transition. The Draghi Report highlights that Europe’s competitiveness relies on mobilising large-scale investment to drive the digital and green transitions. Robust and reliable data remains an essential ingredient to inform investment decisions and accelerate the flow of capital to the low carbon economy, a key challenge that the EU’s sustainability reporting framework was designed to solve. However, this may be further set back given some of the key Omnibus proposals include raising the CSRD employee threshold to 1,000, potentially reducing the number of in-scope companies who would be required to report by 80%, and the CS3D threshold to 5,000 employees. The Council has also proposed increasing the net turnover threshold for CSRD to EUR 450 million and to EUR 1.5 billion for CS3D. Some companies, including those in high-emission sectors who are currently covered by the CSRD, may become exempt, reducing access to sustainability data. 

The widening of data gap, already a challenge, could hinder investors’ ability to make informed investment decisions and accelerate capital flow, ultimately slowing the much-needed decarbonisation progress made to date. This is particularly concerning as in 2024, total losses from natural disasters amounted to USD 320 billion, with 93% attributed to weather events.  At the same time, the EU faces an annual funding gap estimated between €750bn and €800bn. 

The European Central Bank (ECB) has cautioned against significantly limiting reporting obligations, advocating for continued mandatory sustainability reporting for all significant institutions, and at least some requirements for companies with 500–1,000 employees. The ECB warns that a significant reduction could undermine transparency and risk management, hampering broader climate objectives.
These proposals are still under negotiation. The European Parliament is expected to adopt its position by October 2025, with inter-institutional negotiations to follow.

Navigating the transition of sustainability reporting

Beyond scope and timeline adjustments, the EU will also revise the first set of the European Sustainability Reporting Standards (ESRS). The first CSRD reports, published in 2025, have revealed shortcoming in interpretation, application, and duplication, which should be addressed to reduce complexity, enhance usability and interoperability with international standards. That said, careful consideration must be given to maintain essential data to support the green transition, especially on climate and biodiversity, as emphasised by the ECB.  

The European Financial Reporting Advisory Group is leading the technical simplification of the ESRS, with a public consultation period on ESRS exposure drafts running from end of July to end of September 2025, before submitting their technical advice to the European Commission by November 2025.

Interim measures: ‘Stop-the-Clock’ and ‘Quick-Fix’ 

As the sustainability reporting landscape continue to evolve, the European Commission has introduced two key interim measures to ease the transition.  

• The ‘Stop-the-Clock’ Directive delays CSRD requirements for large companies (‘wave 2’) and listed SMEs (‘wave 3’) by two years. Ireland has already transposed these changes , meaning the second and third waves of CSRD reporting will now begin in 2028 and 2029, respectively, for those that will remain within scope. In addition, the new amendments in the Irish law clarify the scope and definition of ‘applicable entities’, align the definition of turnover with that of the EU Accounting Directive and clarify subsidiary exemptions.  
• The “Quick-Fix” Delegated Act focuses on wave 1 companies, who will continue to report this year, by postponing certain ESRS requirements. Companies can defer disclosures on anticipated financial effects through 2026. Larger firms (over 750 employees) receive transitional exemptions for areas like biodiversity, value chain workers, affected communities, and consumers for two years. Existing workforce transitional exemptions, including scope 3 emissions for smaller companies, are also extended by 2 years.

Though these delays offer temporary relief, they must be carefully managed given rising stakeholder expectations, regulatory scrutiny, and the need for credible data.

The path forward 

As interim measures unfold, companies should continue to monitor and navigate regulatory developments, adapt their reporting roadmaps and transform their operating models to ensure long-term readiness. Their proactive and adaptable approach will be essential in shaping Europe’s green and digital transformation.

If simplification is executed carefully, without compromising the quality and integrity of reported information, the EU can turn sustainability reporting from a compliance burden into an investment catalyst. This will empower companies and financial markets to foster innovation, create employment, and capture new emerging markets, all while accelerating the sustainable transition.

This article is the view of the author and does not necessarily reflect IoD Ireland’s policy or position.