CSRD and ESRS: the Updated Framework After the Omnibus Package

What the Original CSRD Was

The Corporate Sustainability Reporting Directive (CSRD), which entered into force in January 2023, had introduced sustainability reporting obligations progressively extended to a growing number of European companies. Subject companies had to report their sustainability performance according to ESRS (European Sustainability Reporting Standards), developed by EFRAG, with mandatory verification by an accredited external auditor.

What the Omnibus Package Changed

With Directive (EU) 2026/470, the CSRD application thresholds have been drastically raised. The reporting obligation now applies exclusively to companies that exceed both of the following criteria simultaneously:

• More than 1,000 employees (annual average)

• Net turnover exceeding €450 million

In the original version of the CSRD, the obligation was triggered for large companies that met at least two of the three classic criteria — with much lower thresholds (250 employees, €40M turnover, €20M assets). The reform excludes approximately 80–90% of the companies initially involved.

Listed SMEs on European regulated markets, originally included in the third phase, are also excluded from the full CSRD obligation. Listed SMEs that fall within the definition of public interest entities (banks, insurance companies and similar) remain subject.

For companies headquartered outside the EU, the obligation is triggered if net turnover generated in the Union exceeds €450 million.

The New Deadlines

The timelines have been completely reset:

• Wave 1 (large companies already subject to the previous NFRD — listed companies, banks, insurance companies with >500 employees): already obligated from fiscal year 2024, publication 2025. The Omnibus introduced simplifications but did not eliminate the obligation

• Large companies (>1,000 emp. AND >€450M turnover): obligation from fiscal year 2027, first publication in 2028

• Listed SMEs (public interest entities): obligation from fiscal year 2028, first publication in 2029

ESRS Standards: What Changes

The ESRS have been significantly simplified. The main changes:

• Reduction of approximately 61% of mandatory information compared to the original version

• Sector-specific standards become optional

• The revised ESRS will enter into force with the Commission delegated act, expected by August 2026, and will apply from fiscal year 2027

• Remains mandatory for all: ESRS 2 (general information) and the double materiality analysis

SME Protection in the Supply Chain

One of the most relevant innovations of the Omnibus is the concept of the "protected enterprise": every company with fewer than 1,000 employees that is in the value chain of a company subject to CSRD acquires the legal right to refuse ESG data requests that go beyond what is provided for by the voluntary standards for SMEs (VSME). Large companies are obligated to inform their suppliers of this right.

The VSME standards must be published by the Commission by 19 July 2026. Until that date a temporary regulatory gap exists: procurement managers of large companies tend to send their ESG questionnaires in advance precisely in the months when the protection is not yet operational. SME suppliers are therefore advised to structurally prepare for the collection of sustainability data, regardless of the formal obligation.

Double Materiality: The Concept Remains Central

Despite the simplifications, the concept of double materiality remains at the heart of the CSRD: companies must report both the impact of their activities on the environment and society (impact materiality), and the risks and opportunities that sustainability factors pose for the business (financial materiality). The double materiality analysis is the mandatory starting point for determining which ESRS standards apply to the specific company.

The Real Impact on SMEs: What Changes in Practice

The reform does not eliminate ESG pressure on SMEs — it redefines it. On the formal level, the vast majority of SMEs exit the direct obligation. On the substantive level, supply chain pressure remains, albeit more proportionate.

In practice:

• SMEs not subject to CSRD do not need to prepare a full ESG report according to ESRS

• SME suppliers of large subject companies may be asked to provide ESG data, but not beyond the VSME perimeter

• Voluntary ESG reporting according to VSME becomes a strategic tool for SMEs that want to manage relationships with large clients and access financing

• Pressure from banks, investors and public tenders towards ESG transparency does not diminish with the Omnibus

• Large companies subject to CSRD must still report Scope 3 emissions, which include those of suppliers — supply chain pressure therefore remains concrete and measurable

The SME Roadmap for 2026

Immediately:

• Verify whether you fall within the new direct application thresholds (>1,000 employees AND >€450M turnover)

• Monitor ESG requests from major corporate clients — VSME protection is not yet operational

• Begin structured collection of basic emissions data (at least Scope 1 and 2)

By July 2026:

• Follow the publication of VSME standards by the Commission

• Evaluate voluntary adoption of VSME to respond in a structured way to supply chain requests

Looking ahead:

• Integrate ESG data collection into ordinary business processes

• Build a carbon strategy that also covers Scope 3 emissions

• From 2031 the European Commission will review CSRD thresholds and evaluate sector-specific obligations for high-risk industries — preparing in advance pays off