Update from Brussels

At EU level, three key pillars of sustainability regulation are currently being adjusted:
the CSRD (sustainability reporting), the CSDDD (due diligence obligations in the value chain) and the EU Taxonomy (green finance).

The political objective: relief, especially for medium‑sized companies, without abandoning the strategic direction of the Green Deal. For companies, this means: timelines, thresholds and detailed requirements are shifting.

At the same time, one thing remains unchanged:
Banks, investors and major customers need reliable ESG data – along the entire value chain.

The focus of this blog:
What does this mean for Wave‑2 companies (all those that were originally supposed to report from 2025 – now scheduled to start with FY 2027) – and how do the options differ depending on company size?

1. CSRD – postponed, simplified, but not abolished

Mit der Stop‑the‑Clock‑Richtlinie wurden die Einstiegszeitpunkte für die verpflichtende Berichterstattung  verschoben:

• Wave 1 (bisherige NFRD‑PIEs): erste CSRD‑Berichte über GJ 2024
• Wave 2 (übrige große Unternehmen, sofern künftig im CSRD‑Scope): erste Berichte über GJ 2027

Quick Fix for ESRS: easing the entry

On 10.11.2025, Delegated Regulation (EU) 2025/1416 (“Quick Fix”) was published in the Official Journal of the EU and entered into force on 13.11.2025 (the 3rd day after publication). It applies to financial years beginning on or after 1 January 2025 and introduces targeted reliefs/transitional provisions for first‑wave companies (reporting on FY 2024):

• Disclosures on anticipated financial effects may remain qualitative until FY 2027 and initially.
• Biodiversity (ESRS E4) and the social value chain (ESRS S2–S4) can be built up gradually over several years.

Omnibus package: focusing rather than rolling back

The omnibus package (“debureaucratization directive”) is intended to further focus the CSRD:

• On 9.12.2025, the Council and Parliament reached a provisional trilogue agreement on the “Omnibus I” Directive. According to this, the CSRD should in future apply only to EU companies with on average more than 1,000 employees and net annual turnover of more than EUR 450 million; for non‑EU companies, the threshold is more than EUR 450 million turnover in the EU. Listed SMEs are to be removed from the scope; smaller companies (fewer than 1,000 employees) are also to be protected from excessive information requirements in the value chain (“Value Chain Cap”/Right‑to‑Refuse).

• The audit obligations are also to be specified: The deadline for EU‑wide harmonized limited assurance standards is to be postponed to 1.07.2027; at the same time, the option of later introducing EU standards for reasonable assurance is to be removed – in practice this means that it will remain permanently at limited assurance. In addition, digital tools (portal with templates/guidance) are to facilitate application.

• In parallel, EFRAG submitted its technical advice on simplified ESRS to the EU Commission on 3.12.2025 (including a reduction in mandatory data points by 61%) and presented the drafts on 4.12.2025 (including the launch of the ESRS Knowledge Hub).

VSME standard

For non‑capital‑market‑oriented SMEs (“VSME”), the Commission recommended a voluntary reporting standard in July 2025. It is intended to enable SMEs to provide banks and major customers with structured ESG information without having to comply with the full complexity of the CSRD. This standard is also gaining importance for all companies below the reporting threshold.

2. CSDDD – supply chain due diligence with high thresholds

The Corporate Sustainability Due Diligence Directive (CSDDD) regulates companies’ human rights and environmental due diligence obligations in their value chain.

With Stop‑the‑Clock:

• the transposition deadline for the Member States was initially postponed to 26.07.2027; under the Omnibus I agreement of 9.12.2025, it is to be extended by a further year to 26.07.2028,

• the full start of the obligations for most companies is postponed to 26.07.2029.

Initial obligations – if Omnibus I is formally adopted – will only apply to very large companies (> 5,000 employees and > EUR 1.5 billion net annual turnover; including a corresponding non‑EU threshold). In addition, climate transition plans are to be removed as a standalone obligation and sanctions capped (including a maximum of 3% of worldwide net turnover).

For most Terra clients this means: no direct CSDDD obligation, but indirect impact as suppliers to large corporations via contractual clauses, risk analyses and complaints mechanisms.

3. EU Taxonomy – simplified but central green finance logic

The EU Taxonomy remains the reference framework for “green” activities – in particular for banks, investors and funding bodies.

• A delegated act of 4.7.2025 simplified reporting, including through:
• • a de minimis threshold (around 10%), below which activities do not need to be assessed in detail for taxonomy alignment,
  • revised templates and more precise DNSH (Do No Significant Harm) requirements.
• Under the omnibus framework, the taxonomy obligation is to be closely linked in future to the reduced CSRD scope – those who remain subject to the CSRD will generally also report taxonomy indicators.

For “green investments”, the taxonomy therefore remains clearly relevant, even if the scope of reporting obligations decreases.

4. Banks: ESG remains relevant for lending – regardless of the CSRD

The EBA guidelines on the management of ESG risks require banks, from 11.1.2026 onwards (from 2027 for small/non‑complex institutions), to integrate ESG risks into strategy, lending, pricing and collateral valuation.

This means:

• Banks must screen their portfolios for climate, transition and other ESG risks – particularly for clients with turnover of more than EUR 50 million.
• To do so, they need structured ESG data from their clients – including from companies that are not (or are no longer) subject to the CSRD.

ESG data requirements will thus become standard through lending processes and financing, regardless of the formal CSRD scope.

5. What is to be expected when?

By the end of 2025 (EU level)

• The “Stop‑the‑Clock” Directive (EU) 2025/794 has already been adopted – this is the “time component” of Omnibus I – and must be transposed into national law by the end of the year.

• Omnibus I (Content Directive):

  • Provisional trilogue agreement on 9.12.2025 (JURI/Council).
  • COREPER confirmation and letter of intent to EP JURI on 10.12.2025.
  • JURI vote in the EP on 11.12.2025; plenary vote and final Council approval are (as of mid‑Dec.) planned.
    In terms of content: CSRD scope > 1,000 employees AND > EUR 450 million turnover; CSDDD scope > 5,000 employees AND > EUR 1.5 billion turnover; including Value Chain Cap/Right‑to‑Refuse, removal of the reasonable‑assurance perspective, postponement of limited‑assurance standards to 1.07.2027.

• EFRAG / ESRS simplification:

  • EFRAG submitted its drafts/technical advice on simplified ESRS to the EU Commission on 3.12.2025.
  • On 4.12.2025, EFRAG presented the drafts at a conference and launched the ESRS Knowledge Hub.

In 2026

• Formal adoption of Omnibus I (Content Directive):
  After approval by the EP plenary and the Council, publication in the Official Journal of the EU will follow, then transposition into national law. As of mid‑December 2025, finalization is expected at the end of 2025 or beginning of 2026.

• New ESRS delegated act (simplified ESRS):
  Based on the EFRAG technical advice of 3.12.2025, the EU Commission will prepare a delegated act revising the first ESRS set. Objective: significantly fewer mandatory data points (EFRAG: −61%) with the principle of double materiality unchanged, plus more transitional/relief provisions.

From 2027/2028

• CSRD Wave‑2 start:
  First reports for FY 2027 (publication 2028) – for large companies that remain within the scope under the new CSRD rules (Omnibus I).

• CSDDD
  National implementation in all Member States by 26.07.2028; application in principle from 26.07.2029 (with exceptions, e.g. for Art. 16 from financial years starting 1.1.2030), provided Omnibus I is adopted as agreed.

6. Germany, Austria, Italy – overview of national implementation

Germany

CSRD Implementation Act (CSRD‑UmsG):

• Government draft of 3.09.2025 (implementation of the CSRD including Stop‑the‑Clock).
• Parliamentary procedure is ongoing.

Expectation:

• Adoption by 2026 at the latest, with

• CSRD obligation for Wave‑1 companies in accordance with the EU timeline,

  • national reliefs for certain large companies (e.g. 500–1,000 employees) in 2025/26,
  • Wave‑2 start for FY 2027 in line with Stop‑the‑Clock.

Austria

NaBeG – Sustainability Reporting Act:

• Consultation draft on 13.01.2025, end of consultation on 10.02.2025.
• Adopted by the Council of Ministers on 18.11.2025 and submitted to the National Council as a government bill; referral to the Justice Committee with committee consultation.

Expectation:

• Adoption in the course of 2026, entry into force shortly afterwards,
• phased application in parallel with the EU deadlines (Wave‑2 obligations from FY 2027).

Italy

CSRD implementation into national law has already taken place.

Stop‑the‑Clock implementation:

• postpones the national CSRD application deadlines accordingly (including a two‑year deferral for many large companies and listed SMEs).

7. Three strategic paths – depending on company size

Even if a large proportion of companies – from the upper mid‑market to large corporations – will in future not (or no longer) fall under mandatory CSRD reporting, sustainability remains a business‑critical success and risk factor.
Because sustainability issues are and remain material impacts, risks and opportunities for a company – regardless of whether a formal reporting obligation exists or not.

This makes it clear: sustainability is no longer just regulation, but hard business reality.

“Compliance light” – meeting minimum requirements

(for typical SMEs)

For these mid‑caps, it is most likely that they will remain permanently outside the CSRD obligation as a result of the omnibus reform.

Recommendation:

• Establish a lean, voluntary reporting system based on the future VSME standard,
• depending on financing and stakeholder pressure, with or without voluntary limited‑assurance engagements (e.g. for climate and energy KPIs).

This creates a compact ESG standard that satisfies banks, funding bodies and major customers – without the full CSRD complexity.

“Strategic sustainability” – sustainability as a business enabler

Companies with turnover of more than EUR 50 million are “large” and in the spotlight of banks, but could formally fall out of the CSRD.

Recommendation:

• Content alignment with the (simplified) ESRS set,
• voluntary application of ESRS without statutory audit requirement,
• targeted voluntary limited‑assurance engagements for key topics (e.g. climate, energy, HR, and where applicable taxonomy‑relevant activities) where expected by banks, investors or owners.

This enables these companies to reach large‑corporate ESG level while remaining flexible in terms of intensity and scope of assurance.

“Transformation path” – sustainability as the core of future viability

(clearly within the CSRD scope)

For these companies, mandatory CSRD/ESRS reporting with limited assurance remains in place – including taxonomy reporting.

Recommendation:

• Full ESRS readiness: double materiality, governance, data architecture, reporting processes,
• consistent use of Quick Fix relief (phased entry for biodiversity, value chain, “anticipated financial effects”),
• early switch to the simplified ESRS as soon as the new delegated act applies.

Conclusion

In short: the “Big 3” – CSRD, CSDDD and Taxonomy – are being streamlined but not abolished. Large companies clearly remain subject to obligations, while the mid‑market moves into a world of voluntary but bank‑ and customer‑relevant standards (VSME, simplified ESRS).

Our offer:

• In a compact scope & banking check, we clarify

  • whether your company is likely to remain within the future CSRD scope or belongs in the VSME world,
  • which ESG data banks will definitely expect from you from 2026/27 onwards.

• On this basis, we develop either a VSME roadmap (with or without assurance) or an ESRS readiness roadmap with you – tailored to your size, sector and financing strategy.

In this way, you benefit from the relief provided by the EU reforms without losing clout in terms of transparency and financing.

Further article

Omnibus agreement: relief for medium‑sized businesses

Margit Holzhammer

Country Manager Austria West
Lawyer, long‑standing director of a hospital, CSR lecturer at various universities and CSR and sustainability consultant at Terra Institute. Her focus sectors are healthcare organizations, banks and tourism. Margit heads the Terra office in Innsbruck.

Questions? Feel free to get in touch by e‑mail (m.holzhammer@terra-institute.eu).