The European Commission has published a draft Delegated Act proposing significant temporary exemptions from reporting obligations under the Corporate Sustainability Reporting Directive (CSRD) for companies in the first wave (Wave 1). This initiative is part of the broader simplification package known as “Omnibus”, aimed at easing regulatory burdens and supporting a manageable transition to ESG reporting.
Regulatory Context and Motivation for Change
In recent months, European debate has focused on balancing ESG transparency with economic competitiveness. The Draghi Report on European Competitiveness and the Budapest Declaration both underscored a political will to simplify regulations, particularly for SMEs.
The new Delegated Act responds to these priorities by aiming to:
- Reduce administrative burdens for smaller and mid-sized businesses;
- Avoid complex and potentially redundant reporting ahead of possible future exemptions from the CSRD;
- Prevent repeated adaptations to standards that are likely to change again by 2027.
Who Is Affected?
The provisions apply to Wave 1 companies, including:
- Public interest entities with more than 500 employees;
- Consolidated groups exceeding certain size thresholds;
- Listed companies, banks, insurance firms, and other entities defined as “public interest entities.”
The most notable change is the introduction of a distinction based on company size, particularly whether the entity has more or less than 750 employees. This threshold affects exemption eligibility and may raise issues of comparability across companies.
Detailed Exemptions: What Changes Until 2027
For companies beginning ESG reporting in 2025, certain key disclosures can be temporarily omitted, particularly for those with an average headcount of 750 employees or fewer.
Environmental Information Exemptions (ESRS “E”)
- Scope 3 emissions and total GHG emissions (ESRS E1-6)
- Anticipated financial effects of climate risks (E1-9)
- Pollution and marine resources disclosures (E2-6, E3-5)
- Biodiversity and ecosystems (E4 and E4-6)
- Resource use and circular economy (E5-6)
Social Information Exemptions (ESRS “S”)
- Characteristics of non-employee workers (S1-7)
- Collective bargaining and social dialogue (S1-8)
- Social protection, disability, training, and well-being (S1-11 to S1-15)
- Value chain social commitments (S2)
- Community and consumer relations (S3, S4)
These exemptions generally apply for the first two years of reporting, and in many cases, up to three years for companies with ≤750 employees.
Why Freeze These Disclosures?
According to the Commission, requiring Wave 1 companies to report additional ESG data in 2025 and 2026 would be unreasonable, especially if many of them might later be exempted from CSRD obligations under future reforms.
Moreover, the ESRS framework is still under revision. Imposing requirements now that could soon change would risk inefficiencies, duplicate efforts, and unnecessary compliance costs.
Benefits and Challenges of the New Approach
Benefits for Companies
- Lower short-term compliance costs
- More time to prepare for a definitive ESRS framework
- Avoids investing in data that may soon become irrelevant
Challenges to Monitor
- Loss of consistency in ESG reporting across similar companies
- Difficulties in comparability and benchmarking between firms above and below the 750-employee threshold
- Regulatory uncertainty until the final CSRD revision is published
When Does It Apply?
The new Delegated Act will apply from January 1, 2025, for financial years beginning on or after that date. In many cases, the exemptions will extend through 2027, pending the release of a revised and simplified set of ESRS.
Conclusion
This draft Delegated Act represents a pragmatic shift in the rollout of the CSRD. The message is clear: simplify now to regulate better later. Still, companies must remain vigilant: 2025 marks only the beginning of an evolving process that will demand adaptability, strategic planning, and close monitoring of the regulatory landscape.
Sources:
AI – generated image.
