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Introduction to the Omnibus Directive

The Omnibus Directive, adopted by the European Union, is part of a broad effort to strengthen consumer protection regulations and increase transparency and corporate responsibility in the area of sustainable development. One of the key areas it changes is ESG (Environmental, Social, Governance) regulation, aimed at improving environmental, social, and governance responsibility standards in companies. In this article, we discuss what changes the new regulations introduce and how they affect companies’ ESG reporting obligations.

What is ESG?

ESG stands for the three main pillars of sustainable development: Environmental, Social, and Governance. ESG regulations require companies to consider environmental protection, social responsibility, and management transparency in their operations and reporting. The goal is to ensure that companies not only pursue profit but also contribute to the sustainable development of societies and the protection of the planet.

Changes in ESG Regulations under the Omnibus Directive

The Omnibus Directive introduces significant changes to ESG regulations, especially in the context of reporting and information obligations for companies. The new rules aim to increase transparency, improve reporting quality, and ensure greater corporate responsibility to society and the environment.

Key Changes in ESG Reporting

Expansion of Reporting Scope

Under the Omnibus Directive, companies will have to expand the scope of their ESG reports. In particular, the new regulations require disclosure of

information regarding, among others, climate strategies, impact on biodiversity, social, and governance policies. Companies will also be required to disclose data on ESG-related risks and how they are managed.

Data Verification Requirements

The Omnibus Directive also introduces new requirements for verifying data contained in ESG reports. Companies will have to provide more detailed and reliable information and subject it to external audit. The aim is to ensure that reports reflect the actual impact of companies on the environment and society.

Increased Corporate Responsibility

The new regulations increase corporate responsibility for compliance with ESG standards. Companies will be required not only to report but also to implement actions to improve their environmental, social, and governance performance. These regulations are intended to encourage companies to take more ambitious actions for sustainable development.

Impact of the Omnibus Directive on Companies

The introduction of new regulations will have a significant impact on how companies operate, especially those that have not previously focused sufficiently on ESG issues. Companies will need to adapt their organizational structures, management processes, and reporting systems to meet the new requirements. This may involve investing in technologies for collecting and analyzing ESG data, as well as training employees responsible for reporting.

Challenges Related to Implementation of Changes

Implementing the Omnibus Directive comes with several challenges. Companies will have to meet increasing requirements for data quality and accuracy, which may involve additional costs. Moreover, for many companies, especially small and medium-sized ones, adapting to the new regulations may be a major

challenge, particularly in implementing appropriate audit and verification processes.

Benefits of Adapting to the New Regulations

Despite the challenges, adapting to the new regulations can bring a range of benefits to companies. Above all, increased transparency and responsibility can improve a company’s reputation in the eyes of consumers and investors. Additionally, implementing ESG actions can improve operational efficiency, reduce risk, and open doors to new markets and sources of financing, especially in the context of growing interest in sustainable investments.

The Most Important and Detailed Regulations on Sustainable Development (ESG) Reporting

• Reduction in the number of companies required to report ESG: The new regulations provide that the reporting obligation will apply only to companies employing more than 1,000 employees, exempting over 80% of companies previously covered by this obligation.
• Simplification of reporting standards: The European Commission plans to reduce the number of required disclosures under the European Sustainability Reporting Standards (ESRS), aiming to make it easier for companies to meet requirements related to the classification of sustainable activities.
• Voluntary reporting for smaller companies: Companies with net revenues not exceeding 450 million euros will be able to voluntarily report taxonomy data on environmentally sustainable activities.
• Postponement of the CSDDD directive implementation: The implementation of the Corporate Sustainability Due Diligence Directive (CSDDD) has been postponed by one year, to July 26, 2028, giving companies additional time to prepare for the new requirements. Limitation of information required in the value chain: Reporting entities will not be able to require ESG information from their suppliers beyond the scope specified in the voluntary Sustainability Reporting Standard, aiming to reduce administrative burdens for smaller entities in the supply chain.
• Reduction of ESG reporting assurance costs: Assurance by auditors will be required at the limited assurance level, not reasonable assurance, which should lower the costs associated with auditing ESG reports.

These changes aim to reduce administrative burdens for companies while maintaining high environmental standards. However, it is worth remembering that these proposals must still go through the legislative process in the European Union before they come into force.

The Future of ESG Regulations in Europe

The future of ESG regulations in Europe promises a period of further increasing requirements for companies. The Omnibus Directive is just one element of a broader trend in which the European Union aims to create uniform and effective ESG standards. Further evolution of regulations can be expected, setting increasingly ambitious goals for companies in environmental protection, social responsibility, and management transparency.

Summary

The Omnibus Directive introduces significant changes to ESG regulations, aimed at increasing corporate responsibility for environmental, social, and governance impacts. Companies will have to adapt their practices to new requirements for reporting and data verification. Although implementing these changes comes with challenges, they can bring significant benefits to companies, including improved reputation, increased operational efficiency, and better risk management. The future of ESG regulations in Europe will likely mean further development of requirements, which will become a key element of sustainable development.