On 26th February this year, the European Commission proposed a legislative package to amend the current regulations governing extra-financial reporting, known as the ‘Omnibus’. In this article, the OID takes a closer look at the proposed changes, their impact on the real estate sector and our recommendations in this context of uncertainty and retreat of ESG standards.
This article was written by Juliette Daire & Geoffroy Gourdain, and reviewed by Alexandre Van Ooteghem & Constance Magnus.
What is the background to the proposed Omnibus Directive?
To promote economic growth, the European Commission wants to ease the regulatory burden on companies. The issue of the cost of reporting has been at the heart of public debate since the publication of the Draghi report in September 2024. This desire for simplification is also part of an international context marked by the return of Donald Trump to the presidency of the United States, which is prompting the European Union to react to fears of a weakening of its competitiveness, in the context of a potential widespread disengagement from environmental issues.
The Commission is therefore committed to reducing the administrative burden on businesses by at least 25%, and by as much as 35% for SMEs, by the end of its President’s term of office. With this in mind, on 26th February 2025 the Commission presented a first package of ‘Omnibus’ measures, a set of legislative reforms designed to amend several directives and regulations in order to ‘eliminate unnecessary or excessive rules’ (extract from the FAQ Omnibus – European Commission), and thus create an environment more favourable to economic development.
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Which European texts are affected by the Omnibus legislative proposals?
The Omnibus legislative proposals affect the CSRD Directive (sustainability reporting), the CSDDD Directive (corporate sustainability due diligencefor large companies), the European Taxonomy, the Carbon Border Adjustment Mechanism and the InvestEU programme.
If the European Taxonomy is amended, other texts requiring the publication of taxonomic indicators will be indirectly impacted, such as the SFDR Regulation.
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What changes are proposed to the CSRD?
The proposed amendments could considerably lighten the content of sustainability reports, reduce the scope of the duty of care and simplify the calculation of taxonomic indicators. Not all of these proposals will necessarily be adopted, and they will not all come into force on the same timetable.
For the CSRD Directive, the first proposal that could be adopted under a fast-track procedure is the postponement by two years of the publication of sustainability reports for wave 2 and 3 companies. As a reminder, this includes the following companies:
- Wave 2: All companies listed on a European regulated market that meet at least two of the following three criteria:
- More than 250 employees
- More than €50 million turnover (€60 million for groups)
- More than €25 million balance sheet total (for groups, €30 million)
- Wave 3 :
- SMEs listed on a European regulated market, excluding microenterprises
The other proposed amendments to the CSRD Directive are as follows:
- Lowering the thresholds for companies covered: only large companies with more than 1,000 employees (and meeting certain financial criteria) could be subject to the CSRD. If this proposal is adopted, it could reduce the number of companies affected by around 80%.
- Revision of the European Sustainability Reporting Standards (ESRS) by reducing the amount of data required, clarifying the rules and ensuring greater consistency with other regulations. For the moment, detailed proposals for revising the ESRS have not been published, leaving companies in a state of uncertainty.
- Abolition of the sector-specific standards, which were expected by 2026.
- Reduction in the number of data items verified during the audit of the sustainability report, by relying on limited assurance instead of reasonable assurance.
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What should companies do if they are no longer subject to the CSRD?
Until the regulations are officially adopted, no exemption is in force. It would be advisable to remain cautious in the face of the many announcements likely to lead in the wrong direction. Furthermore, the various proposals are not likely to be adopted according to the same timetable. For example, the two-year postponement for companies in the second and third waves, if adopted, would come before the reduction in the scope of companies subject to the CSRD.
As long as the amendments have not been published in the European Official Journal (and transposed into national law in the case of Directives), reporting companies must continue their efforts to meet the current regulatory requirements. The work on dual materiality is not simply an exercise in compliance, but a genuine strategic reflection that enables companies to adapt their business model to environmental and social issues. As far as reporting is concerned, the MDR (Minimum Disclosure Requirement) indications are likely to vary little.
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If the number of companies subject to CSRD were to be reduced, what would their alternatives be?
The CSRD has been widely criticised for imposing disproportionate requirements on SMEs. However, before Omnibus, two sets of specific standards were drawn up for SMEs:
- EFRAG’s ESRS LSME (Listed Small and Medium-sized Enterprises) for listed SMEs subject to the CSRD
- The ESRS VSME (Voluntary Small and Medium-sized Enterprises) standards for SMEs not subject to CSRD that have voluntarily chosen to publish a sustainability report.
This second set of standards (VSME) could become the reference text for all companies outside the CSRD scope. The double materiality exercise has been simplified (companies only have to consider their impacts and risks, not their opportunities), and the indicators have been reduced to a minimum.
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If sector-specific standards are abolished, how can reporting be harmonised, particularly for property companies?
The primary objective of the CSRD is to ensure a certain level of extra-financial transparency by harmonising sustainability reports (same issues, same indicators, same reporting structure). If the sectoral standards are abolished, this objective could be compromised.
However, their disappearance can be seen as a call for private initiative and market agreements to ensure harmonisation, which is necessary for the comparability of extra-financial performance. With this in mind, the OID is analysing market practices and will publish a benchmark of the first CSRD reports from real estate players at the end of May 2025.
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How is the Taxonomy likely to evolve?
The European Taxonomy, the European sustainability reference framework for economic activities, is likely to evolve and be simplified. A number of changes are expected, including making the publication of taxonomy indicators voluntary for players subject to the CSRD. Companies that only partially meet the taxonomic criteria could choose to voluntarily declare partial alignment. The Commission proposes to simplify the Taxonomy by reducing the technical criteria (in particular the DNSH criteria) by 70%. A review of the key indicators for financial institutions, in particular the green asset ratio (GAR) for banks, has also been announced.
Finally, the Commission has launched a public consultation to update the presentation templates for taxonomic indicators and to modify the DNSH Pollution by proposing two alternative options. The OID is responding to this consultation with its members.
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CSRD sustainability reports: a stillborn reporting format?
Non-financial reporting remains key to anticipating and mitigating a company’s negative impacts and risks, particularly physical climate risks. However, current environmental and social risks will not disappear as a result of the reform. While vigilance in this area is no longer a regulatory expectation, it could become an imperative for other stakeholders. By way of example, French organisation France Assureurs has placed climate risk in first place in its annual risk mapping and has included the risk of uninsurability for the first time. In other words, while the formal exercise is no longer a matter of regulatory compliance for some players, vigilance remains essential.
Furthermore, the potential disappearance of this reporting requirement and the retreat of environmental issues on the international stage could give rise to competitive advantages for organisations that maintain some form of ambition in this area. Having a resilient business model that is prepared for climate, environmental and social risks, as well as demonstrating an approach to reducing negative impacts, would send a strong signal to internal and external stakeholders (employees, investors, customers, companies in the value chain).
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What role can the real estate sector play in this context?
The property sector is relatively well positioned to benefit from this type of comparative advantage. While it has often been pointed out that the sector bears a heavy responsibility in terms of climate change mitigation and biodiversity, it is in fact in the front line when it comes to the problems of adapting to climate change. The real estate sector is one of those that had to confront ESG issues relatively early on.
If, in the end, reporting regulations no longer provide a sufficiently structuring framework, they could henceforth be carried out at sector level, by the players concerned, as part of a collective intelligence drive.
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What is the legislative process that will follow and what are the next deadlines?
The proposed Directive must now be discussed in a trialogue – informal inter-institutional negotiations involving representatives of the European Parliament, the Council of the European Union and the European Commission.
The version resulting from these negotiations must then be adopted by the European Parliament and the Council of the European Union. It will then be transposed into national law as required by the Directive status.
While it is possible that the measures relating to the change in timetable – i.e. the postponement by two years of the publication of sustainability reports for wave 2 and 3 companies under the CSRD – will be subject to a fast-track procedure, the rest of the reform should go through the traditional process, the legislative path to which remains substantial.
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The ESREI programme would like to thank its sponsors Amundi Asset Management, BNP Paribas Real Estate, Clariane, Ivanhoe Cambridge, La Française REM, Ofi Invest, Pimco Prime Real Estate and Praemia REIM. They enable us to carry out this work and we will continue to go forward on international issues in sustainable real estate in 2025!
