The European Commission’s recent Omnibus proposal aims to simplify and streamline sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD). However, the Dutch Authority for the Financial Markets (AFM) has expressed concerns that these changes may significantly reduce the availability of Environmental, Social, and Governance (ESG) data for investors. 

The key aspects of the Omnibus Proposal are:

• Reduced Scope: The proposal suggests excluding companies with fewer than 1,000 employees from CSRD requirements in the initial implementation phases. This change would decrease the number of listed companies under AFM supervision from approximately 160 to just over 100.

• Delayed Implementation: For other companies and listed SMEs, the proposal recommends delaying the implementation of CSRD requirements, potentially leading to prolonged periods without standardised sustainability reporting.

The delayed implementation of these regulations will be voted this Thursday 4th of April through the fast-track procedure.

AFM’s Position

While the AFM supports streamlining reporting requirements and acknowledges the importance of aligning obligations with a company’s size and capacity, it emphasises the need for transparency and reliability in sustainability reporting. The AFM is particularly concerned that making sustainability reporting entirely voluntary for large listed companies with fewer than 1,000 employees could result in less information being available to investors and other stakeholders. Additionally, the proposal’s move to eliminate the prospect of ‘reasonable assurance’ may hinder progress towards providing stakeholders with more reliable information, as auditors would be required to conduct less in-depth audit procedures.

ANC’s Position

Similarly, the French Accounting Standards Authority (ANC) acknowledges the need for revising the CSRD and its delegated regulation (ESRS) to address concerns about complexity and proportionality. However, the ANC cautions against abandoning the objectives of standardising sustainability reporting, emphasising that robust standards are essential for understanding and decision-making among economic players. The ANC suggests introducing more proportionality into the system by considering simplified reporting for smaller large companies and allowing them time to adapt.

The Critical Role of Reliable ESG Data in Sustainable Finance

Sustainable finance relies on access to high-quality, consistent, and comparable ESG data to guide investment decisions and align capital flows with sustainability objectives. Long before regulations like the SFDR and the CSRD were introduced, investors were already demanding transparency from companies on ESG factors to integrate sustainability information into their risk assessments.

The removal or weakening of sustainability reporting regulations would mean companies reporting in different ways, using different metrics, and with varying degrees of detail. This lack of coherence would hinder cross-company and cross-sector comparability, complicating investor decision-making. Therefore, the introduction of regulatory frameworks did not create this demand, it simply provided a structured, standardised, and mandatory framework for what was already a key consideration in investment strategies.

In summary, the Omnibus Proposal only re-introduces a potential fragmentation of ESG data availability, which could bring inefficiencies and setbacks to sustainable finance. Investors will continue to require this information, whether or not regulations enforce it.

We remain committed to supporting businesses in navigating these evolving standards and ensuring that sustainability reporting continues to provide value to all stakeholders.