Omnibus Proposal Tweaks CSRD Requirements, but AFM Sticks to its Transparency Goals

Key Takeaways

• Omnibus Proposal Adjustments: The European Commission's Omnibus proposal reduces the scope of the CSRD, lowering the number of companies required to report sustainability data.
• Impact on Companies: Fewer companies, particularly those with fewer than 1,000 employees, will be included in the CSRD requirements, with delays for SMEs.
• AFM’s Commitment to Transparency: Despite the changes, the AFM remains focused on ensuring transparent and reliable sustainability reporting.

Deep Dive

When the European Commission unveiled its Omnibus proposal, it sparked a shift in the scope and timing of the Corporate Sustainability Reporting Directive (CSRD)—and with it, some new challenges and opportunities for businesses and auditors alike. The proposal trims the number of companies that must comply with CSRD standards, but despite these changes, the Dutch Authority for the Financial Markets (AFM) is doubling down on its commitment to keeping sustainability reporting both transparent and reliable. The question remains over whether the tweaks in the Omnibus proposal truly improve things, or is it more of a stopgap?

In essence, the Omnibus proposal is about simplifying and streamlining CSRD requirements. While this sounds promising, it also means fewer companies will be required to comply. The number of listed companies subject to CSRD oversight is set to drop from around 160 to just over 100 in the first wave. The second wave, which includes smaller firms, is set to be delayed, while the third wave of companies with fewer than 1,000 employees will be fully excluded from CSRD obligations.

This could feel like a relief for companies and audit firms that had already spent significant time and resources preparing for compliance, but it also raises concerns about the transparency and depth of reporting that will be available to investors and stakeholders. With a smaller group in the spotlight, the impact of these changes could ripple through the wider corporate landscape.

AFM’s Commitment to Transparency, Even with the Changes

Although the Omnibus proposal is still very much in the political arena and hasn’t been finalized yet, the AFM isn’t backing down from its stance on transparency. For the AFM, it’s not just about meeting regulatory requirements—it’s about creating a system that investors can trust.

The AFM wholeheartedly supports the double materiality principle, which remains in place for wave 1 companies. This principle requires companies to disclose how their operations impact the environment and society, as well as how external sustainability factors affect their performance. It's a crucial tool for investors who want to make informed decisions.

But there's a catch. The proposal introduces a voluntary reporting standard (the VSME standard) for large listed companies with fewer than 1,000 employees. This could result in less information being made available to investors. Additionally, the proposal removes “reasonable assurance” requirements—meaning auditors will no longer be required to perform the in-depth procedures that ensure more reliable information. This could be a big setback in the quest for more comprehensive and trustworthy sustainability reporting.

The Start of the Growth Path

As much as the regulatory landscape is shifting, the AFM remains focused on a growth path toward better sustainability reporting. Even with the uncertainty surrounding the CSRD's rollout, the AFM views the 2024 sustainability reports that major listed companies will be publishing as key stepping stones in this journey. These reports will help provide insight into how companies assess their sustainability risks, identify opportunities, and evaluate their environmental and social impact.

For the AFM, it’s all part of a larger process, one that is committed to providing the data necessary for smarter, more sustainable decisions—not just for investors, but for society as a whole.

The AFM isn’t just sitting back and waiting for the new regulations to take hold. In line with its broader sustainability agenda, it’s actively studying how large listed companies are approaching their sustainability reports. The focus? How these companies are applying double materiality, and how they’re explaining their sustainability risks and impacts. These studies aren’t about handing out penalties—they’re about building a collective learning curve.

Additionally, the AFM is investigating how audit firms are preparing to provide assurance based on the CSRD. They’re looking at everything from quality control systems to the procedures firms will use to provide limited assurance. These studies will help shape the best practices that both companies and auditors will need to adopt in the coming years.

The goal is to provide guidance and ensure that companies and auditors are equipped for the changes ahead. There won’t be any heavy-handed enforcement unless there are blatant violations. Instead, the AFM aims for a collaborative approach to help firms improve their sustainability reporting.

Stick with It, Even When It’s Tough

Even with all the changes and delays, the AFM is urging companies and audit firms to stay committed to transparent and reliable sustainability reporting. The proposal may simplify things in some ways, but the AFM knows that transparency is key. It’s not just about meeting compliance—it's about providing valuable insights that help investors make informed decisions and encourage companies to adopt more sustainable practices.

This serves as a chance for businesses to better understand their impact on the world, and for investors to make decisions that reflect their values. The more transparent the process, the more likely we are to see lasting, positive change in the corporate world.

As the regulatory landscape continues to evolve, the AFM’s dedication to transparency and reliability remains unwavering. It’s about working together, learning as we go, and keeping sustainability at the heart of corporate decision-making. The question is whether the rest of the corporate world follow suit?

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