Recent developments surrounding the Omnibus Directive are causing concern, particularly among SMEs that are currently subject to the CSRD, as the biggest changes are expected in this group. For publicly listed companies—the so-called Wave 1 group—the CSRD largely remains intact.
While the proposed adjustments seem to reduce the administrative burden for companies, there is a risk that attention to sustainable impact will fade. It’s understandable that businesses are becoming restless and adopting a wait-and-see approach, as these changes could have a significant impact. We feel this uncertainty too. But one thing is certain: the work you have done so far has absolutely not been in vain. We advocates for a balanced adjustment—not a dismantling, but an improvement.
Note: this article is a collaboration between Hedgehog, Kyden and 414, and was originally published here.
What is the Omnibus Directive?
The Omnibus Directive aims to revise the implementation of the CSRD, with the key changes being:
- Raising threshold values: This would result in fewer SMEs being directly subject to the CSRD.
- Simplifying reporting obligations: Primarily for small and medium-sized enterprises to reduce administrative burdens.
- Flexibility in reporting structures: Allowing companies more freedom in how they structure their sustainability reports.
- Double materiality under pressure: A fundamental change, as this analysis helps identify not only financial risks but also broader sustainability impacts.
These proposed adjustments stem from justified criticism. In its current form, the CSRD can be an administrative burden, where the letter of the law overshadows its spirit. The focus is sometimes too much on compliance and too little on actual impact. But should we throw the baby out with the bathwater? We think not.
The CSRD is more than a compliance exercise
Even if the rules change, the value of a double materiality analysis (DMA), a thorough greenhouse gas (GHG) assessment, and the development of policy plans remains significant. These are not just checkboxes for compliance but powerful tools to embed sustainability structurally within your organisation.
And this is not just an inspiring thought—it has also delivered concrete benefits for businesses. Consider, for example:
- Stakeholder dialogues during the DMA: Organisations that engaged in meaningful conversations with key stakeholders not only gained insights into material topics but also discovered new collaborations and innovations. This process has helped businesses sharpen their strategic focus and better understand where their real impact lies.
- Sustainable HR policies: Board-level discussions on good employer practices have not only fostered internal support but also led to concrete policies on diversity and inclusion, ultimately contributing to attracting and retaining talent.
- CO₂ assessments as a starting point for reduction: Measuring where you stand in terms of emissions enables you to take targeted steps toward reduction. Organisations that have undergone this process now clearly understand their major sources of emissions and which measures will have the greatest impact.
In short: These efforts deliver far more than just compliance. They help businesses strengthen their strategic position, making them more sustainable and future-proof.
Stakeholders continue to demand transparency
Whether you remain subject to the CSRD or not, the demand for ESG data persists. Private equity funds must comply with the SFDR, and pension funds, banks, customers, and even future employees expect insight into your impact. Companies that are well-prepared for this remain future-proof and attractive to investors and customers. We see this reflected in the organisations we guide.
CSRD & beyond: it's about making an impact
We believe that CSRD is a tool to truly drive sustainable impact. Beyond means two things for us:
- Embedding sustainability – Not just conducting the initial analysis, but ensuring that this process can be repeated structurally.
- Achieving impact – Your CSRD analysis is not just a paper exercise, but an opportunity to actively steer improvements. Knowing where you stand and what steps to take to grow.
What needs to happen now?
The Omnibus Directive risks throwing the baby out with the bathwater. We understand that the CSRD, in its current form, can feel like an administrative burden. The focus on making an impact seems to have been replaced by the priority of being compliant. That is not what we believe in.
Fortunately, there are initiatives advocating for the preservation of the core of the legislation. This open letter demonstrates that many organisations feel the urgency to keep sustainability on the agenda. We support this. Even the European Commission itself acknowledges that clarification and improvement are necessary, but without losing sight of the fundamental goal of the CSRD. The final decision from the EU was initially expected on February 26 but now appears to be postponed to March. We will keep you updated on developments and what they mean for your business.
Conclusion: Not dismantling, but improving
We should not return to a situation where sustainability is optional. At the same time, the law must better align with the reality of businesses. The solution is not less transparency but smarter ways to work impact-driven. Let’s ensure we retain the right elements for the right reasons. After all, you have likely already allocated the budget. So, shall we either reallocate this budget to ESG impact initiatives or reserve it for CSRD work later? That is a far more future-proof approach than simply letting it roll into profits.
Because ultimately, this is not about compliance, but about helping companies create real sustainable impact. Curious about how we approach this? We’d be happy to discuss it with you.
