The European Commission published an omnibus package of proposals to amend the existing framework for sustainability reporting, including the reporting obligations imposed on companies under the Corporate Sustainability Reporting Directive (EU) 2022/2464 ("CSRD"), which was implemented intro Irish law on 5 July 2024.
CSRD was the EU's response to the global reframing of company reporting to include environmental, social and governance matters.
The Irish Government will shortly be amending the existing Irish legislation governing CSRD to further clarify and reduce the scope of companies covered and will quickly implement the EU's 'Stop the Clock' proposal together with the changes proposed by the wider omnibus package, once these are adopted at EU level, in order to deliver certainty for business at all levels in Ireland. For large companies, who are the main category currently within the scope of the CSRD, the omnibus proposals would restrict the application of the requirements to only those companies having 1,000 employees, as opposed to 250 employees under the current law. The proposed changes will also ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains. Further, the 'Stop the Clock' proposal would also postpone by two years the reporting requirements for companies currently within the scope of CSRD and which are required to report for the first time in 2026 or 2027.
Under the existing legislation, an Irish Special Purpose Vehicle and Irish SMEs with listed securities on EU regulated markets are, or were due to be, caught by the mandatory reporting requirements if they met certain thresholds.
The omnibus proposals would limit the scope of CSRD mandatory reporting obligations to undertakings with more than 1,000 employees and either a balance sheet total of €25m or a net turnover of €50m.
The net effect is to reduce the number of undertakings subject to CSRD mandatory sustainability reporting by approximately 80% and align the CSRD's thresholds more closely with those in the CSDDD.
Irish SPVs which do not generally have employees would not be subject to CSRD mandatory reporting obligations.
The omnibus proposals would also remove the specific reporting requirements for listed SMEs.
Many third country undertakings would fall out of scope with a tripling of the threshold for EU net turnover to €450m, although they will not have the benefit of the 1,000-employee threshold available to EU undertakings.
Finally, the proposed amendments to the Corporate Sustainability Due Diligence Directive (EU) 2024/1760 ("CSDDD") which was due to come into effect by July 2026, will be postponed by a year and will significantly reduce the compliance requirements on effected businesses. The CSDDD places legal obligations on companies within scope to address the adverse environmental and human rights impacts arising from their operations.
The 'Stop the Clock' Directive which was tabled by the European Commission would, when implemented, remove the uncertainty for entities such as SPVs and SMEs with listed securities, from having to report before their respective deadlines.
The omnibus proposals also sets out better and more efficient streamline reporting compared to the current reporting regime. For those undertakings that remain in-scope for CSRD mandatory reporting, there is a substantial reduction in of the number of data points required by the European Sustainability Reporting Standards and limiting the potential for new data points by removing the Commission's power to adopt new sector-specific standards. However, undertakings required to report in 2025 in respect of financial year 2024 will still be required to report in line with the existing regime.
This is extremely good news for Irish SPVs, in particular and will ensure Ireland continues as a favoured European jurisdiction for structured products and other forms of debt capital markets transactions.
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