Analyst Insight: The European Commission’s proposed Omnibus Simplification Package could significantly change the European Union’s Corporate Sustainability Reporting Directive (CSRD), including its scope and reporting requirements. But that doesn’t mean companies should put less effort toward sustainability. Our CSRD Readiness Report shows that those who work now to create a streamlined supply chain sustainability program will be better prepared to meet changing requirements.

Compliance professionals know better than anyone that the regulatory landscape is always fluctuating. They also know that, when the only constant is change, the best way to minimize risk is to have a proactive program and accurate data.

The CSRD was supposed to set a new standard for transparency. Then came the Omnibus Simplification Package, which threw a wrench into things — fewer companies in scope, fewer mandatory disclosures, and a voluntary reporting standard for businesses suddenly off the regulatory hook. But that’s no reason for companies to slow down.

While the rules of compliance may change, that doesn’t mean there will be a corresponding shift in expectations from stakeholders. The need for data from deep in the supply chain is still necessary, and those that have it readily available aren’t just achieving compliance — they’re gaining a leg up by insulating themselves from market disruptions and ensuring continued access to global markets.

Companies Are Paying Attention

Our CSRD report set out to answer two questions: Who’s ready for the CSRD, and who’s scrambling? We sifted through sustainability reporting from manufacturers of all sizes and across different industries, including Siemens, Toyota Europe, Volkswagen and others. The mission was to pinpoint the frontrunners, expose the gaps, and get a pulse on what’s working, and what’s not.

The good news is that companies are paying attention:

• 99% have sustainability woven into their decision-making.

• 97% openly communicated their sustainability policies. The more businesses broadcast their policies, the more they earn trust.

• 96% are setting business conduct and governance targets, signaling stability and accountability.

• 95% demonstrated awareness that they must manage sustainability practices throughout the value chain.

• 95% actively implement strategies and technologies to address identified risks. This means the smartest companies aren’t waiting for trouble.

What this tells us about leaders in the manufacturing sector is that they aren’t letting requirements dictate behavior. Instead, they’re building proactive systems that meet the needs of stakeholders.

A Change in Scope

The Omnibus Simplification Package raises the threshold for in-scope companies (1,000 employees instead of 250) and introduces a “value-chain cap,” which lets some businesses report under a voluntary standard, instead of using the European Sustainability Reporting Standards (ESRS). But that doesn’t mean CSRD is scaling back.

Transparency, accountability, standardized sustainability reporting:  the need hasn’t changed. And even if your company falls out of scope, chances are some of your customers won’t. If your biggest buyer needs sustainability data, guess who they’re coming to for answers?

As European Parliament member Lara Wolters recently said: “This is not a simplification of EU rules. This is the simplification of a debate.”

Data Foundations Still Matter

Through all the legislative back-and-forth, one truth stands out: You can’t fake readiness. A well-oiled reporting system is an asset, whether you’re legally obligated to report or just supplying data to someone who is. Keep in mind the following:

Regulatory uncertainty is the only certainty. Requirements today might not be requirements tomorrow, but businesses thrive on consistency, and it’s essential to be consistent with reporting.

Stakeholders still demand sustainability. Compliance can feel like a tug-of-war, but keeping an eye on the big picture is essential. Even if regulators aren’t creating a requirement, that doesn’t mean companies won’t face the same requirements from shareholders, customers and employees.

Compliance means obtaining a competitive edge in the market. Even if a company falls out of scope, it may still face requirements. Large companies will still demand data from their business partners, and those who are positioned to deliver it will win contracts.

Risk doesn’t go away. Lawsuits, bad publicity and disruptions to supply chains are all real risks. Without readily available accurate data, companies will be unable to spot them before they impact the bottom line. 

The Omnibus proposal will likely change the CSRD, but that shouldn’t change companies’ behavior. Ultimately, regulations evolve often, and companies with a reactive approach will fall behind.

Companies can’t afford to limit their focus to regulators. Instead, they have to consider market expectations and let that dictate their behavior. Those who keep their data accurate, their governance strong, and their supply chains engaged will come out ahead.

The others will be playing catch-up.