AmCham Slovakia

The European Commission’s proposal is intended to reduce administrative burdens and move ESG from bureaucracy to effective solutions.

The European Commission has presented the so-called Omnibus – a legislative package that is intended to simplify the rules for ESG reporting. While some see it as a weakening of ESG regulation, others believe it can bring improvement and a sensible correction of overly extensive obligations. So what is it really like? Does ESG still make sense after the Omnibus? The answer is clear: yes, and perhaps more so than ever before.

How will Omnibus impact business sustainability efforts?

The Omnibus does not directly address ESG issues per se, but ESG reporting and the related regulatory requirements. The primary goal is to simplify reporting. And that is great news for ESG and sustainability.

It is important to emphasize that this is just a proposal that still has to go through a relatively lengthy European legislative process and the outcome is far from certain. The date for the introduction of the new rules is therefore open-ended. What key changes does the Omnibus bring?

Less bureaucracy, more efficiency

One of the main goals of the Omnibus is to remove unnecessary administrative hurdles. Currently, companies have to deal with a complicated and often opaque ESG reporting system, which forces them to produce extensive documents that do not always deliver real value.

The new rules could allow companies to report ESG in a clearer and less bureaucratic way, eliminating duplication of reporting, freeing up capacity for companies to use for real sustainability actions instead of filling out forms.

In the future, only companies with more than 1,000 employees could be required to report on ESG, significantly reducing the number of companies subject to this obligation. According to estimates, this means that around 80% of companies that would have previously had to report will be exempt from this obligation.

Revision of standards and deferral of obligations

The Omnibus envisages a revision of the ESRS (The European Sustainability Reporting Standards) and the introduction of voluntary reporting for companies with up to 1000 employees according to much more flexible standards (The Voluntary standard for non-listed micro-, small- and medium-sized undertakings). This change creates space for creative and dynamic solutions on how to approach sustainability in the diverse circumstances of these companies.

Another important change is the two-year shift in ESG reporting obligations for companies in the second and third waves. Companies affected by ESG obligations for 2025 and 2026 should not have this obligation until 2027 and 2028, respectively.

These steps can go a long way in ensuring that ESG is not just a formality that companies must comply with, but a tool for effectively managing their environmental, social and governance impacts. Businesses that have previously viewed ESG as a burden can gain more space to find practical and strategic solutions that will have a real impact.

Tailor-made ESG measures

The Omnibus also brings an important shift in the approach to regulation – it emphasizes the importance of proportionality. The current ESG framework often places the same requirements on small and medium-sized enterprises as on large corporations with extensive supply chains. In practice, this has meant that smaller companies have had to spend disproportionate resources to meet the same obligations as large players, which has disadvantaged them and in some cases even discouraged them from ESG initiatives.

The Omnibus proposes greater flexibility – while large companies will continue to have to comply with complex requirements, smaller companies will have a simpler time. For example, in supply chain due diligence, they will no longer have to map every single link in the chain in detail, but only those that have a truly significant impact on their ESG profile. Similarly, some requirements for carbon footprint reporting will be relaxed.

Despite the simplifications, the concept of dual materiality is expected to strengthen. Companies will need to better understand which ESG factors are truly relevant to them and how their impacts affect their business and the broader economic environment. This means that ESG strategies will be able to be more precisely targeted and implemented more effectively.

Simpler rules, same values

It is important that the ESG principle, which links sustainability requirements to the entire supply chain, should be maintained. As a result, this means that real commitments and an approach to sustainability will apply and be required from all entrepreneurs who want to participate in the distribution chains of large companies. This also does not mean that sustainability will not be one of the essential topics for consumers, investors, or banks financing various corporate projects.

Omnibus could ease the journey for companies to embrace ESG by making it less of a scare tactic and more of a strategic tool. Investors, business partners and even banks are increasingly factoring sustainability into their business decisions. Companies that embrace ESG as a natural part of their business can gain a competitive advantage, whether in the form of better access to financing, attraction to talented employees or better business relationships.

Another positive change is the reduction of penalties for formal errors in ESG reports. This will mean that companies will not have to worry about disproportionate penalties for unintentional administrative shortcomings and will be able to focus more on the actual content of their ESG measures.

Omnibus can change the way we look at ESG – instead of being an annoying bureaucracy, it can become a natural part of business thinking.

RUŽIČKA AND PARTNERS Law Firm offers comprehensive professional support in the field of ESG through a multidisciplinary team led by Nada Roštek.

NAĎA ROŠTEK
Partner, RUŽIČKA AND PARTNERS

Naďa Roštek is the leading partner of RUŽIČKA AND PARTNERS' competition law, compliance and ESG practise. In addition to her work in Slovakia, she is also active in this area in the Czech Republic within the CCS Legal & Tax partner office. The latter is a member of the Association of Sustainable Business, where Naďa actively engages. Together with a multidisciplinary ESG team, she is involved in the development of corporate ESG strategies and ESG implementation projects in both jurisdictions. These activities serve as a key tool to increase value and build credibility for companies in the eyes of consumers and business partners. Thanks to her presence in both the Czech Republic and Slovakia, she is able to create unique solutions that take advantage of both markets. This enables more effective implementation of ESG strategies for clients in both countries.