The recent EU Omnibus package may propose to ease the reporting burden for companies in the EU, but many headlines have in fact triggered uncertainty and alarm.
If we can cut through the noise, proactive business leaders can not only prepare for these changes but seize the opportunity to drive strategic business value and even transformation.
My key takeaways for business:
- Large companies still have to report, while SMEs can gain an advantage through voluntary reporting
- Streamlined and integrated data management remains key for compliance and business value creation
- Get ahead by starting today
Sustainability regulations have been on a rollercoaster ride lately. To address concerns about the administrative burden, harmonization, and competitiveness, EU lawmakers have undertaken critical reviews of key policies, most notably the Corporate Sustainability Reporting Directive (CSRD).
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Initial reactions to the Omnibus package ranged from celebratory to cautionary, with some media outlets pointing out “costly confusion” and even “catastrophic changes.” The slightest changes to any regulatory framework can spark confusion, but there is no need to panic. While still subject to final approval, the Omnibus package should provide companies extra time to prepare and reduced metrics to track.
Despite these proposed changes, business leaders should ensure their data management systems are equipped to handle the required sustainability metrics. Systems and processes for data management need to be instituted, KPIs identified, stakeholders managed — all of which takes time. As a rule of thumb, auditors recommend two years of preparation time before a reporting deadline hits. From automated collection and reporting to insights that drive measurable business value, an integrated data system has the potential to make sustainability data so much more than a mere component of compliance.
What are the changes in the Omnibus?
The Omnibus adjusts compliance thresholds, shifts reporting timelines, and removes the burden of CSRD reporting for small and midsize enterprises. Proposed changes include:
- Companies not yet required to report on FY 2024 will have a two-year delay (until 2028) before they must report with the CSRD
- Companies must have 1,000 employees and €50 million net turnover, or €25 million balance sheet to meet CSRD reporting threshold
- Limited assurance requirements are implemented in place of reasonable assurance
- Sector-specific reporting mandates have been eliminated
- Value chain data is only required from suppliers that also meet the reporting threshold
- Corporate Sustainability Due Diligence Directive (CSDDD) due diligence intervals increased from each year to every five years
All proposed changes are still subject to final approval.
What remains untouched in the Omnibus proposals?
Large European companies — those that were required to report with the Non-Financial Reporting Directive (NFRD) — are still required to report with the CSRD this year for FY 2024, and are required to continue reporting despite the proposal. The pool of companies required to report will still expand, but now with a two-year delay and the timeline for non-EU parent companies has not changed. Companies with a two-year delay will still need to start preparing at least 12 months ahead of their new reporting deadlines.
Supply chain emissions, double materiality assessments, KPI identifying and tracking, and transition planning are all still fundamental to the CSRD. Supply chain data insights are still requirements of the CSDDD and the Carbon Border Adjustment Mechanism (CBAM).
The metrics on which companies are required to report are likely to be reduced and simplified, but regulatory compliance still remains a data challenge that requires integrated solutions. For companies that are no longer required to report, voluntary reporting can prove beneficial if data insights are deployed strategically. With the right solutions, sustainability data can unlock valuable insights to improve business performance.
How can sustainability data improve business performance?
With all the new compliance measures businesses have to navigate, it can be easy to get reporting tunnel vision and lose sight of the wider goal: sustainable business outcomes and value creation for the business.
Rigorous sustainability reporting should drive operational efficiency. Combined with a wealth of sustainability data, supply chain scrutiny and systems analysis lay the groundwork for deriving strategic business value. For example, sustainability data supports effective risk management through visibility into risks and their strategic and financial impacts, lowers costs by creating efficiency gains, and provides the insights needed to take action.
Collecting and managing data to comply with sustainability regulations requires data management software. The bare bones solution is the helpful, yet error-prone, Excel spreadsheet, while at the opposite end of the data management spectrum is the ERP-centric system.
The spreadsheet might manage to painstakingly serve the compliance function, but it lacks the ability to provide real-time insights that align sustainability goals with financial goals. What’s worse is that after data is collected and reported, it lives — and dies — on the spreadsheet, offering no added value, and certainly driving no business transformation.
In contrast, by using an ERP-centric system, data needed to comply with sustainability regulations can be pulled, aggregated, and integrated into business systems like finance, procurement, and HR. In fact, an ERP-centric system can provide access to as much as 85 percent of the quantitative data required for CSRD compliance.
ERP systems are the catalyst for strategic business transformation and streamlined regulatory compliance. ERP combined with SAP Sustainability solutions can provide access to sustainability data that permeates all business functions. Business leaders obtain the necessary insights to reduce carbon and material usage, accelerate CSRD compliance, and accurately measure the financial and sustainability impact of their decisions.
Get ahead by starting today
To stay ahead of current and upcoming regulations, streamlined and integrated management of data from operations and supply chain is essential. An ERP-centric approach can drive both sustainability and financial performance, with compliance being just the tip of the iceberg for ERP-centric sustainability data benefits.
Even with CSRD timelines extended for some companies, forward-thinking businesses have much to gain by continuing CSRD-aligned sustainability reporting now. This delay offers an opportunity to develop a strategic, technology-enabled approach to sustainability reporting that drives long-term business value.
Take action now and leverage SAP Sustainability solutions to transform your data management and sustainability reporting, ensuring your business not only complies but thrives in the evolving regulatory landscape. To learn even more about the Omnibus changes and how an ERP-centric system can benefit your business, read SAP’s latest white paper on mastering CSRD.
How to master the EU CSRD with SAP Sustainability solutions: New insights from the Omnibus proposal
Sophia Mendelsohn is chief sustainability and commercial officer at SAP.
