Sustainability Reporting is Changing – What Does It Mean for SMEs?

In February 2025, the European Commission published the so-called Omnibus amendment proposal, introducing significant simplifications and clarifications to corporate sustainability reporting requirements. Although it is still a proposal awaiting approval by the European Parliament and the Council, it is already guiding how companies and experts prepare for the future. Sustainability reporting is changing – again.

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What is the Omnibus proposal?

The Omnibus proposal is a Commission initiative aimed at simplifying and easing the reporting requirements under the CSRD (Corporate Sustainability Reporting Directive) and the Taxonomy Regulation. It includes four key changes:

1. The reporting obligation will be limited to companies with more than 1,000 employees. This significantly narrows the group of companies subject to the reporting requirements compared to the current scope.
2. The reporting timeline will be postponed. The start of the second phase of reporting obligations (large companies not yet reporting) will be delayed until 2027, and the third phase (listed SMEs) until 2028.
3. The content of the ESRS standards will be simplified. The number of data points will be reduced, ambiguities clarified, and sector-specific standards will be abandoned.
4. The application of the EU Taxonomy will be limited to the largest companies. For companies with fewer than 1,000 employees, taxonomy reporting will become voluntary.

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What does the Omnibus proposal mean for SMEs?

Although most SMEs will fall entirely outside the formal reporting obligations, the need for sustainability work remains. Customers, financiers, and large companies increasingly require sustainability data and evidence from their supply chains. A company that can clearly and credibly present its sustainability principles, current status, and goals is in a stronger position in all business relationships.

A company that can clearly and credibly present its sustainability principles, current status, and goals is in a stronger position in all business relationships.

I recommend that companies with fewer than 1,000 employees focus on building a business-driven sustainability strategy instead of preparing for CSRD reporting. Companies should concentrate on the key sustainability themes that relate to their core business and stakeholder expectations. In practice, SMEs now have an opportunity to develop their sustainability work without urgency—but in the right direction—ensuring it supports both the business and its ability to generate results.

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Self-assessment of sustainability work – a support tool for SMEs

Käkikuu's free self-assessment form for sustainability work enables a company to assess the current state of its sustainability work and serves as a foundation for its sustainability report and strategy. The form is a practical tool based on the voluntary VSME sustainability reporting standard for SMEs and our extensive experience in supporting the development of sustainability work in small and medium-sized enterprises.

A sustainability report based on a company’s self-assessment is a summary of the current state of its sustainability work. It is used for internal development, external stakeholder communication, and as a foundation for the company’s sustainability strategy.

The development of a sustainability strategy begins with the results of the self-assessment and stakeholder engagement. The simplified double materiality assessment for SMEs defines the company’s sustainability purpose, goals, actions, and indicators. This streamlined process includes an assessment of the current state, a preliminary identification of relevant sustainability themes, stakeholder consultation, the selection of sustainability topics essential to the company’s core business, and documentation of the entire process.

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Now is the right time to act – on the company’s own terms.

The Omnibus amendment proposal gives SMEs a moment to breathe, but it does not diminish the importance of sustainability for business. It is significantly easier for companies to proactively and calmly build a solid foundation for sustainability work in advance than to react under pressure to external demands.

I recommend the following sustainability steps for SMEs:

1. Do a sustainability self-assessment – gain a clear overview of your current state
2. Use the self-assessment-based sustainability report as a tool for internal development and stakeholder communication.
3. Identify your company’s key sustainability topics through a simplified double materiality assessment.
4. Set your goals and metrics – they don’t need to be complex, as long as they are concrete and impactful.
5. Communicate openly – to your staff, on your website, in proposals, and customer materials.

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In conclusion

The CSRD and its ESRS standards have established a framework through which corporate sustainability efforts will increasingly be evaluated in the future. Although SMEs will not fall directly under the reporting obligation, they are increasingly expected to be able to respond to questions related to sustainability.

Strategy work based on a company’s self-assessment of sustainability offers SMEs an easy and structured way to take the first steps from their own starting point – while anticipating the direction set by the EU. The Omnibus proposal provides a chance to pause, but it does not diminish the importance of sustainability in business.

Order the sustainability self-assessment form here