On 26.02.2025, the European Commission ("EC") adopted the so-called "Omnibus Package", which includes a number of proposals for significant amendments to Directive (EU) 2022/2464 of the European Parliament (the CSRD Directive or ESG-Reporting) as part of the European policy for sustainability development and responsibility of companies and financial institutions. This package aims primarily to improve environmental, social and governance ("ESG") standards in the European Union, while reducing the administrative burden on business that the current ESG-regulatory framework creates.

What are the main changes that are envisaged?

• Significant reduction in the scope of the CSRD Directive. The EC proposes that only large enterprises with more than000 employees and more than EUR 50 million net sales revenue or more than EUR 25 million book value of assets will be obliged to report non-financial information. Other enterprises that do not meet these criteria will have the option to voluntarily report non-financial information using a simplified voluntary standard to be adopted by the EC, based on the voluntary standards for small and medium-sized enterprises developed by EFRAG.
• Revision of the European Corporate Sustainability Standards (ECSS). ECSS cover various aspects of companies' environmental, social and governance activity. The EC aims to reduce the number of indicators on which companies have to report data and to improve the overall consistency of reporting requirements.
• Removal of sector specific requirements. The Omnibus package contains a proposal to remove the  competence of the EC to introduce sector-specific standards depending on the different economic sectors in which companies are active. This will lead to the unification of the ESG standards and processes towards all obliged entities.
• Postponement of reporting requirements. The omnibus package proposes a two-year postponement of the implementation of reporting requirements for large companies that have not yet started to implement the CSRD directive, i.e. until 2028. This aims to give European legislators sufficient time to reach an agreement on the proposals made by the EC.
• Taxonomy reporting requirements. It is planned that such an obligation will remain only for large enterprises with more than 1,000 employees and with more than EUR 450 million net turnover.

With the proposed amendments, around 80% of the companies will be excluded from the reporting obligation. This will change the focus from small and medium-sized enterprises to large enterprises, which usually have a bigger impact on the climate and the environment. The aim is to simplify EU rules on sustainability reporting, especially for small and medium-sized enterprises, and to reduce administrative costs for business, helping companies to focus on their development and expansion. This in turn would create a more business-friendly environment in the EU, increasing competition and unlocking the full economic potential of the EU. These amendments will inevitably have an impact on business in Bulgaria, where the first steps towards ESG regulations have already been taken.

How will the amendments affect business in Bulgaria?

In August 2024, Bulgaria adopted amendments to the Accounting Act and the Independent Financial Audit Act (the Independent Financial Audit and Assurance on Sustainability Act after the amendments), introducing the regulatory framework for ESG reporting. At the end of February 2025, the National Assembly approved amendments to the first reporting periods, postponing them by one year. In this sense, for the large public-interest enterprises and for public-interest entities that are parent enterprises, the first reporting period is 2025, in case their average number of employees is above 500 as of 31 December 2025.

However, legislative amendments to ESG regulation have yet to be considered by the European Parliament and the European Council. If the EC proposals are adopted, Bulgaria will have to transpose them into our national law. This will give additional time for companies with sustainability reporting obligations to effectively prepare for the new regulatory requirements.

On the other hand, the limitation of the scope of the CSRD Directive and thus of the obliged entities will significantly ease the administrative obligations of business in Bulgaria. The proposal to remove the obligation of small and medium-sized public-interest enterprises to publish sustainability reports will lead to the reduction of the costs related to preparing and reporting of non-financial information. Nevertheless, those companies that have already invested resources in adopting and implementing of ESG policies will have the option to voluntarily report non-financial information.

Although the proposed amendments aim to reduce the administrative burden on business, they could also have a negative impact on the European ambition for green transition. Reducing the number of companies required to report sustainability data could be more challenging for investors to make informed decisions on sustainable investments, potentially slowing progress towards the EU's climate goals. In addition, postponing the reporting periods could limit access to the information necessary to assess corporate sustainability practices, which could undermine efforts to meet the Paris Agreement goals.

In conclusion, while the amendments to the CSRD Directive proposed by the EC may ease the administrative burden on business, it is important to consider their potential impact on transparency and progress towards sustainability development. Achieving balance between reducing bureaucracy and upholding ambitious green transition goals is essential for the EU's sustainable future.

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