EU tax directives #4: proposed simplification of the EU Corporate Sustainability Reporting Directive – New York office Snippet

Blog

31-03-2025

3 minutes read

Loyens & Loeff New York regularly posts ‘Snippets’ on a range of EU tax and legal topics. This Snippet summarises proposed changes to the EU Corporate Sustainability Reporting Directive (CSRD) and the impact for US multinational enterprises (MNEs).

Aligning with the EU's broader sustainability goals, the CSRD is an EU directive that aims to enhance transparency and accountability regarding environmental, social, and governance matters.

The CSRD entered into force as from January 2023 and is being phased in over four ‘waves’ starting as of financial year 2024. The EU Commission proposed a so-called ‘Omnibus Simplification Package’ (the Proposal) in February 2025 to, inter alia, limit the scope, postpone and simplify the CSRD.

From our practice, we see that the CSRD may also be relevant for US MNEs. US MNEs may be affected because they are directly in scope at ultimate parent entity (UPE) level (wave 1 or 4). However, we see US MNEs particularly being affected because they tend to use an EU intermediate holding company (EU HoldCo) for (a substantial part of) their global operations and those operations generally meet the (relatively low) thresholds for wave 2. This is the case if they meet (on a consolidated basis) at least 2 of the following requirements on 2 consecutive balance sheet dates: 1️. ≥ 250 employees, 2️. > €50M net turnover and 3️. > €25M of assets.

Such EU HoldCo is then generally required to prepare a consolidated sustainability statement under the CSRD in respect of itself and its EU and non-EU subsidiaries, even if it does not prepare its own consolidated financial statements in reliance of a consolidation exemption for financial reporting purposes. The reason for that is that the exemptions for financial reporting operate independently from the exemptions for sustainability reporting.

Pursuant to the Proposal, the scoping thresholds for the CSRD may be increased. As a result, about 80% of currently in-scope companies would no longer fall within scope. Considering the size of a typical US MNE, however, we expect that most of the US MNEs will remain in-scope of the CSRD.

The Proposal also postpones the sustainability reporting obligations under the current CSRD for waves 2 and 3 by two years. If adopted, this means that a wave 2 in-scope company within a US MNE group will have to publish a sustainability statement for the first time in respect of the financial year starting on or after January 1, 2027 (instead of January 1, 2025).

For more information about the Proposal, we refer to our previous news article.