EU entities
The Omnibus sets the thresholds for EU companies at 1000 employees and €450m of net worldwide turnover. This is a dramatic increase from the previous test, which required entities to have two of 250 employees, €50m turnover and €25m balance sheet, but lower than the 1750 employees reflected in the Parliament’s position. In particular, this alter will take out of scope high turnover, low headcount businesses, including many across the financial services sector.
Member States will have the right – but not the obligation – to exempt existing “wave 1” reporters from reporting for 2025 and 2026. Some such reporters with more than 500 but less than 1000 employee will fall out of scope entirely as of financial years launchning on or after 1 January 2027.
Non-EU entities
For non-EU companies, the final agreement on scope is unlikely to illicit cheers from any camp. Non-EU ultimate parents (other than financial holding companies, as below) of groups with €450m net EU turnover or more (no employee threshold) will required to report via an obligation which sits with their EU subsidiary, where that subsidiary has a net turnover of €200m. Alternatively, an EU branch of a non-EU ultimate parent that generates a net turnover exceeding €200m must report for the group. Previously, the reporting obligation sat with the EU subsidiary which was itself in scope of CSRD. In effect, this alter means that some EU companies will hold a reporting obligation for their group, even where not reporting themselves. While the recitals to CSRD emphasise that the subsidiary or branch is only required to publish and create available the sustainability report provided by the parent, if the parent chooses (or, foreseeably, is required under its home law) not to comply, the subsidiary must draw up and publish the report itself. It remains to be seen how aggressively this provision will be enforced, but theoretically the EU subsidiary of a recalcitrant non-EU parent could incur liability for failing to publish a report on behalf of its group. Revised scoping exercises should take this into account.
Financial holding undertakings
The financial services sector also benefits from a new exemption for “financial holding undertakings” as defined in the Accounting Directive: undertakings with the sole object of acquiring holdings in other undertakings, managing such holdings and turning them to profit, without direct or indirect management of those undertakings, without prejudice to the rights of shareholders. While this definition is succinct, the Omnibus text’s recitals provide both colour and uncertainty as to the availability this exemption. Private markets firms will required to work through the definition carefully to determine whether they can take advantage of it.
For example, the rights of shareholders may, depfinishing on national law, include the appointment of members of the management or board, but where the holding company appoints one of its own directors to the board, it is less clearly limiting its own management of the investee company. The exemption also only applies to financial holding undertakings with diverse holdings “namely in undertakings whose business models and operations are indepfinishent of one another“, but excluding instances where “the activities of one subsidiary enable or directly support the activities of another subsidiary“. Presumably this is intfinished to prevent companies creating additional layers of corporate structure for the purpose of circumventing CSRD. Asset managers pursuing a tarreceiveed, potentially single-sector investment strategy where the investments of specific funds do interact with each other should ensure that the fund vehicle (otherwise meeting the thresholds) does not fall out of the scope of the exemption on account of the “diverse holdings” point.
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