Key Takeaways
- The subsidiary exemption permits an entity to skip individual CSRD reporting when its parent includes it in a consolidated sustainability statement.
- Omnibus I extended this exemption to listed subsidiaries, which were previously carved out and forced to report individually.
- Financial holding undertakings gained a new opt-out from consolidated sustainability reporting if their subsidiaries operate independently.
- Listed SMEs are no longer in mandatory scope; they may report voluntarily under the VSME standard expected as a delegated act by mid-2026.
What is CSRD Exemptions and Opt-Outs?
The CSRD contains several mechanisms that remove or reduce the reporting burden for specific categories of entity. The most widely used is the subsidiary exemption under Article 19a(9) of the amended Accounting Directive. Where a parent undertaking publishes a consolidated sustainability statement that covers its subsidiaries under the ESRS, those subsidiaries may opt out of individual reporting. Before Omnibus I, large listed subsidiaries could not rely on this exemption. The Omnibus I directive deleted that carve-out, so a listed subsidiary whose parent already reports at group level no longer faces a standalone obligation.
Omnibus I also introduced a scope exclusion for financial holding undertakings. An entity whose sole purpose is to acquire and manage holdings in other businesses (without direct involvement in their management) may elect not to prepare consolidated sustainability disclosures, provided its subsidiaries have independent business models and operations. This targets pure holding structures where consolidation would aggregate unrelated activities into a single sustainability statement that serves no analytical purpose.
The third major change is the removal of listed SMEs from mandatory scope. The original CSRD designated these entities as Wave 3 reporters from FY 2026, later deferred to FY 2028 by the stop-the-clock directive. Omnibus I eliminated that wave entirely. Listed SMEs may still report voluntarily using the VSME (Voluntary Sustainability Standard for Micro, Small and Medium-Sized Enterprises), which EFRAG delivered to the European Commission in December 2024 and which the Commission expects to adopt as a delegated act by mid-2026.
Worked example: Rossi Alimentari S.p.A.
Client: Italian food production company, FY 2027, revenue EUR 67M, 820 employees, IFRS reporter. Rossi is a wholly owned subsidiary of a French listed parent (Groupe Alain S.A., revenue EUR 1.2B, 6,400 employees) that publishes a consolidated CSRD sustainability statement.
Step 1 — Assess individual scope under Omnibus I: Rossi has 820 employees and net turnover of EUR 67M. The revised CSRD thresholds require both 1,000+ employees and EUR 450M+ turnover for mandatory reporting. Rossi meets neither criterion on a standalone basis.
Documentation note: record the scope assessment against both Omnibus I thresholds. Attach Rossi's FY 2027 management accounts showing net turnover of EUR 67M and headcount of 820. Conclude that Rossi falls outside mandatory individual scope.
Step 2 — Evaluate the subsidiary exemption: Even if Rossi were large enough to trigger individual scope, the subsidiary exemption under Article 19a(9) applies because Groupe Alain's consolidated sustainability statement covers Rossi. Before Omnibus I, a listed subsidiary could not rely on this exemption. Rossi is not listed, so the pre-Omnibus restriction was irrelevant in its case, but the engagement team documents the analysis for completeness.
Documentation note: record the parent's consolidated reporting status, identify the specific ESRS disclosures in Groupe Alain's sustainability statement that cover Rossi, and cite Article 19a(9). File a copy of the parent's published sustainability statement or a confirmation letter from Groupe Alain's group sustainability team.
Step 3 — Determine residual disclosure obligations: Rossi's statutory auditor considers whether any voluntary sustainability disclosures appear in Rossi's own management report. The auditor applies ISA 720.11 to assess consistency between those voluntary disclosures and the financial statements. No separate limited assurance engagement is required because Rossi is not individually in scope.
Documentation note: record the ISA 720 consistency assessment. Cross-reference Rossi's voluntary disclosures (if any) to the parent's consolidated sustainability statement. File the engagement letter confirming no sustainability assurance scope.
Conclusion: Rossi's exemption from individual CSRD reporting is defensible because it falls below the Omnibus I size thresholds on a standalone basis and, independently, qualifies for the subsidiary exemption through inclusion in the parent's consolidated sustainability statement.
What reviewers and practitioners get wrong
- Teams apply the subsidiary exemption without verifying that the parent's consolidated sustainability statement actually covers the subsidiary in question. Article 19a(9) requires the subsidiary to be included in the parent's consolidated management report. If the parent's double materiality assessment excludes certain subsidiaries from specific ESRS topics, those subsidiaries cannot claim a blanket exemption for the excluded topics.
- Firms advise clients to stop reporting after the Omnibus I scope reduction without checking member-state transposition timelines. The transition exemption for Wave 1 entities falling below the new thresholds is discretionary at the member-state level. An entity in a member state that has not yet transposed the provision remains obligated to report. The Omnibus I directive requires transposition by 19 March 2027, and member states may move faster or slower within that window.
Related terms
Frequently asked questions
Can a listed subsidiary still claim the CSRD subsidiary exemption?
Yes. The Omnibus I directive removed the previous carve-out that forced large listed subsidiaries to report individually. From the directive's entry into force (18 March 2026), a listed subsidiary may rely on Article 19a(9) if its parent's consolidated sustainability statement covers it. The subsidiary must still reference the parent's report in its own management report and make it accessible to users.
Do listed SMEs have to report under the CSRD after Omnibus I?
No. Omnibus I removed listed SMEs from mandatory scope entirely. These entities were originally designated as Wave 3 (FY 2026, later deferred to FY 2028). They may report voluntarily using the VSME standard, which EFRAG delivered to the European Commission in December 2024 and which is expected to be adopted as a delegated act by mid-2026.
What is the financial holding undertaking opt-out?
The Omnibus I directive introduced an exemption for parent entities whose sole purpose is to hold and manage investments in other businesses without direct involvement in their management. If those subsidiaries operate with independent business models, the holding entity may elect not to prepare a consolidated sustainability statement. The exemption targets pure holding structures where consolidated ESRS reporting would aggregate unrelated activities.