The European Commission is planning an EU omnibus regulation to simplify many of the corporate sustainability reporting requirements. The omnibus proposal is part of the EU’s broader efforts to become more competitive as the political tide has turned in Europe to the right, mirroring US president Donald Trump’s anti-ESG and deregulation push.
The European Commission says the regulations are burdensome for companies and need to be simplified. But some investors and companies are concerned that the EU’s reporting rules could be rolled back and weaken transparency. There are also concerns that it could curb the EU’s ambitions to spur private investment in green projects.
What is the EU omnibus regulation?
The EU rarely uses omnibus bills, which is when a series of legislation is passed at the same time to accomplish the same goal. In this case, three EU sustainability laws are being reviewed:
- The corporate sustainability reporting directive (CSRD), which has been in force since July 2024 and requires companies to disclose detailed information on their impact on the environment and human rights issues, including their greenhouse gas emissions.
- The corporate sustainability due diligence directive (CSDDD), a law that requires companies to consider the social and environmental impact of their operations, as well as implement climate transition plans. Member states have until 2026 to adopt it to national law.
- The EU green taxonomy, a classification system to help clarify what economic activities are sustainable and prevent greenwashing that has been in force since 2020.
The omnibus regulation process started in November when European Commission president Ursula von der Leyen announced a process to streamline and align ESG reporting rules. While the EU’s corporate reporting rules are being looked at first, other omnibus packages to streamline other rules may follow later this year.
It’s unknown if there will be a formal legislative proposal or a roadmap followed by a proposal at a later date. It is possible that the rules are reopened at Level 1, meaning they would be up for renegotiation by legislatures. If the laws are instead reassessed on the more technical level, called Level 2, the rules are more likely to be streamlined in line with the original ruling.
Addressing simplification and competition
The European Commission wants to enhance the EU’s competitiveness amid geopolitical turmoil and economic uncertainty. Removing red tape is part of that process. The omnibus process is largely driven by the Budapest declaration, which aims to reduce reporting burdens by 25% in the first half of the year.
The European Commission wants to enhance the EU’s competitiveness amid geopolitical turmoil and economic uncertainty. Removing red tape is part of that process.
Some say these regulations overlap, with inconsistent reporting requirements. In a report on competition from former European Central Bank (ECB) president Mario Draghi, he said the EU’s red tape made it harder for companies to scale up and compete with the US and China.
European countries are split on the omnibus process, with Germany and France pushing for a delay in the implementation of the existing rules, while Spain and Italy want to move ahead without weakening the reporting rules.
Meanwhile, a report from the ECB found that the EU needs to increase transparency if it wants to facilitate more green capital, but the complexity of reporting regulation could hinder such efforts and should be streamlined while keeping in mind the objective of transparency. However, the European Banking Authority (EBA) expects the CSRD to have a positive effect on the level of data available. In a report on ESG data availability, the EBA found that without the data required by companies under the CSRD, financial institutions will need to rely on third-party data providers, which could lead to issues of comparability, standardisation and transparency.
The central bank relies on data to identify climate and nature risks to banks and the economy. Reporting from these sustainable financial rules will improve this data, ECB executive board member Frank Elderson said in a speech.
“This is essential to ensure that the broader sustainable finance framework can serve its purpose of unlocking finance for the green transition and thereby contributing to Europe’s competitiveness agenda,” he said.
Would the EU omnibus regulation do away with the Green New Deal?
The EU is facing an investment gap. At the same time, more investment is needed in green technology if the EU wants to transition to a net zero economy by 2050.
There’s still uncertainty about what will be included in the omnibus proposal or how it could play out in the EU legislative process, especially as some of the rules have already been transposed into national law. But so far this legislative review has been far from simple and has left companies, investors and regulators uncertain about what is next for ESG regulation and transparency.
Climate advocates and some policymakers are concerned that reducing reporting requirements would weaken corporate accountability and potentially conceal potential investor risk. Many European companies have spoken out in favour of the EU CSRD and CSDDD and have asked for simplification without deregulation. There’s a consensus among investors, regulators and advocates that climate change risk is a financial risk and some type of reporting is needed to help protect the wider economy.
There are also legal and compliance risks for companies, as many firms have already put in place measures to adhere to the reporting requirements. A legislative process that takes months or even years could put these efforts on hold, potentially costing firms.
