© Christian Lue
The European Commission has proposed 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.
The commission has urged legislators to fast-track the omnibus proposal, which was submitted to the European Parliament and European Council for adoption.
What’s in the EU omnibus package?
The proposed EU omnibus changes move to align the CSRD (which covers reporting rules) closer to the CSDDD (a legal obligation to look at and mitigate climate and social risks).
The EU omnibus proposal removes around 80% of companies from the scope of the CSRD rules, as reporting would only apply to companies with over 1,000 employees and a turnover of €50mn or a balance sheet of more than €25mn.
It also postpones reporting requirements for companies set to report in 2026 or 2027 by two years. Instead, companies could report on a voluntary basis using sustainable reporting standards developed by the EU’s standards body, the European Financial Reporting Advisory Group. Sector-specific reporting standards were also removed.
Changes to the CSDDD would mean companies would not have to conduct in-depth reviews of adverse impacts from value chains with indirect business partners. It also simplifies and limits the information companies can request from small- and medium-sized companies. The frequency of due diligence reviews would also be extended from one year to five years. And while in the original ruling, member states were allowed to adopt stricter rules, the new proposal would mean national laws could not deviate from EU law.
The EU taxonomy, which has been around since 2020, would also be changed. Companies with less than 1,000 employees and a net turnover of up to €450mn can voluntarily report on the taxonomy, and companies can partially align with the taxonomy to be considered sustainable. The materiality threshold would also be changed, with no reporting for activities that do not exceed 10% of a company’s turnover.
Other changes to the EU’s sustainability reporting requirements are expected, as the commission also plans to revise the European Sustainability Reporting Standards (ESRS) to substantially reduce the number of data points and make it more consistent with other legislation. The ESRS provides a framework for companies that report on ESG topics.
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.
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.
Many investors and politicians seem split on the proposal. A group of investors and asset managers warned that the omnibus regulation would not only weaken disclosures, but could damage the bloc’s long-term competitiveness. The European Banking Federation welcomed the omnibus, while the EU parliament is divided on the proposal.
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.
While the omnibus proposal left in double materiality and transition plans, and reporting rules would still apply to non-EU firms operating in the bloc, its narrowed scope has some investors worried about access to data. A change in proposals could cause a delay in sustainability investment, as well as inconsistent sustainability reporting. The omnibus 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. The proposal still faces some legislative hurdles, and a process that takes months or even years could put these efforts on hold, potentially costing firms. And there could be even more changes as the omnibus proposal goes through the legislative process.
What started out as a way to give investors and companies fewer burdens may have sparked even more confusion and had the opposite effect of what was intended.
Update, 13 March 2025: this story was updated to reflect details of and reactions to the European Commission’s proposals.
This page was last updated March 13, 2025
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
