Since launching in 2019, the EU Green Deal has set the global standard for climate and sustainability progress. But five years later, with a stagnating economy and a political shift to the right, the EU is reconsidering its approach to increase economic competitiveness.
Last September, former Italian Prime Minister Mario Draghi issued ‘The Future of European Competitiveness,’ outlining a strategy for the EU to revive its economy. This led to the Budapest Declaration, which called for aggressive simplification of regulations. As Europe started to implement this approach, their “Green Deal” regulations drew attention. First up were the reporting rules: The Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy – which the new omnibus proposal aims to simplify.
EU Commission Vice-President Teresa Ribera said, “What we need to avoid is using the word simplification to mean deregulation,” saying that the EU will continue its Green Deal despite the omnibus. EU Commission President Ursula Von der Leyen echoed that, saying the rules would be reopened to simplify but not deregulate. Here is a breakdown of the omnibus proposals:
Corporate Sustainability Reporting Directive (CSRD):
- Fewer companies and more time: Large companies are already producing CSRD reports and the Omnibus proposal will not impact this group – estimated at about 7,000 firms. The proposal would restrict the next round of companies due to report in 2026 and 2027 to companies with more than 1,000 employees and €50M in revenue. This smaller group will report in 2028 rather than 2026, and the companies covered by CSRD will be reduced by 80%.
- Reduced Data Points: The proposal aims to reduce the number of required data points in the European Sustainability Reporting Standards (ESRS) and shift the focus to quantitative rather than narrative reporting.
- No Sector-Specific Standards: Originally expected in future updates, standards for specific industrial sectors would be scrapped.
- Limited Supply Chain Disclosure: Companies will only be able to request data from value chain partners with 1,000+ employees, exempting most small suppliers.
- No More Reasonable Assurance: The proposal would keep “limited assurance” but scrap a requirement for reasonable assurance (a higher level of verification).
- Voluntary Reporting for Small Companies: Smaller companies can still report through voluntary small and medium enterprise (SME) standards.
Corporate Sustainability Due Diligence Directive (CSDDD):
- Delayed Implementation: EU member states would have until 2027 to adopt (transpose) the regulation and until 2028 for full adoption.
- Tier 1 Suppliers Only: Due diligence would only apply to direct (Tier 1) suppliers, excluding suppliers deeper in the value chain. Companies would be barred from requesting disclosures from small-cap suppliers.
- Longer Cycles: Due diligence checks across the value chain would occur every five years instead of annually.
- Financial Institutions Exempt: Banks and other financial entities will no longer be required to conduct due diligence.
EU Taxonomy:
- Higher Thresholds, Fewer Companies: Mandatory reporting now applies to companies with 1,000+ employees, cutting the number of impacted companies by 80%.
- Simplified Reporting: The number of required data points will be cut by 70%.
Carbon Border Adjustment Mechanism (CBAM):
- Smaller Importers Exempt: Companies importing under 50 tonnes of covered goods annually and SMEs would not be subject to CBAM. They claim this would reduce the number of companies reporting by 90% while still covering 99% of emissions.
- Easier Compliance: Simplified calculations and reporting requirements aim to reduce administrative burden.
The EU claims these proposals will save annual administrative costs of around €6.3 billion while still meeting the goals of the Green Deal. The EU also released an additional omnibus designed to simplify and cut red tape for sustainable investing.
This timeline might be the most important takeaway: As an example, the approval process for the original CSRD policy took more than two years to approve. There are tough negotiations ahead, so expect a lengthy and uncertain process – while, in the meantime, all of these policies remain in place.
Related Article: European Corporate Sustainability Reporting Directive (CSRD)
