The European Commission has adopted new proposals that will cut red tape and simplify EU rules for citizens and business. The new package of legislative proposals published February 26th hopes to give European companies a competitive edge. Bárbara Machado and Magnus Lund Nielsen discuss the new proposals in an article on the Euractiv website.
Commission’s new omnibus slashes green reporting to catch up with US
In a bid to boost European competitiveness, the Commission is scaling down green reporting requirements in a package of legislative proposals unveiled today.
Last September, former ECB President Mario Draghi delivered a bombshell report, warning Europe’s lack of productivity growth posed an “existential challenge.”
If the EU does not change course, it will not be “a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage,” Draghi wrote.
Now, to “simplify” EU regulation, the Commission proposes a series of legislative changes to existing EU law on green reporting, hoping to give European companies a competitive edge. The regulatory cutbacks are referred to as the omnibus.
While the Environmental NGO WWF called the scheme “von der Leyen’s deregulation omnibus,” Commission Executive Vice-President and Economy Commissioner Valdis Dombrovskis stressed the “simplification agenda is not deregulation.”
The commissioner also framed today’s proposals in the context of increasingly fragile transatlantic relations. “This week, we saw a longstanding strategic partner vote against a UN resolution condemning Russia’s aggression against Ukraine. We need to treat these developments as a call to action.”
What’s in the package?
The package of legislative proposals concerns five different areas:
- the Corporate Sustainability Due Diligence Directive (CSD)
- Corporate Sustainability Reporting Directive (CSRD)
- Carbon Border Adjustment Mechanism (CBAM)
- the EU taxonomy
- the Corporate Sustainability Due Diligence Directive (CSDDD).
Corporate Sustainability Due Diligence Directive
The CSDDD, initially envisioned as a tool to hold companies accountable for environmental and human rights violations, has been scaled back in response to industry pushback.
Now, the requirement to sever business relationships when such violations persist has been removed, along with a critical tool to prevent potential abuses.
The revised proposal also extends compliance deadlines and significantly reduces the reporting burden. Companies will reassess risks every five years instead of annually, a move designed to ease corporate concerns about excessive red tape.
An EU official emphasised that the core idea remains, but “the main focus of due diligence will now be on direct business partners, rather than across the entire supply chain.”
But critics warn that without stringent oversight, human rights and environmental abuses may persist further down the supply chain.
Corporate Sustainability Reporting Directive
The CSRD, introduced to increase corporate transparency on environmental and social impacts, is also set to be reduced. The revised framework removes 80% of companies from its scope, limiting reporting obligations to firms with over 1,000 employees.
According to an EU official, the aim is to “prevent sustainability reporting from becoming an undue burden, particularly for SMEs that lack the capacity to comply with extensive data requirements.”
While this move eases pressure on businesses, it raises concerns about reduced transparency in corporate sustainability efforts. Investors and watchdogs may struggle to assess a company’s climate impact if a large portion of the business ecosystem is exempted from reporting.
The Commission is also eliminating sector-specific reporting standards and adopting a voluntary standard for SMEs, which sets the limits on the amount of information smaller companies are legally required to disclose.
EU taxonomy
On sustainable finance, the Commission will narrow the scope of the EU taxonomy to align with the threshold set in the CSRD, limiting reporting obligations to companies with more than 1,000 employees.
A big cut in the data to be reported is also envisaged, with a promised reduction in reporting templates by 70%.
A new ‘principle of materiality’ will be introduced “which will allow companies not to have to report the type of their business which is considered not material,” an EU official stated.
For Commissioner for Financial Services, Maria Luís Albuquerque, this should allow companies to “to focus their efforts on assessing activities that truly matter.”
Finally, the ‘do no significant harm’ (DNSH) criteria for chemical products will be simplified as a first step before a thorough review and simplification of all DNSH criteria by the end of 2025
Carbon Border Adjustment Mechanism
The EU’s world-first CO2 tariff, the Carbon Border Adjustment Mechanism, also known as CBAM, will be largely left untouched.
Under fire for covering all imports of iron, steel, cement, and fertiliser above €150, it will switch to a total mass limit of 50 tonnes per year across all goods – which will still cover 99% of emissions but exempt 90% of companies.
Instead, CBAM reporting for the 10% of companies that remain affected will be simplified: CO2 values associated with goods will become easier to change, certificates won’t have to be purchased in 2026, and reporting can be outsourced to trusted import specialists.
InvestEU
As reported by Euractiv last week, the EU’s flagship investment program, InvestEU, is set to receive a major boost, with regulatory tweaks aimed at unlocking an additional €50 billion in public and private investments.
The Commission hopes to channel more money into innovative projects by leveraging returns from past investments and unused funds from older financial instruments.
External link
Energy in Demand - Sustainable Energy - Rod Janssen 