On February 26, the European Commission adopted a proposal to drastically reduce sustainability reporting requirements in the European Union. The Omnibus Simplification Package included two proposed directives to delay reporting requirements until 2028 and limiting the impact of businesses. It appears the EU is poised to fast-track the delays, giving the Parliament and Council time to debate the remaining changes while taking the pressure off businesses.
Following the passage of the European Green Deal, the EU pushed through a series of regulations aimed at businesses’ climate related activities. Starting in 2020 with the adoption of the Taxonomy for Sustainable Activities. The Taxonomy created a classification system for business and investors to know what activities are considered green or climate friendly.
In 2023, they adopted the Corporate Sustainability Reporting Directive. The CSRD created requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions. In 2024, they adopted the Corporate Sustainability Due Diligence Directive. The CSDDD created additional reporting requirements, as well as legal liability, for companies in relation to their value chain.
While these gains were praised by climate and environmental activists, as the obligations in the directives became clear, the business community began to push for reforms. During the 2024 European Parliament elections, the burden on businesses became a major theme, with the European Green Deal taking the majority of the blame for the EU’s faltering economy. The elections resulted in a shift to the right, with environmentally focused parties losing seats.
The reform process began almost immediately. In November 2024, Ursula von der Leyen, president of the European Commission, announced her intention to revamp sustainability regulations to reduce the burden on businesses. She stated the Council and Commission will have an omnibus bill that will take “a huge approach to reduce in one step, in all the different fields, what is agreed is too much today. We will look at the triangle Taxonomy, CSRD, CSDDD.” That omnibus bill was proposed on February 26.
The Omnibus Simplification Package came in the form of two directives. The first directive delays implementation of the CSRD and CSDDD until 2028, for fiscal year 2027. The second directive significantly reduces the number of businesses that must file sustainability reports under the CSRD, limiting it to large companies with companies with over 1,000 employees and €450-plus million in annual net turnover. It also reduces the enforcement mechanism of the CSDDD, limiting pecuniary damages and restricting who can bring civil action.
While the sustainability reporting world was hyper focused on the leaks and final language of the Omnibus Simplification Package, the proposal is the first step of the legislative process.
Now that the Commission adopted the proposal, it has been sent to the European Parliament and the Council of the European Union. The Commission officially presented the package to the European Parliament on March 10 in a public hearing. Both bodies will go through an internal process of negotiating a position. In the Parliament, the proposal will now go through a series of committees before a vote on their final position. Similarly, the Council will vote on their respective position on the proposal.
Once the positions have been adopted, the three bodies will enter into “trilogue” discussions with representatives, known as rapporteurs, from the Parliament, Council, and Commission negotiating the final law. When the three come to an agreement, the final version returns to the Parliament and the Council for a final vote.
The process could take months. However, as I initially suspected, the directive delaying the implementation of the CSRD and CSDDD to 2028 is moving quickly. The European People’s Party is pushing for a fast-track process. If the EPP is successful, which all signs indicate they will be, the directive to delay could be adopted in May or June. EU countries will then have until the end of the year to transpose the changes into national law. A delay also appeases the Trump administration and U.S. interests, without making any significant changes.
The rush for a delay is not an indicator of success for the other directive. I suspect that will be a lot messier process, with advocates on both sides actively engaging to make their respective arguments. A final directive to reduce sustainability reporting requirement in the CSRD and CSDDD will most likely not be adopted until 2026.
Read the full article here
