In November 2024, European Commission President Ursula von der Leyen announced an ‘Omnibus’ proposal aimed at improving the competitiveness of European businesses.
At the moment, we have more questions than answers about what it will actually entail, but reportedly it could streamline the taxonomy and reopen negotiations on two major corporate reporting mandates: the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).(1)
On January 21, 2025, at the World Economic Forum, President von der Leyen offered some rationale behind the possible changes:
".. We must make business much easier all across Europe. .. .. And too many firms are holding back investment in Europe because of unnecessary red tape.
.. we will launch a far-reaching simplification of our sustainable finance and due diligence rules." (2)
POLITICO reported that France had pushed to indefinitely delay the CSDDD and postpone the Corporate CSRD by two years. Germany has also advocated for a delay and a significant reduction in CSRD’s scope.(3)
These regulatory shifts may have profound implications, particularly for the estimated 50,000 companies required to comply with CSRD, including around 1,000 UK-based businesses that meet reporting criteria.(4)
Investor and Civil Society opposition
While at first "cutting red tape" may appear a popular suggestion, it sparked significant opposition
Over 160 investors, managing a combined €6.6 trillion, have urged the EU not to reopen negotiations on its green finance taxonomy and corporate ESG reporting mandates.(5)
More than 150 Civil Society Organisations have voiced strong opposition:
"It [The CSDDD] tackles unfair contract terms, like last-minute orders and impossible deadlines, that put economic pressure on SMEs. The real threat to small businesses isn’t regulation - it’s corporate exploitation...
.. We call on the European Commission to actively protect EU corporate accountability laws including the CSDDD and to reaffirm the official timeline for their transposition and implementation at the national level."(6)
240 economists and researchers have warned that:
"The signatories stress the dangerous nature of such a step backwards, in terms of environmental and climate action, but also for the European economy."(7)
Corporate Uncertainty
Companies that fail to report and comply with the CSRD currently face fines of up to10 million Euros or 5% of their annual revenue.
Some companies must disclose as many as 1,000 data points as part of annual reporting that details the environmental impact of their activities, including Scope 3.(8)
Many of the in-scope entities that are supposed to start reporting in 2025 (for the financial year beginning in 2024), have already invested a lot of time and effort in such reporting - now they face uncertainty over whether that was in vain, and if they have to start preparing for some new reporting framework.
The EY 2024 Global Climate Action Barometer assessed the quality of pre-CSRD disclosure worldwide as 'worryingly low',(9) so it's anyone's guess if the actual quality behind CSRD was going to be sufficiently higher, but it was undoubtedly time-consuming and expensive.
Many Member States have already transposed the CSRD into national law, and it's unclear what new changes might mean to them.
We will find out more detail about the fate of the European ESG regulations after the 26th February 2025.
In the meantime, both corporates and climate campaigners are awaiting what the upcoming Omnibus simplification package will contain and whether any rule changes will be sufficient to protect people and planet while generating growth in the economy.
For now, only one thing is certain: with President Trump's hostility towards ESG, any ambiguity from the European Commission is only adding to the anxiety of those working in the field today. Cumbersome as it may be, the regulation we have today was hard-won by those who strive to support businesses, and protect people and planet at the same time, and any change must not lose sight of its core objectives.
Private Goodness offers ESG and Climate Change training to lawyers and Board Directors. Find out more about our services here.
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