Mounting calls from industry and business leaders have urged the European Commission to ease the heavy regulatory burden imposed by the EU Green Deal. As the European Union prepares to reform a series of laws—namely the EU Taxonomy, Corporate Sustainability Reporting Directive (CSRD), and Corporate Sustainability Due Diligence Directive (CSDDD)—it is imperative that the Commission adopt a balanced, strategic approach that both supports sustainability objectives and alleviates unnecessary administrative strain.

Background: The Green Deal and Its Regulatory Impact
Under the European Green Deal, various directives were implemented to drive corporate action on climate change and sustainability. The EU Taxonomy, introduced in 2020, established a classification system for green activities. This was followed by the CSRD in 2023, which expanded reporting requirements on greenhouse gas emissions and other environmental, social, and governance (ESG) metrics. The CSDDD, adopted in May 2024, extended these obligations further into companies’ supply chains, adding layers of legal liability and additional reporting criteria.

While these measures have been vital in pushing forward the EU’s climate agenda and aligning with the Paris Agreement goals, many businesses argue that the cumulative effect has created an overly complex and burdensome regulatory landscape.

The Omnibus Simplification Package: A Much-Needed Reset
An Omnibus Simplification Package is on the horizon in response to these concerns. The initial package, set for release on February 26 (with a leaked copy circulating since February 22), aims to overhaul current reporting obligations. The proposed reforms are expected to:

  • Reduce Reporting Burdens: Particularly for mid-cap companies, which have been highlighted as a priority in the Competitiveness Compass.
  • Revise Implementation Timelines: Aligning with the demands of several member states advocating for more proportional, staggered obligations.
  • Streamline Disclosure Requirements: Simplifying criteria and reducing the volume of mandatory indicators, with proposals to cut reporting requirements by at least 25% for large companies and 35% for SMEs.

Additional Regulatory Challenges
Beyond the sustainability directives under the Green Deal, businesses are also grappling with other EU regulations that have added to their administrative burden. Regulations such as the General Data Protection Regulation (GDPR), the Markets Act, and the Services Act have imposed further operational challenges and compliance costs. While designed to enhance consumer protection and market integrity, these measures sometimes inadvertently complicate business operations. Our recommendations for regulatory simplification and proportionality can be extended to address these broader issues of EU regulatory overreach.

Insights from the Expert Community
Our expert circle on CSR/ESG has weighed in on the potential trajectory of these reforms. Two primary themes emerged:

  1. Proportionality and Efficiency: There is a strong push to ensure that reporting obligations are aligned with the business’s size and complexity. This includes tailoring timelines and reducing unnecessary indicators, thereby preventing a one-size-fits-all approach.
  2. Strategic Improvement, Not Deregulation: While there is clear momentum to simplify, core disclosure obligations must remain robust to maintain the EU’s sustainability commitments. Notably, proposals are expected to refine the EU Taxonomy by clarifying criteria for transition activities and introducing voluntary disclosures to enhance usability in financial markets.

Anticipated Reforms and Future Directions
Looking ahead, several key changes are likely:

  • EU Taxonomy: Refinements will focus on establishing clear thresholds for what constitutes a ‘substantial contribution’ to sustainability, addressing industry concerns regarding feasibility.
  • CSRD: A narrowing of the scope is expected, with potential postponements in sector-specific standards. This may include excluding extensive value chain reporting, such as Scope 3 emissions, to better balance cost and benefit.
  • CSDDD: The directive is anticipated to feature a narrower scope of liability for parent companies and introduce a ‘safe harbour’ mechanism for best-effort due diligence, mitigating legal uncertainty.

A Call to Action for the European Commission
The upcoming legislative process presents a critical opportunity for the European Commission to deliver meaningful reform. Simplification should not come at the expense of transparency or accountability. Instead, the goal must be to create a framework that reduces business complexity while preserving the integrity of the EU’s climate and sustainability goals.

Stay tuned for further updates as the Omnibus Simplification Package unfolds. Our recommendations can also be applied to various instances of EU regulatory overreach, ensuring businesses can operate efficiently while meeting essential sustainability and data protection standards.

Copenhagen Compliance will monitor developments closely as we move forward and provide insights on navigating this evolving regulatory landscape. We invite stakeholders to join the conversation and share their perspectives on creating a more efficient and balanced approach to sustainability reporting.