EU simplifies sustainability rules: Less bureaucracy, more investment
The European Commission has put together a comprehensive reform package that significantly simplifies sustainability reporting and supply chain legislation for companies and facilitates investment in the European Economic Area. The aim of the measures is to save more than six billion euros in administrative costs while at the same time strengthening the competitiveness of European companies and supporting the transition to a sustainable economy.
"We promised simplification and kept our word! Today we are presenting our first comprehensive simplification proposal. Companies in the EU will benefit from streamlined rules on sustainable finance reporting, due diligence and taxonomy. This will make life easier for companies while ensuring that we stay on track with our emission reduction targets. Further simplification proposals will follow."
Ursula von der Leyen, President of the European Commission
Reducing bureaucracy is key
A central component of the reform is the reduction of bureaucracy for companies. In future, the requirements will focus on large companies, as they have the greatest impact on the environment and society.
In future, the Corporate Sustainability Reporting Directive (CSRD) will only apply to companies with more than 1,000 employees and either a turnover of more than 50 million euros or a balance sheet total of more than 25 million euros. This means that around 80% of the companies originally covered will be exempt from the CSRD reporting obligation. Smaller and medium-sized companies will benefit from a significant reduction in bureaucracy, including a 70% reduction in reporting forms.
In addition, companies will be given more time to implement the new requirements. The reporting obligations will be postponed by two years to 2028 to give companies sufficient leeway to make adjustments.
VSME standard for companies
Companies wishing to attract sustainable investments still have the option of reporting voluntarily.
The EU Commission will adopt a voluntary standard for all non-scope entities, including SMEs, based on the voluntary standard for SMEs developed by EFRAG (the so-called "VSME" standard).
CO2 border adjustment system to be adapted
Simplifications are also planned for the Carbon Border Adjustment Mechanism (CBAM). Small importers who import less than 50 tons of CO2-relevant goods per year will be exempt from reporting obligations. Above all, this is intended to strengthen fair trade, while at the same time maintaining the ecological standards of the EU regulations.
With these measures, the EU wants to create a better framework for investments and enable companies to focus more on sustainable transformation. The reforms offer more transparency and targeted incentives for investments in environmentally friendly innovations. The conditions thus created should not only promote sustainable growth, but also ensure the competitiveness of the European economy.
Simplification of the supply chain law
The Supply Chain Act is not only being postponed, but also simplified. Due diligence checks in the supply chain will be limited to direct business partners, companies with fewer than 500 employees will have to provide less information to large direct business partners and supply chain audits will only be required every five years. Overall, the Supply Chain Act is set to reduce regulations by at least 25 percent.
The CSDDD now affects the following companies based in the EU that
- employ more than 1,000 employees and
- achieve annual global sales of more than 450 million euros.
Companies also pass on their due diligence obligations to SMEs if they are part of the upstream or downstream activity chain.
The softening of the CSDDD, which was only adopted in 2024, has led to harsh criticism from many environmental and human rights organizations. Südwind and the Network for Social Responsibility see this as an attempt to render the laws ineffective.
"By getting involved in the reckless deregulation race of Elon Musk and Donald Trump, the EU Commission is sabotaging its own Green Deal and thus the progress made in protecting human rights and the climate. Due diligence can prevent human lives and the destruction of nature: it is now up to the Austrian government to show foresight and responsibility and stop the omnibus proposal."
Stefan Grasgruber-Kerl, supply chain expert at the human rights organization Südwind.
Key points of the reforms
- Significant reduction in reporting obligations
Around 80 percent of companies are exempt from sustainability reporting requirements. The requirements focus on large companies with the greatest impact on the environment and society. - Extension of the transposition deadline
Companies that fall within the scope of the directive will receive a deadline extension of two years. The new reporting obligations only apply from 2028. - Relief for small and medium-sized enterprises (SMEs)
The bureaucratic burden for SMEs will be significantly reduced, among other things by reducing the number of registration forms by 70 percent. - Adjustment of the CO2 border adjustment system
Small importers with less than 50 tons of CO2-relevant goods per year will be exempt from reporting obligations in order to facilitate fair trade. - More investment incentives for sustainable projects
Companies can continue to voluntarily prepare sustainability reports in order to gain access to sustainable financing and investments.
Further necessary steps until actual implementation
The EU Commission's proposal for the Omnibus Regulation goes through several steps before it becomes legally binding:
1. proposal by the EU Commission
- The EU Commission has proposed the Omnibus Regulation as part of the "Omnibus Simplification Package" and is forwarding it to the Parliament and the Council.
2. then examined by Parliament and Council
- Both institutions analyze the proposal, can suggest changes or reject it.
- An agreement can be reached in the first or after a second reading.
3. trilogue negotiations (if necessary)
- If no agreement is reached, the Parliament, Council and Commission will conduct informal negotiations.
4. approval and acceptance
- Once an agreement has been reached, the law will be adopted and published in the EU Official Journal; it does not need to be transposed into national law as it is a regulation. It is possible that the law will be passed this year.
The coming years will show whether this relief is sufficient to strengthen companies in the long term or whether further measures are required. However, it is clear that the reforms represent an important step towards a more efficient and at the same time more sustainable economy.
Link
Press release of the EU Commission of 26.2.2025
