Europe Simplifies Its ESG Regulatory Frameworks: What to Know About the Omnibus Directive

The Budapest Declaration Evolves ESG Regulation
In its Budapest Declaration in November 2024, the EU Council called for a "simplification revolution." German Chancellor Olaf Scholz also called for the simplification of the CSRD in a letter to the President of the European Commission, Ursula von der Leyen, reigniting the debate on these issues in early 2025.
On November 8, 2024, the Council of the European Union, an institution consisting of the heads of state and government of the Member States of the European Union, made 12 recommendations aimed particularly at enhancing the competitiveness of the EU (link). These are based, among other things, on the reports "Much more than a market" (Enrico Letta) and "The future of European competitiveness" (Mario Draghi).
It's the 4th proposal that caught the attention of regulatory reporting actors:
💬“Launching a simplification revolution, ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs. We must adopt an enabling mindset based on trust, allowing business to flourish without excessive regulation. Key objectives to be implemented by the Commission without delay include making concrete proposals on reducing reporting requirements by at least 25% in the first half of 2025, and including red-tape and competitiveness impact assessments in its proposals.”
Following these declarations, Ursula Von der Leyen proposed Omnibus legislation aimed particularly at consolidating and simplifying the CSRD, the Taxonomy Regulation, and the CS3D. A European Commission proposal is thus expected to be published on February 26, 2025
What is an Omnibus Directive?
Within the scope of European legislation, an "omnibus" law is a legislative initiative that consolidates several amendments or revisions of existing texts under a single proposal. Whether it is a directive or a regulation, its adoption process differs.
- In the case of an omnibus regulation proposal: It amends existing regulations. It must be adopted by the European Council (which may be supplemented by the Parliament) or by the European Commission. Therefore, it applies directly in the law of member countries, without the need for transposition.
- In the case of an omnibus directive proposal: The directive amends existing directives. The adoption process is the same as for standard directives: review by each European body (Council, Parliament, Commission), which may result in several back-and-forths. The proposal can be rejected at any stage of the procedure, and as it is a directive, it must be transposed by the Member States into their law.
The CSRD and the CS3D being European directives, any potential modification must be done via an omnibus directive: this is, among other things, the purpose of the proposal that will be presented on February 26, 2025. However, the delegated regulations accompanying the CSRD, which notably detail the ESRS, could theoretically be amended by regulation, without the need for transposition by the Member States.
The omnibus directive is a European regulatory instrument that has already been used in the past. As an example, Directive (EU) 2019/2161 – signed in late 2019, taking effect in early 2020, and transposed into French law in late 2021 – aimed to modernize the EU's consumer protection rules.
Why is simplification being discussed?
At Greenscope, we fully support the idea that environmental regulations, such as the CSRD, should lead to a profound transformation of the activity of all economic actors. However, we do not ignore the fact that the various European regulations and directives adopted since 2019 as part of the Green Deal can impose a very real workload on European economic actors.
For companies, the operational challenges are numerous. The significant number of datapoints to report and the drafting of narrative parts represent a real administrative burden for the employees responsible for managing the CSRD. According to the most critical voices of the CSRD and the CS3D, this work entails high compliance costs, which harm the competitiveness of European companies – especially listed SMEs and mid-sized companies.
Calls for simplification have therefore been made repeatedly, calling for prioritizing climate objectives (and the data points concerning them) within the CSRD, or raising the applicability thresholds of these directives, for example by Olaf Scholz, the German Chancellor, in early 2025 (source).
Content and Objectives of the Omnibus Directive on Sustainability
Several European regulations would be affected by the omnibus directive in preparation, including the CSRD, the CS3D, and the European Taxonomy. While the content of the proposal expected to be submitted on February 26, 2025, remains unclear, French authorities have proposed major modifications in a document recently made public by several media outlets.
Regarding the CSRD directive, they suggest:
- A drastic reduction in the number of datapoints
- The introduction of a new category of companies, "midcaps" (250 to 1500 employees), which would thus be subject to the same reporting standards as SMEs. More than 30,000 companies would be affected, according to an EU document
- The limitation of reporting requirements applied to the value chain
- The suspension of work on sector-specific ESRS standards
- The postponement of the CSRD's entry into force by two years
Additionally, an indefinite postponement of the CS3D is also being considered, a measure publicly supported by Éric Lombard, French Minister of Economy and Finance. A revision of the calculation of the Green Asset Ratio (GAR), a key indicator of the European Taxonomy, is also under study.
It is important to note that this Omnibus directive aims to simplify several regulations beyond ESG reporting, including:
- The REACH regulation on chemical substances
- The simplification of regulations in the agricultural sector
- The easing of banking standards, among others
Why Greenscope Helps You Navigate Compliance More Than Ever
In order to prepare for compliance with a regulatory framework that may evolve, anticipation remains the key word for companies and reporting players. In-depth training on existing regulations, to better understand the basics and anticipate their deployment, remains essential. It must be complemented by active monitoring of regulatory developments: at Greenscope, we closely follow regulatory news.
Within companies, it is also crucial to audit and harmonize ESG processes. This approach allows for the identification of inconsistencies, the rationalization of efforts, and the prioritization of issues based on their strategic relevance. A rigorous analysis of existing processes will thus promote a more effective and coherent approach.
Last priority for companies: strengthen the quality of their ESG data. Reliability, traceability, and data standardization must become priorities to meet transparency requirements and facilitate audits, while enhancing their credibility with investors and stakeholders. This issue goes far beyond regulatory reporting requirements.
The latest news
08/11/2024: Budapest Declaration (source).
27/11/2024: Ursula von der Leyen proposes Omnibus legislation (source).
06/01/2025: German Chancellor Olaf Scholz calls for regulatory framework simplification (source).
20/01/2025: Stéphane Séjourné announces the abolition of the CSRD (source).
21/01/2025: Stéphane Séjourné's statements are refuted (source).
23/01/2025: Éric Lombard announces the postponement of the CS3D directive (source).
Upcoming:
26/02/2025: Submission of the Omnibus proposal and initiation of the legislative process.
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