Europe simplifies its ESG regulatory frameworks: What you need to know about the Omnibus Directive

In its Budapest Declaration of November 2024, the EU Council called for a "revolution in simplification." German Chancellor Olaf Scholz also urged the simplification of the CSRD in a letter addressed to the President of the European Commission, Ursula von der Leyen, reigniting the debate on these issues at the beginning of 2025.

On November 8, 2024, the Council of the European Union—an institution composed of the heads of state and government of EU member countries—issued 12 recommendations aimed at improving the EU’s competitiveness (link). These recommendations draw on reports such as "Much more than a market" (Enrico Letta) and "The Future of European Competitiveness" (Mario Draghi).

The fourth proposal, in particular, has caught the attention of regulatory reporting stakeholders:

💬"Launching a simplification revolution, ensuring a clear, simple, and smart regulatory framework for businesses and drastically reducing administrative, regulatory, and reporting burdens, particularly for SMEs. We must adopt an enabling mindset based on trust, allowing businesses 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 statements, Ursula von der Leyen proposed an Omnibus legislation aimed at consolidating and simplifying the CSRD, the Taxonomy Regulation, and the CS3D. A proposal from the European Commission is expected to be published on February 26, 2025.

In the context of European legislation, an omnibus law is a legislative initiative that consolidates multiple amendments or revisions of existing texts into a single proposal. Depending on whether it takes the form of a directive or a regulation, its adoption process differs.

• Omnibus regulation proposal: This modifies existing regulations. It must be adopted by the European Council (which may include the Parliament) or by the European Commission. Once adopted, it applies directly in the legal systems of member states without requiring transposition.
• Omnibus directive proposal: This modifies existing directives. The adoption process follows the same steps as a standard directive: it undergoes readings by each European institution (Council, Parliament, Commission), which may involve multiple back-and-forth discussions. The proposal can be rejected at any stage of the process and, as a directive, it must be transposed into national law by member states.

Since both the CSRD and CS3D are European directives, any modifications to them must go through an omnibus directive—which is one of the key elements of the proposal set to be presented on February 26, 2025.

The omnibus directive is a European regulatory tool that has been used in the past. For example, Directive (EU) 2019/2161—signed at the end of 2019, effective from early 2020, and transposed into French law by late 2021—was designed to modernize EU consumer protection rules.

At Greenscope, we fully support the idea that environmental regulations, such as the CSRD, should drive a profound transformation of business activities across the entire economic landscape. However, we also recognize that the various European regulations and directives adopted since 2019 under the Green Deal can impose a significant workload on European businesses.

For companies, operational challenges are numerous. The high number of required datapoints and the narrative reporting obligations represent a real administrative burden for employees responsible for managing CSRD compliance. According to critics of the CSRD and CS3D, this workload results in high compliance costs, which may negatively impact the competitiveness of European businesses—particularly listed SMEs and mid-sized enterprises (ETIs).

As a result, calls for simplification have been repeatedly made, urging policymakers to prioritize climate-related objectives (and the associated datapoints) within the CSRD or to increase the applicability thresholds of these directives. Notably, German Chancellor Olaf Scholz called for a revision of the directive in early 2025 (source).

Several European regulations are expected to be impacted by the upcoming Omnibus Directive, including the CSRD, CS3D, and the EU Taxonomy. While the exact content of the proposal—set to be submitted on February 26, 2025—remains unclear, the French authorities have proposed significant modifications in a document recently made public by several media outlets.

Regarding the CSRD, the proposals suggest:

• A drastic reduction in the number of datapoints required for reporting.
• The introduction of a new category of companies, "midcaps" (250 to 1,500 employees), which would be subject to the same reporting standards as SMEs. This change would impact over 30,000 companies, according to an EU document.
• Limiting value chain-related reporting requirements.
• Suspending work on sector-specific ESRS standards.
• Postponing the CSRD’s entry into force by two years.

Additionally, the indefinite postponement of the CS3D is being pushed—a measure publicly supported by Éric Lombard, France’s Minister of Economy and Finance. A revision of the Green Asset Ratio (GAR)—a key metric of the EU Taxonomy—is also under consideration.

It is important to note that this Omnibus Directive aims to simplify various regulations beyond ESG reporting, including:

• The REACH regulation on chemical products.
• The simplification of agricultural sector regulations.
• The streamlining of banking sector standards, among others.

To stay compliant with a potentially evolving regulatory framework, anticipation remains key for businesses and reporting stakeholders. A thorough understanding of existing regulations is essential to grasp their foundations and anticipate their implementation. This should be complemented by active monitoring of regulatory developments—at Greenscope, we closely track regulatory updates.

Within companies, it is also crucial to audit and harmonize ESG processes. This approach helps identify inconsistencies, streamline efforts, and prioritize key ESG issues based on strategic relevance. A rigorous assessment of existing processes will enable a more efficient and coherent approach to compliance.

Finally, companies should focus on enhancing the quality of their ESG data. Reliability, traceability, and standardization must become priorities to meet transparency requirements, facilitate audits, and strengthen credibility with investors and stakeholders. This challenge extends far beyond regulatory reporting obligations—it is a core driver of sustainable business performance.