EU unveils details of Omnibus simplification for sustainability reporting

The first legislative packages to simplify sustainability reporting will be issued next month, with a focus on the EU taxonomy, sustainability due diligence and the carbon border adjustment mechanism.

In its Competitiveness Compass, a draft of which was leaked earlier this week, the European Commission says the first Omnibus will aim to ensure better alignment with the needs of investors, and that smaller companies along the supply chain don’t inadvertently get subjected to “excessive reporting requests”.

25-35% reduction in reporting burden

One of the strategies the Commission will use to achieve this will be to create a new definition of small mid-caps. 

“By creating such a new category of company, bigger than SMEs but smaller than large companies, thousands of companies in the EU will benefit from tailored regulatory simplification in the same spirit as SMEs,” the Compass notes.

This new category will be applied to all sustainability reporting requirements, including the Carbon Border Adjustment Mechanism (CBAM) and, presumably, the Corporate Sustainability Reporting Directive (CSRD).

With these adjustments to existing and upcoming regulations, the EU is aiming to deliver “an unprecedented simplification effort”, reducing the reporting burden by at least 25% for all companies and 35% for SMEs. In total, this could save companies €37.5 billion in compliance costs by 2030.

Focus on innovation for competitiveness

Beyond reporting, the Competitiveness Compass lays out policy steps the EU plans to take to restore the bloc’s competitiveness – which are mostly based on the competitiveness report produced last September by former European Central Bank President Mario Draghi.

“Europe has everything it needs to succeed in the race to the top. But, at the same time, we must fix our weaknesses to regain competitiveness. The Competitiveness Compass transforms the excellent recommendations of the Draghi report into a roadmap. So now we have a plan. We have the political will. What matters is speed and unity. The world is not waiting for us. All Member States agree on this. So, let's turn this consensus into action,” said EU Commission President Ursula von der Leyen.

Measures will include creating a dedicated ‘EU Start-up and Scale-up Strategy’ to address the obstacles preventing new companies from emerging and scaling up; promoting the access of innovative companies to European research and technology infrastructures and EU-funded intellectual assets; and increasing research and development funding.

Staying the course on decarbonisation

At the same time, the Commission has reasserted its intention to deliver the EU’s climate commitment to reduce emissions by 90% by 2040. This will be done in part by incentivising clean energy and industry and creating an ‘Industrial Decarbonisation Accelerator Act’ to extend accelerated permitting to sectors in transition.

The EU government will also create demand incentives for low-carbon products, such as benchmarking and labelling, as well as mandates or preference in public procurement or financial incentives. 

“As the Draghi Report shows, decarbonisation policies are a powerful driver of growth when they are well integrated with industrial, competition, economic and trade policies,” the Compass adds.