In February, the European Commission adopted a proposal to drastically reduce sustainability reporting requirements in the European Union. The Omnibus Simplification Package includes a “stop the clock” directive to delay reporting requirements until 2028 to allow the legislative bodies time to debate the overall changes. One of those bodies, the Council of the EU, approved the delays on March 26. Now, all eyes shift to the Parliament as they consider the proposal and possible amendments before an early April vote.
As part of the European Green Deal, the EU pushed through a series of regulations aimed at businesses’ climate related activities. Starting in 2020 with the adoption of the Taxonomy for Sustainable Activities that created a classification system for business and investors to know what activities are considered green or climate friendly. In 2023, they adopted the Corporate Sustainability Reporting Directive to create requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions. In 2024, they adopted the Corporate Sustainability Due Diligence Directive, adding additional reporting requirements, as well as legal liability, for companies in relation to their value chain.
While these gains were praised by climate and environmental activists, as the obligations in the directives became clear, the business community began to push for reforms. During the 2024 European Parliament elections, the burden on businesses became a major theme, with the European Green Deal taking the majority of the blame for the EU’s faltering economy. The elections resulted in a shift to the right, with environmentally focused parties losing seats.
The reform process began almost immediately. In November 2024, Ursula von der Leyen, president of the European Commission, announced her intention to revamp the Taxonomy, CSRD, and CSDDD to reduce the burden on businesses. That bill was proposed on February 26.
The Omnibus Simplification Package included two directives. The first directive delays implementation of the CSRD and CSDDD until 2028, for fiscal year 2027. The second directive significantly reduces the number of businesses that must file sustainability reports under the CSRD, limiting it to large companies with companies with over 1,000 employees and €450-plus million in annual net turnover. It also reduces the enforcement mechanism of the CSDDD, limiting pecuniary damages and restricting who can bring civil action.
Now that the Commission adopted the proposal, it has been sent to the European Parliament and the Council of the European Union. Both bodies have distinct internal process of negotiating a position. In the Council, approval is dependent on the Committee of Permanent Representatives of the Governments of the Member States to the European Union, known as Coreper. On March 26, Coreper voted to approve the delay.
In Parliament, the process is more public and follows a traditional legislative process. In an effort to fast-track the vote, by invoking an urgent procedure that prioritizes the vote. The posted draft agenda for the April 1 Committee on Legal Affairs, known as JURI, notes a “vote on request for urgent procedure” under Rule 170. The rule states “A request to decide urgently on a proposal submitted to Parliament pursuant to Rule 48(1) as a result of unforeseen developments may be made to Parliament by the President… Such requests shall be made in writing and supported by reasons…” If approved, the item will get priority. Some estimate that the directive could be adopted as early as April 3, giving members of parliament until April 2 to propose amendments.
Once adopted, sustainability reporting in the European Union will be paused until 2028, for fiscal year 2027. Focus will then shift to the other directive and what changes will be made to the CSRD and the CSDDD.