Backslide on green? – EC proposes the ‘Omnibus’ package

June 2025  |  FEATURE | RISK MANAGEMENT

Financier Worldwide Magazine

June 2025 Issue

The European Union's (EU) commitment to sustainability has been a significant focus in recent years, playing a crucial role in the bloc's evolution into a modern, resource-efficient and competitive economy.

Under the 2020 ‘European Green Deal’, the EU’s growth strategy consisted of a package of policy initiatives which set member states on the path to a green transition, with the overarching aim of reaching climate neutrality by 2050.

However, in response to appeals, especially from the French and German governments, to lessen the regulatory load on businesses, the European Commission (EC) introduced the ‘Omnibus Simplification Package’ on 26 February 2025. This proposal aims to reform several laws enacted under the EU Green Deal that mandated businesses to tackle climate change.

With an overarching goal of reducing reporting requirements, the Omnibus will determine to what extent the scope of the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) regulatory frameworks can be limited.

“When Ursula von der Leyen, president of the EC, announced the ‘Omnibus Simplification Package’, she cited competitiveness and reducing regulatory burdens as key motivations,” recalls Belle Benckendorff, EU and western Europe researcher at the Business & Human Rights Resource Centre. “Although framed under the ‘Better Regulation’ agenda, the proposal has faced criticism for contradicting its own guidelines.”

The real driving forces, according to some critics, behind the Omnibus appear to be pressure from business lobbyists and politicians advocating for deregulation. “A letter sent to the EC from German, French and Italian business associations contained a list of 10 requests for the Omnibus,” explains Ms Benckendorff. “According to ReclaimFinance’s investigation, seven of them were either fully or largely incorporated into the Omnibus proposal.”

Key proposals

In summary, the EC believes that the Omnibus package simplifies sustainability due diligence, taxonomy, carbon border adjustments and investment programmes – “simplification promised, simplification delivered”, as characterised by Ms von der Leyen.

According to the EC, its proposals, if adopted, would enable a cost-effective implementation of sustainability rules and save corporates around €6.3bn by “reducing administrative burdens” and take 80 percent of all EU companies out of reach of the CSRD. The EC has also pushed back the start date for larger companies currently scheduled to begin their sustainability reporting in 2026, to 2028.

The number caught by the Taxonomy Regulation is also being scaled back to align with the scope of the CSDDD. The taxonomy’s reporting templates are also being cut back by 70 percent. This includes adjustments to add an optional ‘partially aligned’ reporting category to the taxonomy and a promised simplification of the ‘do no significant harm’ criteria.

For Ms Benckendorff, the Omnibus proposals could be counterproductive, easing the regulations on companies at the expense of sustainability goals, and a recipe for uncertainty across the EU. “The EC’s proposal weakens sustainability reporting and due diligence by returning to voluntarism and removing the civil liability regime and mandatory climate transition plans,” she contends. “This undermines the regulation’s effectiveness. Due diligence could become a tick-box exercise and transition plans a greenwashing tool.

“The tier-one focused approach of the Omnibus proposal is not only below the United Nation’s ‘Guiding Principles on Business and Human Rights’ and the Organisation for Economic Co-operation and Development standards, it creates regulatory uncertainty and contradicts the EU’s original intent for its sustainability laws and Green Deal,” she continues. “Binding legislation was introduced to ensure competitiveness without harming human rights and the environment and precisely because voluntary commitments were previously not enough.”

Simplification versus deregulation

In the view of many observers, the scale of the EC’S proposed changes go well beyond simplification and into the realm of deregulation, and strong opposition is expected. Indeed, thus far, 160 investors representing €6.6 trillion, and business associations representing over 6000 companies, have expressed their objections.

Among those voicing concerns are the Progressive Alliance of Socialists and Democrats in the European Parliament, the Spanish government and politicians from across Europe. Civil society, including Europe’s trade unions, have also spoken against the Omnibus proposal.

“The Omnibus proposal suggests the dismantling of key sustainability laws, including the CSDDD, before it is even implemented,” contends Ms Benckendorff. “This bypasses planned review processes foreseen in the CSDDD itself, which were supposed to enable an evidence-based assessment before any amendments or changes to the law were proposed.

“The EU Commission should consider due diligence in a prudent manner,” she adds. “It is important to recognise the value of risk-based due diligence not only to identify human rights harms but also to manage business risks effectively.”

As the proposals await approval, changes remain possible. But for the moment, it is important to recognise that any dialling back of the EU’s most ambitious reporting requirements does not equate to a deprioritising of sustainability.

On the contrary, balancing the goals of competitiveness and sustainability remains a complex challenge – one requiring parity between short-term economic benefits and long-term environmental and social impacts.

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Fraser Tennant