On Wednesday 26 February, the European Commission delivered on its promise to reduce the regulatory burden on businesses by proposing to simplify and postpone a number of emblematic texts from the previous mandate in an ‘omnibus’ simplification package covering four pieces of legislation: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Taxonomy Regulation and the Carbon Border Adjustment Mechanism (CBAM). In a second omnibus package, it tackles the InvestEU programme, simplifying its framework as well.
To those who cry deregulation and backsliding on climate and human rights, the Commission replies that it is not aiming at anything of the sort. “None of this undermines the green objectives or calls into question what we have done in the past”, tried to reassure the European Commissioner for a Clean, Just and Competitive Transition, Teresa Ribera.
“The past five years have been a period of intense regulatory activity. While our commitment to securing the green transition has not wavered, we must acknowledge that this has come at a cost”, added the European Commissioner for Implementation and Simplification, Valdis Dombrovskis.
CSDDD. For example, the Corporate Sustainability Due Diligence Directive (CSDDD), which has been much criticised by the private sector, has been postponed for a year, according to the Commission’s proposal.
In 2024, after bitter negotiations, the co-legislators agreed on a gradual application from 2027, starting with companies with more than 5,000 employees and a turnover of more than €1.5 billion. These will be deferred for one year, until July 2028.
The deadlines for Member States to transpose the directive have also been extended (from 2026 to 2027).
The Commission is not stopping there. It proposes, for example, to lift the obligation on a company to terminate a business relationship with a supplier that has caused a serious negative impact on the environment and human rights. Transactions must be suspended in such cases, but may be resumed once the situation has been put in order.
Even more significantly, the Commission is revisiting the civil liability of companies that fail to comply with the directive. It removes the possibility of legal recourse at EU level, leaving only the possibility for victims of negative impacts covered by the directive to take their case to national courts.
This does not affect a victim’s right to compensation, says the Commission, which says that such a system saves time by being based on existing legal systems in the Member States.
For Pascal Canfin MEP (Renew Europe, French), the changes to the directive constitute “massive deregulation”.
The Socialists and Democrats, Greens/EFA and The Left political groups also claim that the proposed changes considerably weaken the objectives of the text.
CSRD. Although the CSRD on extra-financial reporting has only been effective for large companies since January 2024, its implementation has posed a number of difficulties (see EUROPE 13410/8, 13491/29).
To remedy this, the Commission is proposing to postpone by two years, until 2028, the reporting requirements for companies currently within the scope, which were required to produce a report from 2026 or 2027.
Secondly, the scope of application would be much narrower, covering only companies with more than 1,000 employees and a turnover in excess of €50 million. According to the Commission, this would remove around 80% of companies from the scope of application.
Through a delegated act, the latter establishes a “value chain cap” that defines a voluntary information standard for small and medium-sized enterprises (SMEs). This text limits the amount of information that companies or banks falling within the scope of the CSRD can request from SMEs in their value chain.
In addition, the European Sustainability Reporting Standards (ESRS) would be considerably reduced, with 70% fewer data points. According to a Commission working document, all these measures would reduce administrative costs for businesses by €4.4 billion.
To see the proposed changes to the CSRD and CSDDD: https://aeur.eu/f/fnp and the proposed deferral of application: https://aeur.eu/f/fno
Taxonomy. The Commission is continuing its momentum. It has prepared draft amendments to reduce the reporting obligations of the EU Taxonomy Regulation by limiting them to the largest companies, corresponding to the scope of the CSDDD.
The size of the reporting templates, which are imposed by this regulation have been reduced by around 70%.
The Commission is also introducing the so-called “materiality” principle, which will allow companies not to have to declare the type of activity they consider “not material” in their reports.
CBAM. The transitional phase in the application of the Carbon Border Adjustment Mechanism (CBAM) has led to a number of shared observations: in its current form, the tool does not effectively target imported carbon emissions.
The Commission is therefore proposing to exempt from CBAM operators whose combined imports of steel, aluminium, fertiliser and cement do not exceed 50 tonnes in any one year. This should bring relief to no less than 91% of businesses, while still targeting 99% of imported emissions on CBAM products.
This omnibus also proposes other adjustments to the procedure, which we have previously detailed (see EUROPE 13586/8), such as extending the deadlines for obtaining CBAM certificates each year.
On the other hand, the effective implementation date of the mechanism has been maintained for the beginning of 2026, contrary to what we had written. However, importers will have a margin to purchase CBAM certificates (February 2027).
To see the proposal: https://aeur.eu/f/fo6
Investments. Finally, the Commission is proposing to revise the InvestEU regulation in order to mobilise up to €50 billion in additional private and public investment (see EUROPE 13571/19).
It estimates that it would be possible to increase the public guarantee from the EU budget by €2.5 billion by 2027 by re-using budgetary resources or ‘reflows’ from previous financial instruments or programmes: the European Fund for Strategic Investments (EFSI), the debt instrument of the European Interconnection Model (EIM), and the InnovFin debt facility.
The European Competitiveness of Enterprises and SMEs (COSME) programme, initially mentioned among the sources of funding in a draft text obtained last Thursday by Agence Europe (see EUROPE 13584/1), no longer features in the final proposal.
In addition, the European Commission is proposing to offer Member States the possibility of allocating funds under shared management, from the Recovery and Resilience Facility (RRF) or other national resources, to a financial instrument of the InvestEU programme in order to stimulate equity investments and the granting of debt instruments in currencies other than the euro, without any risk of change for the EU budget.
Finally, the Commission estimates that “around €350 million in savings” could be generated by measures to simplify reporting for SMEs and social economy enterprises. These savings were estimated at €200 million in the draft text (see EUROPE 13584/1).
To see the proposal for an InvestEU regulation: https://aeur.eu/f/fo4 (Original version in French by Léa Marchal, Anne Damiani and Bernard Denuit)