Is Omnibus Set to Weaken EU Sustainability Disclosure?

As the European Union edges closer to finalising its landmark Omnibus proposal – a sweeping package designed to simplify and streamline sustainability reporting – nearly 200 organisations, including more than 150 leading businesses and investors, have issued an open letter warning policymakers against diluting the bloc’s sustainability framework. 

The joint statement, released on 1 July, urges the European Parliament and Council to preserve the core elements of the EU’s sustainability rules, which are seen as critical for competitiveness, growth and the continent’s climate ambitions.

“For the EU to reach its industrial decarbonisation and competitiveness objectives, the Draghi report identifies an annual investment gap of €800 billion,” explains Aleksandra Palinska, Executive Director at the European Sustainable Investment Forum (Eurosif).

“Private capital is needed to bridge this gap. To play their role, investors need quality, reliable and comparable corporate disclosures, including on sustainability risks and impacts. EU rules on corporate sustainability reporting have been expected to fill the existing data gap.

“Sweeping changes to these rules, before they are fully implemented, will create regulatory uncertainty and are likely to hinder the contribution investors can make to sustainable growth. 

“Instead, the focus should be on supporting companies to implement the rules effectively and if necessary targeted adjustments of rules at the technical level.”

“The EU Taxonomy, CSRD and CSDDD are essential tools that empower investors to drive capital towards a sustainable, net zero future,” says Andreas von Angerer, Head of Impact at Inyova. 

“Any uncertainty or disruption to this framework not only risks undermining progress but also puts those progressive businesses already leading the way at a disadvantage, slowing the transition and hindering Europe’s global leadership.”

Understanding the EU Omnibus proposal

The EU Omnibus Regulation, announced in late 2024 and set for publication in 2025, aims to consolidate and simplify overlapping sustainability requirements under the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy Regulation. 

While the proposal’s primary goal is to reduce administrative burdens – cutting reporting requirements by 25% for large companies and 35% for SMEs – it has sparked debate over whether simplification could come at the expense of the EU’s environmental and social objectives.

The Omnibus proposal responds to calls from business leaders and policymakers for a “simplification revolution,” as outlined in the Budapest Declaration and the EU’s Competitiveness Compass. 

However, recent drafts under consideration by the Parliament and Council threaten to dramatically narrow the scope of sustainability reporting, potentially exempting tens of thousands of companies from key obligations.

“Corporate sustainability disclosure rules are essential to enabling investors to efficiently allocate capital towards the most sustainable companies and projects, financing the EU’s energy transition while also identifying and managing sustainability risks in their portfolios as part of their fiduciary duty,” says Héléna Charier, Head of SRI solutions at La Banque Postale Asset Management.

“While technical optimisations and further assistance to the market in implementing the framework would be welcomed, maintaining a robust and predictable corporate and financial disclosure framework is crucial for advancing a sustainable European financial system that supports European competitiveness.”

The global state of sustainability reporting

Globally, sustainability reporting is undergoing rapid transformation. 

The EU’s CSRD is among the most ambitious, requiring large and listed companies to disclose detailed information on ESG impacts, risks and opportunities. These disclosures, based on European Sustainability Reporting Standards (ESRS), are intended to help investors and stakeholders assess companies’ sustainability performance and align capital flows with the European Green Deal.

Other major economies are also moving toward mandatory ESG reporting, with frameworks like the International Sustainability Standards Board (ISSB) and the Task Force on Nature-related Financial Disclosures (TNFD) gaining traction.

Interoperability between EU rules and these international standards is a key concern for global businesses.

Who signed the open letter?

The joint statement is endorsed by a powerful coalition of coordinating organisations, including:

• Eurosif (European Sustainable Investment Forum)
• Institutional Investors Group on Climate Change (IIGCC)
• Principles for Responsible Investment (PRI)
• Corporate Leaders Group Europe (CLG Europe)
• Global Reporting Initiative (GRI)
• Climate think tank E3G

Among the 198 signatories are major multinationals such as French utility EDF, Dutch lighting giant Signify, Ingka Group (IKEA’s parent company), Vattenfall, Nokia, Allianz, La Banque Postale Asset Management, Nordea and Triodos Bank. The group spans 84 investors and financial institutions, 29 companies, 42 service providers and 43 other supporting organisations.

“Europe will need finance and corporate sectors to work together to meet economic competitiveness, climate and nature goals,” says Nathan Fabian, Chief Sustainable Systems Officer at Principles for Responsible Investment (PRI). 

“Wholesale changes to key sustainable finance tools and frameworks during their implementation creates uncertainty in the market and risks undermining the ability of economic actors to communicate clearly, setting back economic transition. 

“Undoing the progress made is not in the interests of investors either. Investors would benefit from increased consistency of the framework, but sustainability information is essential to investors’ confidence and allocation decisions. 

“The objectives and integrity of the sustainable finance framework must be maintained.”

What does the open letter hope to achieve?

The letter calls on EU policymakers to:

• Retain double materiality reporting across all ESG topics and ensure alignment with international standards (GRI, ISSB, TNFD)
• Maintain a meaningful CSRD scope covering companies with 500+ employees
• Preserve value chain transparency beyond the proposed cap, which would limit reporting to standards designed for micro and small businesses
• Require credible climate transition plans
• Enforce risk-based due diligence under the CSDDD.

Signatories argue that weakening these rules would undermine transparency, investor confidence and the EU’s ability to attract capital for the green transition. 

They warn that drastic limits – such as raising reporting thresholds to only the largest firms – would leave the vast majority of European companies outside the scope of sustainability obligations, hampering progress toward decarbonisation and responsible business conduct.

“We appreciate the European Commission’s omnibus proposal, which aims to simplify regulations, enhance competitiveness and reduce administrative burdens,” says Ophélie Mortier, Chief Sustainable Investment Officer at DPAM Degroof Petercam. 

“However, after years of significant regulatory volatility concerning ESG factors, we urge the need for stability. 

“This stability is crucial for long-term investments and for incorporating ESG considerations into sound investment decisions, integrating relevant ESG factors into the financing of the real economy.”

As the European Parliament prepares for final negotiations, the signatories’ message is clear: targeted simplification is welcome, but not at the cost of the EU’s hard-won leadership in sustainability.