The European Commission’s new omnibus package slashes reporting requirements for thousands of companies while preserving green objectives, aiming to boost competitiveness by cutting red tape across key sustainability frameworks.
EU sustainability rules are undergoing a dramatic overhaul. The European Commission has delivered on its promise to cut red tape, announcing a comprehensive simplification package expected to save businesses €6.3 billion annually in administrative costs.
The proposals, released on February 26, 2025, aim to boost competitiveness while maintaining the bloc’s commitment to climate goals. The package represents the Commission’s first significant step in its ambitious simplification agenda, targeting a reduction of at least 25% in administrative burdens across the board and at least 35% for SMEs by the end of its mandate.
The measures cover several key areas of environmental regulation, including sustainability reporting, due diligence requirements, the EU Taxonomy, and the carbon border adjustment mechanism (CBAM).
“Simplification promised, simplification delivered!” declared Commission President Ursula von der Leyen.
“We are presenting our first proposal for far-reaching simplification. EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence and taxonomy. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals.”
Significant changes to EU sustainability reporting rules
One of the most significant changes affects the Corporate Sustainability Reporting Directive (CSRD). The Commission proposes removing approximately 80% of companies from its scope, focusing obligations only on the most prominent firms with more than 1,000 employees or turnover above €50 million – those most likely to have substantial environmental impacts.
For companies that remain in scope, the proposals include a two-year postponement (until 2028) of reporting requirements for those currently required to report as of 2026 or 2027. The package also reduces EU Taxonomy reporting obligations by roughly 70% and limits mandatory reporting to only the largest companies.
Commissioner Maria Luís Albuquerque emphasised that the simplification maintains environmental ambitions: “We are defining a path towards more growth-friendly, more usable and proportionate EU sustainable finance rules. It’s about striking the right balance between reducing excessive administrative burden and focusing on our longer-term goals.”
Streamlined due diligence and supply chain monitoring
The overhaul also simplifies sustainability due diligence requirements under the Corporate Sustainability Due Diligence Directive (CSDDD). Companies will now generally focus systematic due diligence only on direct business partners, and assessments will be reduced from annual to every five years, with ad hoc assessments where necessary.
The proposal removes EU civil liability conditions while preserving victims’ compensation rights under Member States’ civil liability regimes. Application of requirements for the most prominent companies will be postponed by one year (to July 2028).
Commissioner Michael McGrath said the changes strike a balance: “We are simplifying compliance for large companies while upholding the core objective to prevent companies from indirectly contributing to exploitative business practices harming human rights, the climate, or the environment through their value chains.”
CBAM simplification for small importers
The most dramatic simplification comes from the Carbon Border Adjustment Mechanism (CBAM). The Commission is introducing a cumulative annual threshold of 50 tonnes per importer, exempting approximately 182,000 importers (90% of the total) – primarily SMEs – from CBAM obligations while covering over 99% of emissions in scope.
“This is expected to bring about €1.12 billion in savings while still covering over 99% emissions in scope,” noted Commissioner Valdis Dombrovskis. The new threshold will also save public authorities in the Member States approximately €87.5 million through reduced processing.
Investment capacity boost
Beyond regulatory simplification, the package optimises several investment programs, including InvestEU, EFSI, and legacy financial instruments. These changes are expected to mobilise around €50 billion in additional public and private investments and generate €350 million in cost savings through simplified administrative requirements.
Business reaction and next steps
The proposals have generally been met with relief from the business community, which had long complained about overlapping requirements and implementation costs. Environmental groups, however, have expressed concerns about the potential weakening of standards.
The legislative proposals will now be sent to the European Parliament and Council for consideration. In a sign of urgency, the Commission has called for the fast-track adoption of certain measures, particularly those postponing CSRD disclosure requirements and CSDDD transposition deadlines.
Commissioner Stéphane Séjourné, Executive Vice President for Prosperity and Industrial Strategy, said: “We can show that Europe is not only an incredible market to invest, produce, sell and consume but also a simple market. This proposal delivers real simplifications – less administrative burden, easier access to funding, and clearer, more predictable rules. We keep our objectives but change the way to achieve them better.”
The Commission has indicated that additional simplification packages targeting small mid-caps, farmers, and digital reporting are in development, demonstrating its commitment to comprehensive regulatory reform while maintaining Europe’s green transition goals.
