The European Commission’s Omnibus Proposal is a step back

Following just three months of hasty discussion, the European Commission has presented its Omnibus proposal. However, rather than strengthening Europe’s sustainability leadership and competitive advantage in the green transition, the proposal weakens the EU Green Deal, undermines the 1.5°C climate target, and jeopardises Europe’s long-term economic resilience.

The Omnibus proposal introduces key changes, including:

• A one-year postponement of the Corporate Sustainability Reporting Directive (CSRD) for companies in the second reporting wave, and a delay for the first batch of the Corporate Sustainability Due Diligence Directive (CSDDD).

• Raising the reporting eligibility for mid-sized companies from 250 to 1,000 employees, effectively exempting 80% of businesses from sustainability disclosure.

• An increase in the minimum thresholds for CBAM and Taxonomy, leading to exclusion of smaller importers and producers.

• Changes to the content of the European Sustainability Reporting Standards (ESRS) only after the proposal has been accepted by the European Commission and the European Parliament.

The Commission justifies these changes primarily on two grounds: perceived pressure on deregulation from the US following Donald Trump’s return and the Draghi report, which highlights the EU’s sustainability reporting framework as a major administrative burden. However, we believe that this argument is flawed, for the following reasons:

1. Reporting costs will come down after the first round. Sustainability reporting is a new process for many businesses, and initial implementation costs are naturally higher due to the need to hire consultants, purchase software, or build in-house expertise. Over time, these costs will decrease as companies develop internal knowledge, consultants become more efficient, and software solutions improve. This is precisely why larger corporations were required to report first - they have the resources to absorb initial costs more easily.

2. CSRD is not just a reporting obligation, but a business strategy tool. The CSRD is not mere bureaucracy; it provides companies with crucial insights into their future risks and opportunities through double materiality assessments, climate resilience analyses, and transformation planning. For example, many companies are only now beginning to understand their biodiversity impacts and dependencies. Scaling back reporting requirements means many businesses will remain unaware of the risks that could threaten their long-term viability.

The proposal also threatens sustainability-focused start-ups that have built their business models around supporting CSRD compliance. The uncertainty created by shifting regulatory requirements weakens investor confidence and financial planning. Many software companies rely on servicing more than 40,000 mid-sized firms. The Omnibus proposal eliminates this market, stifling an emerging industry where Europe could take a global leadership role. As the US steps back from sustainability commitments, Europe has an opportunity to champion green industries. Yet the Omnibus moves in the opposite direction.

Volt MEP Damian Boeselager stresses, ‘Less red tape for small companies is great, if done right. But this sustainability reporting package may damage clean tech’s ability to access sustainable funding, and without that, it will be hard to achieve a climate-neutral economy. We’ve seen this playbook across the Atlantic: cutting too much and fixing the fallout later does not work.’

Volt acknowledges that administrative burdens can and should be reduced, but this should be done based on real experience. Instead of dismantling sustainability regulations before their benefits are realised, Volt proposes:

• Simplifying how to report, not what to report, by harmonising methodologies and implementing guidance, which will ease compliance without undermining predictability for companies.

• Waiting for at least one full reporting cycle before making major revisions to the CSRD, allowing regulators to assess which parts can be streamlined without weakening transparency.

• Maintaining the reporting obligation for mid-sized companies. A well-structured double materiality analysis helps prioritise relevant reporting topics, reducing unnecessary complexity.

The Omnibus proposal is a step backward for both Europe’s sustainability ambitions and its economic competitiveness. It sends the wrong signal at a time when businesses and investors need clarity and long-term direction.

The EU should not bow to pressure from external forces or short-term cost concerns. Instead, it must remain committed to a resilient, future-proof economy and one that is competitive because it is sustainable, not despite it.

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Opinion article by Volt Europa Policy Shapers Thijn Kortenbach, Jakob Habsburg and Lars Tum