The European Commission has adopted new proposals that will cut red tape and simplify EU rules for citizens and businesses.
In February's Competitiveness Compass, the Commission set out its vision to make the EU's economy more prosperous and competitive, building on the recommendations of the Draghi report. To regain competitiveness and unleash growth, the EU needs to foster a favourable business environment and ensure that companies can thrive.
The first two so-called Omnibus packages of simplification measures aim to achieve this. The measures will focus the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment, and make sure they do not burden smaller companies.
The first package covers steps to:
The Proposals would remove an estimated 80% of companies from the scope of Directive (EU) 2022/2464, the Corporate Sustainability Reporting Directive (CSRD), and push back reporting timelines for companies in the scope of both the CSRD and Directive (EU) 2024/1760, the Corporate Sustainability Due Diligence Directive (CSDDD).
An additional proposal would simplify and strengthen the scope of the EU's Carbon Border Adjustment Mechanism (CBAM) under Regulation (EU) 2023/956, establishing a carbon border adjustment mechanism, by introducing a new exemption for importers below a certain annual threshold, and postponing the application dates for CBAM certificates and declarations.
We have covered each of these key proposed changes below.
Corporate Sustainability Reporting Directive (CSRD)
The current version of the CSRD applies to companies that reach two of three baselines:
The revised proposal would reduce the scope of the CSRD to only apply to companies with more than 1,000 employees that hit the turnover or balance sheet thresholds.
The Commission will also delay reporting for companies due to comply with the CSRD starting in 2026 by two years and align the CSDDD reporting timeline with that delay. This deferred timeline will also push out the first wave of reporting requirements for the largest companies by a year to 2028.
Companies in the scope of the CSRD will report using a revised and simplified version of the European Sustainability Reporting standards (ESRS). The Commission committed to revising the ESRS to:
For companies no longer in the standard, the Commission plans to adopt a voluntary reporting standard aligned with the European Financial Reporting Advisory Group. The Commission said the standard will limit the information in-scope banks or corporations can request from companies in their supply chain with fewer than 1,000 employees.
Corporate Sustainability Due Diligence Directive (CSDDD)
When it comes to the CSDDD, the packages remove the obligation for companies to "systematically conduct in-depth assessments" of adverse effects in its supply chain. Now, companies will only be required to do a "full due diligence" of its value chain, beyond direct business partners, "only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there".
The revisions also:
Carbon Border Adjustment Mechanism (CBAM)
The EU's CBAM, established by Regulation (EU) 2023/956, establishes a carbon border adjustment mechanism to address greenhouse gas emissions which are embedded in specified goods imported into the customs territory of the EU. It aims to address and prevent the risk of carbon leakage, reducing global carbon emissions and supporting the goals of the Paris Agreement.
Concerns have been noted, particularly by SME's over the administrative burden caused by some of the measures set out in CBAM. In order to address these concerns, simplify and strengthen the EU's CBAM, a proposal has set out amendments to the mechanism.
Importers of small quantities of CBAM goods, which represent very small quantities of embedded emissions imported into the Union and in most cases correspond to SMEs and individuals, will be exempt from CBAM obligations through the introduction of a new de minimis threshold exemption. This would exempt importers where imported CBAM goods do not exceed 50 tonnes mass, cumulatively per calendar year from the obligations relating to CBAM authorisations, declarations and the purchase of CBAM certificates.
The level of this de minimis threshold is believed to keep 99% of emissions within the scope of CBAM, while exempting around 99% of importers.
Further amendments proposed seek to facilitate those importers who remain in scope of CBAM with their reporting requirements. These include:
What happens next?
The proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.
In its work programme for 2025, the Commission announced a series of measures to address overlapping, unnecessary or disproportionate rules that create barriers for EU companies. Collectively, with these measures, the Commission wants to reduce administrative burdens by 25%, and by 35% for small and medium-sized businesses, by the end of its mandate in 2029.
European Commission President, Ursula von der Leyen promised: "more simplification is on the way".
"This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals".
For more information on this subject, see:
