Aiming to make homegrown businesses more competitive, the European Commission is pushing to introduce a wide-ranging “Omnibus package”, promising to streamline and simplify existing sustainability reporting and due diligence rules.
EU leaders have sought to respond to growing discontent among businesses operating there, with a recent report from former Italian prime minister Mario Draghi — commissioned by Commission president Ursula von der Leyen — blasting excessive regulation and under-investment in the bloc.
Key proposals include simplifying amending a number of existing regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation.
Not everyone supports the plans, which are still to be voted on. A group of 90 organisations led by WWF EU has criticised the package, expressing concerns it could undermine existing sustainability reporting standards.
Another group of 240 researchers, primarily economists, suggested it may dilute the effectiveness of sustainability laws. Large European corporations, such as Nestlé and Unilever and startups alike have warned that the move could weaken sustainability reporting and due diligence requirements.
“The proposal is completely stupid because half of Europe has already transposed the directive and the obligation is already imposed,” says Alexis Normand, cofounder of Greenly.
“More than 1,000 companies have already done it, and you're basically telling them, ‘You guys are idiots, you complied with the law’. So it’s rewarding the countries that didn't transpose it.”
Greenly has been part in forming a coalition with others in favour of the current CSRD.
“I have found myself to be allied with people I did not expect would join the cause, which are a lot of investors and bankers and financial institutions. They want this data because they themselves have incentives to reduce the emissions intensity of their portfolios,” he tells Sifted.
So what are the changes and how do they affect the climate tech scene?
Omnibus proposal
Corporate Sustainability Reporting Directive (CSRD)
Introduced in 2023, this directive requires companies to report on their environmental, social and governance performance.
The Omnibus package proposes a lowered threshold for mandatory sustainability reporting. As of now, companies with over 250 employees were required to report; under the new proposal, only companies with more than 1,000 employees and either a turnover exceeding €50m or a balance sheet total above €25m must report.
For companies still within the CSRD's scope, Omnibus introduces simplified reporting templates, reducing the total required data points by nearly 70%. Additionally, companies won’t have to report on activities that have little financial impact, meaning anything that makes up less than 10% of their revenue, spending, or assets.
Paris-based climate tech Greenly, provides a platform that enables SMBs to assess their emissions, a service that has been in increased demand as regulations, like the CSRD, kicked in to report their environmental impact.
The startup raised a $52m Series B last year and is one of the best funded European startups in the carbon accounting space. The CSRD represent 20% of Greenly’s pipeline and the proposal would impact the company.
“I estimate that half of those, around 10% of our pipeline, are not going to do sustainability reporting if it is not compulsory,” he says. The other half would still pursue ESG reporting but at a lighter level, using voluntary standards for SMB’s like VSME.
Corporate Sustainability Due Diligence Directive (CSDDD)
This directive calls for responsible corporate behaviour in companies’ operations and value chains.
For EU companies with more than 500 employees and a net turnover of €150m+ worldwide, the current directive cites 2027 as the deadline to adhere to the CSDDD. Under the new proposal, the timeline would be delayed by one year before the rules come into effect.
The new proposal also suggests that due diligence for the value chain of the companies should only be focused on direct partners and not cover direct and indirect suppliers as in the current directive.
EU Taxonomy Regulation
This was originally designed as a classification to clarify which economic activities are environmentally sustainable.
The Omnibus proposal would see the same lowered threshold as in CSDR, with no obligation for companies with less than 1,000 employees to report. It would also change the current regulation so that companies should be allowed to be partially aligned with the taxonomy and don’t have to report on business activities that are less than 10% of turnover.
“So what you're seeing is a backlash of people who don't want to transition, and I agree that it's a transition,” says Normand. “So we have to set the pace and no one knows what the right pace is, except everybody knows it's too slow.
“In the worst case scenario, it will be okay for us as a business, but it's such a missed opportunity if we delay everything by two years.”
For carbon accounting startups that have already seen diminishing interest from investors in the last couple of years, the new proposal wouldn’t make things easier.
According to Lubomila Jordanova, founder of Plan A, a Berlin-based carbon accounting company, her startup will not be affected by Omnibus because it doesn't only focus on compliance but integrates decarbonisation strategies and ROI (return on investment) planning. It also collaborates with large companies and their value chain participants.
“There has been an emergence of numerous companies offering niche solutions for CSRD-related topics, such as DMA or biodiversity. This trend mirrors what we observed during the early days of the carbon accounting boom,” she says.
“The CSRD change positions these companies as “nice-to-have” solutions rather than “must-have”, as their functionalities are not inherently embedded in the proposed CSRD reporting standards.”
“But we also need to calm down. This proposal has not been voted through yet, and it will be another few months. Until then, the current regulation still stands,” she says.
Falling interest in sustainability investment
It’s not only the carbon accounting startups that may lose business due to a slackening of sustainability regulation.
Gordon Tveito-Duncan, CEO and cofounder of GaiaLens, an AI-powered sustainability analytics platform for institutional investors is also sceptical about what kind of signal it sends to investors.
“From the investor side, a lot of people were looking forward to the CSRD coming into effect, because that would lead to better company data in terms of sustainability metrics, which are generally hard to get,” Tveito-Duncan says.
“The CSRD was supposed to be the big thing in the space this year, and this gives a signalling effect of a loss of confidence in the space,” says Tveito-Duncan.
With the current sustainability framework, he believes that it would lead to more confidence and trust in ESG data and therefore lead to more business activity around it.
“I fear that it may reduce flows into sustainable investing,” he says.
He says that the EU have been the global leaders in pushing sustainability regulation and creating these sustainability frameworks and disclosure regimes. But with president Donald Trump taking office in the US, things have changed, quickly.
“A lot of people in this space, just to speak from sustainable finance, are surprised at how quickly the EU has been affected by Trump,” Tveito-Duncan says.
“Given that the EU has embedded some element of sustainability in pretty much all its policies and regulations for the past two decades and suddenly seems to be under review straight away, within a month of Trump coming into office.”
“I would have thought the EU would hold out for a bit longer, maybe not the whole year, but most of the year.”
Sifted approached the European Commission for comment.
