Balance between reporting and proportionality in climate policy

🇪🇺 On the Ground in Brussels: The EU Omnibus Proposal and the Sustainability Crossroads 🔙 The European Commission’s Omnibus I & II package aims to reduce regulatory burdens by 25% and by 35% for SMEs, with the goal of simplifying sustainability regulations. However, a closer look reveals a critical debate: Does this proposal strike the right balance between easing administrative complexity and maintaining the integrity of the EU’s sustainability commitments? Critical changes: 📌CSRD scope reduced—Only companies with over 1,000 employees and €50M turnover must report, excluding 80% of previously covered firms. 📌Sustainability reporting delayed—Companies originally set to report in 2026-2027 now start in 2028. 📌Weakened due diligence obligations—Indirect value chain risks assessed only when "plausible information" of harm exists, rather than systematically. 📌CBAM exemptions expanded—90% of small importers no longer required to comply. 📌Lighter Taxonomy reporting—70% fewer required data points, no mandatory reporting for firms below €450M turnover, and a new materiality threshold. 📌€50B investment boost—Looser reporting obligations for financial intermediaries and SMEs to unlock public and private capital. Critical Risks: 🔹 Transparency at Risk – Limiting CSRD and CSDDD reporting could restrict access to essential sustainability data. 🔹 Greenwashing Risks – Voluntary Taxonomy reporting could reduce standardization, making sustainability claims harder to verify. 🔹 Competitiveness vs. Climate Commitments – Cutting sustainability obligations may boost short-term investment but hurt long-term resilience. 🔹 Regulatory Capture – If drafted under heavy lobbying influence, is the EU prioritizing corporate interests over public good? As we navigate the implications of this legislative shift, it is essential to examine whether these regulatory rollbacks truly serve the broader interests of sustainable economic growth—or if they disproportionately benefit corporate actors at the expense of long-term climate and social objectives. 🚨The Feedback Period Is Open! Have Your Say! The European Commission is accepting feedback on this draft until 26 March 2025. This is an opportunity to ensure that policy decisions reflect a balanced, transparent, and forward-looking approach to sustainability regulation. 👉 EU Feedback Portal: https://lnkd.in/eNkXvZvC #Sustainability #EU #CSRD #CBAM #DueDiligence #GreenDeal #ESG #CorporateAccountability

To support its implementation, the IFRS Foundation has educational material focusing on how #companies should disclose the anticipated financial effects of sustainability-related risks and opportunities. This is intended to provide practical guidance so that corporate disclosures become more meaningful for investors and creditors. Disclosing anticipated financial effects is crucial because it illustrates how climate risks and opportunities may influence a company’s business model, strategy, financial position, performance, and cash flows in the future. This information complements traditional financial statements. Companies are expected not only to report current impacts such as higher insurance premiums due to flooding but also future impacts, for example investments in energy-efficient technology or potential demand reductions resulting from shifting consumer preferences. The International Sustainability Standards Board (ISSB) emphasizes that disclosures should include both quantitative aspects, such as figures, estimates, or ranges, and qualitative aspects, such as narratives, context, and assumptions. However, these disclosures should not duplicate financial statements but rather complement them with consistent assumptions and data. This ensures that investors gain a holistic understanding of how companies are responding to sustainability-related risks and opportunities as well as their long-term prospects. To address challenges in data availability, the International Sustainability Standards Board (ISSB) introduced proportionality mechanisms. The principle is that companies are only required to use all reasonable and supportable information available at the reporting date without incurring undue cost or effort. Sources may include internal data such as risk management processes and operational reports, as well as external data such as public databases and industry analyses. Over time, the quality and depth of disclosures are expected to improve as companies enhance their capabilities, thereby strengthening transparency for investors.

⚖️EU Observer today: Can an 80 % rollback of EU sustainability rules survive the EU Charter test? EU Observer publishes a feature today that treats the Omnibus "simplification” package as a possible breach of EU fundamental-rights law, drawing on Cirio Law Firm's legal analysis. I was honoured to be interviewed for the piece. Here is the article: https://lnkd.in/dNytTxCT (requires registration/paywall). With additional insights from Andreas Rasche (CBS). ➡️ Key legal point Under Article 52(1) of the EU Charter of fundamental rights and the European Convention on Human Rights, a reduction of protection of rights recognised under the Charter and Convention most likely requires a documented test of necessity and proportionality. No such test accompanies the proposed cuts to e.g. CSRD scope, the Tier-1 limit on due diligence, or the removal of the obligation to implement climate-transition plans. ➡️ Business risk If the package is adopted unchanged, parts could be annulled in Luxembourg (ECJ) or Strasbourg (ECtHR), following likely challenges from NGOs or potentially member states with strong green agendas. The result: prolonged uncertainty over reporting duties, liability exposure and capital-market expectations—precisely what the reform aims to avoid. ➡️ A more balanced route is available Retain the duties to disclose material risks and to act where harm can be prevented, but simplify through clearer definitions, streamlined formats and proportionate audit requirements. Better for business, planet and people. Have you mapped the potential litigation risk if the package goes through as drafted? I would be very interested in views from corporate counsel, policy-makers, ESG experts and civil-society practitioners. #EUlaw #CSRD #LegalCertainty #CSDDD

The proposed Omnibus Simplification Package by the EU presents a pivotal moment for #sustainability reporting and #climate regulation across the continent and potentially beyond. While the intention behind the original directives of the #EU Green Deal was commendable—aiming to combat #climatechange and align with the Paris Agreement—the reality is that these requirements have imposed significant regulatory burdens on businesses, particularly small and medium-sized enterprises (SMEs). The looming reforms aim to strike a balance between environmental accountability and economic viability, but this raises critical questions about the fundamental commitment to sustainability. On one hand, reducing the reporting burden on businesses could enhance their competitiveness and encourage investment, especially in sectors that are crucial for the transition to a greener economy. The emphasis on simplifying regulations acknowledges the genuine concerns from the business community about the administrative challenges posed by complex reporting obligations. This could lead to a more favorable business environment where companies can focus more on innovation and less on compliance. However, the risk of diluting the original sustainability goals is a legitimate concern. The EU has positioned itself as a leader in environmental governance, and any significant rollback of reporting standards could undermine this reputation. It could also send a concerning signal to other countries (considering prior rejection of climate reporting in the U.S). If the EU opts for a less stringent approach, it may embolden other jurisdictions to follow suit, potentially stalling global progress on combating climate change. Moreover, the potential delays in the implementation of regulations like the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) could hinder the momentum needed for businesses to adapt to more sustainable practices. While the intent to protect SMEs is understandable, if the reforms result in a watered-down framework, the very companies they aim to protect may miss the chance to innovate and lead in sustainability. Ultimately, the decision-makers face a delicate balancing act. The Omnibus Simplification Package could either pave the way for a more robust and sustainable economic future by fostering innovation or risk regressing by prioritizing short-term economic relief over long-term environmental goals. It is crucial that the reforms maintain a commitment to substantive sustainability practices, ensuring that businesses are not only competitive but also responsible stewards of the environment. Jon McGowan https://lnkd.in/ejbBC-nY