What's next for corporate sustainability rules in Europe?

European lawmakers are taking aim at regulatory red-tape related to sustainability rules as Brussels continues its efforts to boost the region’s competitiveness.

Later this month, the European Commission will introduce an Omnibus proposal that seeks to streamline corporate sustainability reporting regulations on social and environmental risks. The reform, the Commission’s work programme 2025 notes, includes a “record number of initiatives with a strong simplification dimension.”

The Omnibus proposal is expected to reform the EU’s Corporate Sustainability Reporting Directive, which entered into force in 2023 and requires companies to disclose information related to their impact on people and the environment. It is also expected to address the Corporate Sustainability Due Diligence Directive, a more recent set of regulations that require companies in Europe to prove they are taking action to protect the environment and human rights throughout their supply chain.

The Omnibus proposal, the Commission states, will help the EU achieve its goal of reducing administrative burdens by at least 25%, and at least 35% for small- and medium-sized enterprises. Moreover, the Commission says it will introduce tailored requirements of a new category for small and mid-cap enterprises.

“To sustain our growth in the next quarter of the century, Europe must shift gears,” President of the European Commission Ursula von der Leyen said during a speech at the World Economic Forum’s Annual Meeting 2025 in Davos, Switzerland. Simplifying and reforming regulatory regimes, von der Leyen added, will help “bring down the most common barriers to scaling up all across Europe — because continental scale is our greatest asset in a world of giants.”

Adhering to sustainability reporting standards has repeatedly been cited as a concern for companies in Europe.

A recent World Economic Forum white paper, Delivering on the European Green Deal: A Private Sector Perspective, found that Europe’s compliance and reporting demands remain the biggest obstacle to fulfilling sustainability commitments for many companies. The paper, which urges the EU to deliver on its commitment to reduce the reporting burden by at least 25%, calls on lawmakers to “streamline reporting requirements as soon as possible” and develop “sector-based sustainability reporting requirements” in collaboration with other major economies.

The white paper, published in collaboration with Accenture, pulls insights from the Forum’s CEO Action Group for the European Green Deal, a platform for businesses to increase their efforts around climate action and demonstrate their commitment to Europe's climate agenda. The group, which firmly maintains that Europe should stay committed to its ambitious emission-reduction targets, has nonetheless stressed the need for mitigating complex reporting requirements.

“Simplifying sustainability reporting, standardizing and digitalizing permitting processes, improving transparency and accessibility of funding mechanisms, and reallocating carbon revenues to climate action will be essential to reaching net zero by 2050,” the white paper notes.

Major investment groups, however, have warned that weakening sustainability rules could create legal uncertainty and negatively impact the EU’s competitiveness. In an open letter published earlier this month, a coalition of more that 200 financial sector groups managing a combined €6.6 trillion in assets called on the EU to “preserve the integrity and ambition” of its sustainability rules.

“Businesses and financial market participants need long-term policy stability to support their implementation efforts,” the letter notes, adding that “timely access to high-quality and comparable reporting” is fundamental to informing investment decisions."

The move to reform Europe’s sustainability reporting rules comes as leaders across the continent continue to sound the alarm on European competitiveness falling behind other major economies like the United States and China.

At the Annual Meeting 2025, European Commission President von der Leyen announced the launch of the EU’s Competitiveness Compass, a new five-year roadmap to boost competitiveness. The plan seeks to reduce red tape, lower barriers to the single market, create a unified capital market and bridge the skills and labour gap, among other goals.

“The focus will be to increase productivity by closing the innovation gap,” von der Leyen said. “It is a strategy to make growth faster, cleaner and more equitable, by ensuring that all Europeans can benefit from technological change.”

The Competitiveness Compass is based on a series of recommendations detailed in a report released last year by former European Central Bank President and Italian Prime Minister Mario Draghi, which identifies actions needed to boost the EU’s competitive standing on the global stage.

“We must take a new stance towards cooperation: in removing obstacles, harmonising rules and laws, and coordinating policies,” the report states. “There are different constellations in which we can move forward. But what we cannot do is fail to move forward at all.”