The President of the European Commission, Ursula von der Leyen, announced in her Competitiveness Compass an initial Omnibus proposal that envisages the simultaneous revision of sustainability reporting regulations for businesses and financial institutions:
- Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD);
- Corporate Sustainability Due Diligence Directive (EU) 2024/1760 (CSDDD);
- EU Taxonomy Regulation (EU) 2020/852. (1)
The good intentions of reducing administrative and bureaucratic burdens on businesses, especially SMEs, were already declared in the Lisbon Strategy (2000). However, European regulations have reached Kafkaesque levels of complexity over the following 25 years, across all sectors, with little relief for SMEs. In the author’s opinion, SMEs should be prioritised in any effort to simplify regulations.
1) Von der Leyen 2: ‘competitiveness’ comes first
‘Competitiveness’ is the leitmotif of Ursula von der Leyen’s statements, following the lines of a report of the same name published by former ECB President Mario Draghi. (2) It is within the framework of the Competitiveness Compass that regulatory simplification is placed at the top of the list of ‘horizontal enablers’ identified by the Commission.
The promise is to significantly reduce administrative burdens on businesses by at least 25%, and even 35% for SMEs. Simplification, undoubtedly, can improve efficiency and reduce bureaucratic burdens on businesses, workers, and citizens, as well as on public administrations that interact with them.
2) Competitiveness Compass (2025): the simplification chapter
The Competitiveness Compass communication, in its chapter 2.1, emphasises the need for the European Union to enhance its competitiveness by simplifying and streamlining regulations, reducing administrative burdens, and accelerating decision-making processes. Key points include:
- regulatory simplification. The EU must cut red tape to make regulations proportionate, stable, coherent, and technology-neutral. This includes faster permitting, simplified access to funds, and streamlined administrative procedures, particularly for sectors like renewable energy and energy-intensive industries;
- implementation and simplification efforts. The EU Commission is leading an unprecedented simplification effort, with a dedicated Commissioner overseeing the process. This includes regular stakeholder dialogues, reality checks, and ambitious targets;
- SME focus. Tailored regulatory simplifications will benefit SMEs and a new category of small mid-caps. Measures include simplifying the Carbon Border Adjustment Mechanism and introducing an SME and competitiveness check in impact assessments;
- digitalisation. Digital tools and AI will be leveraged to reduce reporting burdens and improve cross-border interoperability. The European business wallet will facilitate seamless digital interactions with public administrations;
- harmonisation and enforcement. The Commission will pursue full harmonisation and enforcement to ensure a level playing field across the single market, avoiding fragmentation and gold plating;
- inter-institutional cooperation. All EU institutions must work together to maintain a commitment to better regulation throughout the legislative process, ensuring that simplification efforts are sustained from start to finish. (3)
3) The Lisbon Strategy (2000) and the better regulation policy
The Lisbon Strategy, launched in 2000 and fostered by former European Commission President Manuel Barroso, aimed to transform the EU into the world’s most competitive and dynamic knowledge-based economy by 2010. It focused on three pillars: economic growth through innovation and competitiveness, social cohesion via job creation and poverty reduction, and environmental sustainability. Despite its ambitious goals, the strategy faced criticism for lacking clear implementation mechanisms, and by 2010, almost all targets remained unmet.
The better regulation policy, complementing this, ought to ensure that EU laws are effective, efficient, and evidence-based, minimising unnecessary burdens on businesses and citizens.
It emphasises evidence-based policymaking, stakeholder consultation, simplification, transparency, and proportionality. Key tools include impact assessments to evaluate potential effects of legislation, public consultations to gather feedback, and ex-post evaluations to assess regulatory effectiveness. Initiatives like the Regulatory Fitness and Performance Programme (REFIT), launched in 2015, ought to review existing laws to ensure they remain fit for purpose. (4)
3.1) The REFIT programme
REFIT, the Regulatory Fitness and Performance Programme, is an EU initiative aimed at ensuring legislation remains effective, efficient, and free of unnecessary burdens. It works by evaluating existing laws, engaging stakeholders, and proposing improvements to simplify regulations while preserving their benefits.
The process starts with identifying outdated or overly complex laws through evaluations and fitness checks, which assess their performance against objectives. Stakeholder feedback from businesses, NGOs, and citizens is crucial in this phase. Based on findings, the European Commission proposes actions such as repealing outdated laws, streamlining reporting, or introducing digital tools to reduce compliance costs.
This programme emphasises evidence-based policymaking, using impact assessments to ensure changes achieve their goals without unintended consequences. Transparency and accountability are maintained through regular progress reports and stakeholder engagement, ensuring regulations adapt to evolving economic, technological, and societal needs. (4)
4) Over-regulation
The good intentions of REFIT were included in the better regulation agenda (2015) and fuelled the hopes of both businesses and other stakeholders. After a promising start in some regulatory areas, however, REFIT has not delivered the results everyone hoped for. Here are a quantitative and a qualitative example:
- the number of EU regulations published annually, more than halved during the decade of the Lisbon Strategy (from 2,909 in 2000 to 1,266 in 2010), has risen again, reaching a record 3,250 EU regulations in 2024. And 123 legislative proposals are currently pending;
- food safety regulations, which underwent a structural reform with the General Food Law (2002) and the Hygiene Package (2004), have become increasingly complicated with a series of often unjustified and/or disproportionate rules and burdens.
5) Deregulation: what risks?
Addressing over-regulation with deregulation is a simplistic and dangerous approach, especially when it comes to regulations developed to protect health and other fundamental human rights, as well as the widespread demands of citizens. This approach, however, has been recurrent in both terms of Ursula von der Leyen’s European Commission. Some examples follow.
5.1) Denied rights
The first von der Leyen Commission already omitted the necessary updating of a series of rules safeguarding fundamental rights. Among these:
- REACH. The revision of the regulation ensuring the safety of chemical substances was first postponed, then reopened for discussion, preserving the ‘(toxic) business as usual’ rather than protecting citizens’ health from serious risks (e.g., PFAS);
- pesticides. The Commission withdrew its ambitious SUR (Sustainable Use and Reduction of Pesticides Regulation) proposal, under pressure from the four global monopolists of ‘plant protection products’ and the major agricultural confederations (e.g., Coldiretti, FNSEA) that serve them. This ignored European Citizens’ Initiatives and civil society demands;
- nutrition. The European Court of Auditors criticised the Commission’s delays in adopting fundamental implementing acts for food safety (e.g., allergens), consumer information (e.g., nutritional profiles and Front-of-Pack Nutrition Labelling, following the Nutri-Score model);
- food contact materials. The Commission also omitted the structural reform of the Food Contact Materials Regulation (EC) No 1935/04, which still exposes consumers to intolerable risks of exposure to toxic chemicals and microplastics;
- animal welfare. European citizens’ priorities, expressed through European Citizens’ Initiatives, include a systematic reform of rules ensuring animal welfare, which still await concrete action.
5.2) Reneged rights
The second von der Leyen Commission has already reneged on fundamental rights that citizens and civil society have been advocating for decades. Some examples:
- UTPs (Unfair Commercial Practices) Directive (EU) 2019/633. 94.8% of agricultural businesses are family-run, and 37% of them closed between 2005 and 2020 due to pressure from financial oligarchies. Farmers cannot survive without a fair price for their produce, but the Commission continues to ignore their demands, supported by consumers;
- EUDR, European Union Deforestation Regulation (EU) 2013/1115. After decades of protests by farmers, landless workers, and indigenous communities in low- and middle-income countries, the EU legislator finally introduced precise due diligence responsibilities for critical supply chains. However, two months before EUDR’s entry into force, the Commission requested and obtained its postponement.
- NGTs. European citizens have always claimed the right to know if food contains or is derived from GMOs, old or new. They demand guarantees, alongside farmers applying organic systems, to preserve biodiversity. Peasant associations linked to the Via Campesina movement are also concerned about the risk of patents on even minor variations of traditional seeds. Contrary to this, the Commission insists on the dangerous proposal to deregulate new GMOs, based on the false assumption of their ‘unrecognisability’.
6) Omnibus, CSR, and due filigence at risk?
Social partners have spent years developing the ESG (Environmental, Social, Governance) criteria that are now the basis of CSRD (Corporate Sustainability Reporting) and CSDDD (Sustainability Due Diligence Directive). The EU legislator has therefore:
- enacted the CSRD on November 10, 2022, ensuring its progressive application, which has already begun for large companies;
- defined due diligence criteria (CSDDD), after three years of debate, to guarantee rights rooted in international conventions for decades.
The hypothesis of deregulation floated by the European Commission, first announced in November 2024, therefore comes as a bolt from the blue. This is true both for companies that have already introduced ESG criteria and for civil society.
7) Industry’s call for stability amid regulatory overhaul
Large companies have already faced the necessary investments to comply with these rules, and listed companies are adapting. Since all are in any case required to report on ESG—under both CSR and due diligence perspectives—to access the financial market, based on the Sustainable Finance Disclosure Regulation (EU) 2022/1288 (SFDR).
The need for simplification cannot therefore be resolved in this way. ‘The actual impact of the Omnibus packages and a simplification agenda on reducing business burdens is yet to be seen’, explains Markus J. Beyrer, BusinessEurope Director General. ‘If the overall cumulative burden on companies continues to increase, this would fall far short of a “one in, one out” approach. We therefore need to see the overall burden reduction program, with clear milestones and timeline—from short to mid-term’. (5)
7.1) The forerunners’ critique to deregulation proposal
Even further, the Collège des Directeurs du Développement Durable (C3D), representing over 400 Chief Sustainability Officers from French companies like Bouygues, EDF, L’Oréal, and Carrefour, provides a sharp critique of the Omnibus proposal. They strongly oppose any dilution or delay of the CSRD, CSDDD, and Environmental Taxonomy, arguing that these regulations are essential for maintaining Europe’s global leadership in sustainability, competitiveness, and sovereignty.
The signatories dismiss claims of excessive regulatory burden, noting that reporting focuses on material items and does not directly burden SMEs. They warn that weakening these rules would cede influence to U.S. or Asian frameworks and undermine Europe’s strategic position. While advocating for clearer communication and compliance support, they insist that simplification must not lead to deregulation, as these frameworks are critical for addressing ESG risks and ensuring long-term success. (6)
7.2) The laggards’ worries
A small coalition of global conglomerates—including representatives from logistics and port operations (e.g., DP World), food and beverage (e.g., Nestlé, Ferrero, Mars, Incorporated), retail and apparel (e.g., Primark), consumer goods and cosmetics (e.g., Unilever, L’Occitane), lighting and technology (e.g., Signify), investment and finance (e.g., NEI Investments)—has raised different concerns about the Omnibus proposal. (7)
These corporations fear that the proposal’s political exam at the European Parliament and the Council may reopen the debate on CSRD and CSDDD, after the huge lobbying investments they made. In their actual texts, both Directives in fact allow them to leverage greenwashing certifications to project a sustainable image, often masking practices that fall short of genuine environmental or ethical commitments.
The signatories thus call for a more pragmatic, phased approach to implementation, emphasising the need for clearer guidance and flexibility to ensure that the regulations achieve their sustainability goals without undermining economic growth. (7)
8) Asset managers’ critique of the Omnibus proposal
Building on this perspective, the Principles for Responsible Investment (PRI) document, ‘A Practical Guide to ESG Integration for Equity Investing’, critiques the challenges of implementing ESG regulations, particularly for asset managers and investment professionals. The 160 signatories—institutional investors and asset owners managing about €6.6 trillion in funds, and financial analysts—highlight concerns about the complexity and lack of standardisation in ESG frameworks, which can create inefficiencies and increase costs. (8)
Inconsistent regulatory approaches, such as those proposed in the Omnibus initiative, could undermine the effectiveness of ESG integration by fragmenting markets and reducing comparability of ESG data. The professionals emphasise the need for clear, consistent, and materiality-driven ESG reporting requirements to avoid overburdening companies and investors. They caution that poorly designed regulations could deter investment in sustainable initiatives, ultimately weakening Europe’s ability to compete globally in the transition to a sustainable economy. (8)
9) Civil society call to uphold EU sustainability leadership
Civil society organisations, human rights defenders, environmental activists, trade unions, and over 170 stakeholders have united in strong opposition to the European Commission’s Omnibus proposal, warning that reopening agreed legislative texts like the Corporate Sustainability Due Diligence Directive (CSDDD) risks creating regulatory uncertainty, undermining investments, and eroding the EU’s leadership on sustainability. (9)
The current approach lacks transparency, thorough impact assessments, and inclusive stakeholder engagement, threatening to weaken hard-won protections for people and the planet. Over 150 business and human rights experts, 230 economists, and 400 Chief Sustainability Officers from French companies have echoed these concerns, urging the Commission to focus on effective implementation through guidance and clarifications rather than reopening negotiations. Any dilution of these rules would harm economic competitiveness, delay progress, and erode trust in the EU’s legislative process at a time when robust and inclusive governance is urgently needed.
10) Provisional Conclusions
BusinessEurope’s Director General, Markus J. Beyrer, stressed that businesses need more than just reporting simplification:
‘To truly ease the burden, the Commission must go beyond simplifying reporting and implement measures that will rapidly relieve businesses and foster investment. This includes addressing the energy cost differential with our major competitors, accelerating the market deployment of innovation, and making permitting procedures faster. Ultimately, what matters for companies is that they see tangible improvements in their daily operations.’ (5)
11) Competition? Left behind
It’s worth recalling that the self-proclaimed ‘architects of European competitiveness’—Ursula von der Leyen and Mario Draghi—were not quite as prescient as they claimed. Their bold predictions that EU sanctions would ‘cripple the Russian economy’ now ring hollow, serving as a stark reminder of the overconfidence that laid the groundwork for the worst recession Europe has faced since World War II. These were their expectations, in 2022:
- European Commission President Ursula von der Leyen declared, ‘Our sanctions will have a massive and lasting impact on the Russian economy, cutting off its access to critical technologies and markets.’ (10)
- Similarly, in his address to the European Parliament on 3 May 2022, during the ‘This is Europe’ debate, then-Prime Minister Draghi emphasised the importance of coordinated economic measures to impact Russia’s ability to continue its activities. (11)
Yet, the reality has been starkly different. The EU’s economy has plunged into a deep recession, with GDP growth stagnating, unemployment rising, and energy costs soaring. The European Central Bank (ECB) has struggled to contain inflation, while businesses face unprecedented challenges in maintaining competitiveness. The Eurozone’s unemployment rate has climbed to 7.5% in 2024, the highest in over a decade, and energy prices remain 40% higher than pre-crisis levels, crippling industries and households alike. (12)
Neither von der Leyen nor Draghi were elected by European constituencies, yet their policies have had far-reaching consequences. The Omnibus proposal, rather than addressing these systemic issues, risks further destabilising the regulatory environment, undermining the very foundations of Europe’s sustainability agenda. Without a disruptive change in leadership and policy direction, the EU’s recovery remains a distant hope.
Dario Dongo
References
(1) An EU Compass to Regain Competitiveness and Secure Sustainable Prosperity. European Commission. Press release, 29 January 2025. https://ec.europa.eu/commission/presscorner/detail/en/ip_25_339
(2) The Future of European Competitiveness: Report by Mario Draghi. European Commission. https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en#paragraph_47059
(3) A Competitiveness Compass for the EU. Commission’s Communication, 29 January 2025. COM(2025) 30 final. https://commission.europa.eu/document/download/10017eb1-4722-4333-add2-e0ed18105a34_en
(4) REFIT – Making EU Law Simpler, Less Costly and Future Proof. European Commission. https://tinyurl.com/yck9d4p5
(5) European Commission Work Programme 2025: Efforts to Reduce Regulatory Burden Must Be Bolder and Faster. BusinessEurope. 12 February 2025. https://www.businesseurope.eu/
(6) Bonnifet, F. Letter to the European Commission on the Omnibus Proposal. On behalf of the Collège des Directeurs du Développement Durable (C3D). 6 January 2025. https://www.we-support-the-csddd.eu/
(7) EU: Major Businesses Urge Commission to Ensure ‘Omnibus’ Approach Will Not Allow Renegotiation of Agreed Texts, incl. CSDDD. 18 January 2025. https://www.business-humanrights.org/en/latest-news/business-letter-omnibus/
(8) A Practical Guide to ESG Integration for Equity Investing. Principles for Responsible Investment (PRI). 4 February 2025. https://www.unpri.org/download?ac=22691
(9) 150+ CSOs from Across the Globe Reaffirm ‘No’ to Reopening EU Sustainability Legislation incl. CSDDD & Criticise Lack of Proper Consultation. Business and Human Rights Resource Center. 4 February 2025. https://www.business-humanrights.org/en/latest-news/cso-input-simplification-consultations/
(10) von der Leyen, U. Press Statement by President von der Leyen on a New Package of Restrictive Measures Against Russia. European Commission. 28 September 2022. https://ec.europa.eu/commission/presscorner/api/files/document/print/en/statement_22_5856/STATEMENT_22_5856_EN.pdf?
(11) Draghi, M. Address to the European Parliament During the ‘This is Europe’ Debate. European Parliament. 3 May 2022. https://www.europarl.europa.eu/doceo/document/CRE-9-2022-05-03-ITM-005_EN.html
(12) Eurozone Economic Outlook: Recession Deepens as Unemployment Rises. Eurostat. 2024. https://ec.europa.eu/eurostat
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
