An EU omnibus will not solve the reporting problem

Ursula von der Leyen’s announcement about folding the Corporate Sustainability Due Diligence Directive (CS3D), the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy into a single omnibus regulation has raised many important (and largely unanswerable) questions about the future of the EU’s flagship sustainability rules.

There are some who believe it marks the beginning of the end.

Creating an omnibus legislation requires each law to be re-opened. And, while the Commission president insists their content is not up for discussion – just their format – it’s hard to imagine an increasingly pro-business Council and Parliament won’t push to amend them during negotiations.

The announcement came as the Council finalised its pledge to make the EU more competitive, known as the Budapest Declaration, in which it committed the Commission to developing “concrete proposals on reducing reporting requirements by at least 25% in the first half of 2025”.

It also came as Parliament prepares to decide whether von der Leyen can have her choice of European Commissioners for the next five years.

Her nomination for vice-president is proving divisive: she wants Teresa Ribera, a left-leaning Spanish socialist with a strong record on climate, but the selection is being blocked by MEPs on the right.

The odd timing of the omnibus comments – von der Leyen would normally save details about major legislative plans until her Commission is fully formed – may be an attempt to reassure Parliament that she’ll reduce sustainability requirements no matter who is in charge of key climate files.

But it’s embarrassing for a number of Ribera’s fellow nominees, who insisted they had no intention of amending sustainability laws while being grilled by Parliament this month.

Sources close to the Commission say civil servants further down the ladder, those actually writing and implementing the rules, only found out about the plans after von der Leyen had commented publicly.

Real Economy Progress understands that it’s the Secretary General of the European Commission that is working on the omnibus.

All this paints a picture of a panicked political decision, not a well-calculated technical one.

The main drivers are widely understood to be the French and German governments and their big business associations. They know von der Leyen needs the backing of Council and Parliament right now, more than her own appointees and staff.

While some businesses and politicians want sustainability rules scrapped entirely, others simply want them to be better aligned.

One Commission advisor told Real Economy Progress she would welcome an omnibus if it enabled the Taxonomy and CSRD to speak to each other more explicitly, because it’s a genuine problem for companies trying to comply with both.

But it’s much less clear what the strategy would be able to achieve in practice.

Von der Leyen says she doesn’t want to touch the content of the laws, but reducing by 25% the “thousands” of indicators she claims they mandate is unlikely to come from just consolidating them.

It’s been suggested certain elements could be merged. The Taxonomy’s requirements on human rights and environmental due diligence, for example, could be deemed fulfilled if a company is also covered by CS3D. But it won’t be enough to hit the goal, especially for companies not covered by both.

And, as incoming justice commissioner Michael McGrath pointed out in his Parliamentary hearing, CS3D isn’t a disclosure requirement. So if the concern is genuinely about reducing the reporting burden rather than the EU’s sustainability ambitions, it should be left out of the discussion.

The European Sustainability Reporting Standards, on the other hand, house most of those 1,000+ indicators von der Leyen talked about. But they won’t be up for grabs under the omnibus plan, because they’re created by a Delegated Act and responsibility for them sits with the Commission alone.

Overall, it seems the current plan has been concocted by those at the very top of companies, governments and the Commission, and doesn’t have much potential as a meaningful legislative strategy.

But it is the latest sign the sustainability agenda is under threat, and in an existential way this time around.

The more unworkable an omnibus is in reality, the easier it will become to shoehorn in further demands for legislative delays and full-on renegotiations over the coming years.

And the harder it will be to convince overstretched companies to take this agenda seriously.