Leaked document: EU promises “far-reaching” omnibus and new definition for SMEs

Commission’s draft Competitiveness Compass says “first” omnibus will focus on simplification and outlines plans for real-economy policy change

The EU will announce plans to make its omnibus proposal part of an “unprecedented simplification effort”, and exempt 31,000 companies from certain sustainability obligations, according to a leaked document seen by Real Economy Progress.

The European Commission has drafted a 21-page strategic roadmap, known as its Competitiveness Compass, which it will publish on January 29th.

The document identifies the priority actions for European policymakers over the next five years, with a view to “reignit[ing] economic dynamism in Europe”.

“This Commission will deliver an unprecedented simplification effort,” it promised in the draft version.

“This will start with a first Simplification Omnibus proposal next month, including a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy.”

An omnibus is a single piece of legislation that amends a series of existing laws at the same time.

Earlier this week, Real Economy Progress wrote that EU officials had hinted at a “fleet” of omnibuses, rather than just the one originally announced by Ursula von der Leyen in November.

The use of the word “first” to describe the omnibus in the Competitiveness Compass document appears to confirm this, although it does not provide further information about additional proposals.

The Commission said the proposal “will ensure tight alignment of the data required with the needs of investors, proportionate timelines, focus on the most harmful activities, financial metrics that do not discourage investments in smaller companies in transition, and obligations proportionate to the scale of activities of different companies.”

“It will notably address the trickle-down effect to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators.”

New definition for SMEs

To carve more companies out from the scope of the Corporate Sustainability Reporting Directive and other laws, the Commission will propose a new definition for small mid-caps next month.

“By creating such a new category of company, bigger than SMEs but smaller than large companies, up to 31,000 companies in the EU will benefit from tailored regulatory simplification in the same spirit as SMEs,” the Competitiveness Compass document explained.

It is likely the new category will align with requests from EU Member States, meaning it will apply to companies with between 250 and 1,000 staff and sales of less than €1.5bn or a balance sheet below €2bn.

The French government has requested that such a definition be used to change the way existing EU laws are applied, through another omnibus. It wants qualifying companies to be allowed to apply the European Sustainability Reporting Standards (ESRS) in the same way as SMEs.

Further reductions and simplification

The Commission will pledge to pursue further simplification efforts over the next five years, informed by new biannual “reality checks”.

“Each Commissioner will hold regular implementation dialogues with stakeholders, twice a year, to understand implementation issues, hear business concerns and identify opportunities for simplification and burden reduction,” said the document.

It also outlines a series of real-economy initiatives that will be part of its Competitiveness Compass, including a review in 2025 of the Carbon Border Adjustment Mechanism, and changes to procurement rules.

French government demands 

French government authorities penned a letter this week, asking for “an indefinite postponement” of the Corporate Sustainability Due Diligence Directive, on the grounds that it had strayed from its original objective.

The statement acknowledges that the French government approved the directive, but suggested it is no longer being treated as an “obligation of means” – which holds companies responsible for their due diligence process – and that firms are now at risk of being punished for the outcome of that process, too.

The authorities also called for CSRD to be “significantly lightened” by “drastically” cutting the number of indicators companies have to disclose against, and limiting them to climate-related issues.

Earlier this month, the French accounting standards authority called for sector-specific standards under the ESRS to be redefined, rather than postponed. The Commission has delayed the introduction of sector-specific guidance by two years, until 2026, because companies are concerned it will add to their reporting burden. But in a letter dated January 8th, ANC said such standards could be designed to help firms apply the existing sector-neutral requirements, rather than serving as separate rules.