EU kicks off new mandate by slashing sustainability rules

26 February 2025 - 15:49 h

Press Release

The European Commission’s first major policy move of this mandate is alarming. Rushed through with just 24 hours for internal consultation, the Omnibus proposal threatens years of work on sustainable finance while creating uncertainty for businesses and investors.

Driven by the Commission’s “simplification” agenda, the Omnibus is the product of a political commitment to cut administrative burdens by 25-35%. Instead of delivering meaningful reform, it chases arbitrary reduction targets at the expense of the Commission’s stated green ambitions.

The Omnibus scales back corporate sustainability reporting, weakens due diligence obligations and limits the potential for financial markets to drive the green transition. It undermines Europe’s competitive edge, stripping away regulatory innovation and sustainable prosperity, while failing to provide the clarity that industry needs. If this is what simplification looks like, then who is it actually for?

1. Transition plans weakened beyond meaningful enforcement – CSDDD

“The requirement for companies to “adopt transition plans and put them into effect” has been replaced with vague wording to “adopt a transition plan, including implementing actions”. This shift adds another layer of ambiguity, limiting enforcement and creating legal uncertainty, even with well-designed guidelines.”

Vincent Vandeloise, Senior Research and Advocacy Officer at Finance Watch

2. 80% of companies cut from sustainability reporting – CSRD

“Changes to CSRD scope mean that companies with fewer than 1000 employees and €50m turnover are no longer required to report, removing 80% of companies currently in scope. The impact? Investors lose access to critical ESG data and any certainty over which companies will still disclose. Meanwhile, businesses already invested in compliance are left stranded.”

“Removing sector-specific requirements weakens the relevance of sustainability reporting for investors and financial markets. Does it make sense for a retailer and an oil company to report the same information? Without tailored standards, reporting will remain less comparable within industries, making it harder to assess real sustainability impacts.”

Vincent Vandeloise, Senior Research and Advocacy Officer at Finance Watch

3. Making the taxonomy voluntary undermines market transparency

“The Taxonomy is the best tool to assess corporate sustainability, and making it voluntary for companies with under 450m turnover would severely weaken possibilities to improve the SFDR framework. Most companies will stop reporting their Taxonomy alignment, pushing asset managers towards self-defined sustainable activities falling outside the Taxonomy. This risks diverting investment away from the most impactful green activities and increasing concentration risk for sustainable products.”

Vincent Vandeloise, Senior Research and Advocacy Officer at Finance Watch

If the Omnibus sets the tone for the next four years, there is serious cause for alarm. The Commission should reflect on what simplification is meant to achieve and rethink its approach. Deregulation for its own sake cannot become the new normal – it threatens the very competitiveness it pretends to achieve.

To arrange an interview with Vincent Vandeloise, Senior Research and Advocacy Advisor at Finance Watch, please contact Max Kretschmer, Press Officer at Finance Watch, at [email protected] or call on +44 (0) 7999926545.

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Finance Watch is an independently funded public interest association dedicated to making finance work for the good of society. Its mission is to strengthen the voice of society in the reform of financial regulation by conducting advocacy and presenting public interest arguments to lawmakers and the public. Finance Watch’s members include consumer groups, housing associations, trade unions, NGOs, financial experts, academics and other civil society groups that collectively represent a large number of European citizens. Finance Watch’s founding principles state that finance is essential for society in bringing capital to productive use in a transparent and sustainable manner, but that the legitimate pursuit of private interests by the financial industry should not be conducted to the detriment of society.