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EU Weakens Sustainability Reporting, Raising Fears of Climate Backsliding

March 3, 2025
Reading time: 3 minutes
Primary Author: Compiled by Christopher Bonasia

Thijs ter Haar/Flickr

Thijs ter Haar/Flickr

The European Union’s move to simplify sustainability reporting rules through a new “omnibus” legislation package risks weakening key policies and undercutting investors’ confidence in the bloc’s climate commitments, critics warn.

Presented alongside the Clean Industrial Deal, the omnibus package “raises serious concerns as it pushes for deregulation under the false premise of reducing administrative burdens,” said Climate Action Network-Europe (CAN-Europe). “Moreover, this contradicts the Commission’s ambition to mobilize private capital for the EU’s climate transition.”

“Without mandatory sustainability disclosure, investors will be left in the dark when seeking returns that benefit both people and the planet.”

On February 26, the European Commission introduced the first of two “omnibus” legislation packages, aiming to “get the balance right” between sustainability goals and economic competitiveness. The package was announced alongside two new strategies: the Clean Industrial Deal, which seeks to decarbonize heavy industry, and the Action Plan for Affordable Energy, which aims to lower energy costs.

While these initiatives provide policy direction, they are not legally binding. The EU also plans to introduce new grid rules later this year to streamline permitting and accelerate expansion, reports Canary Media.

The omnibus bill scales back reporting requirements laid out in the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. The changes were intended to ease burdens on smaller companies while focusing on major emitters. However, some investors warn the revisions could create regulatory uncertainty, while critics argue they will weaken the EU’s sustainability framework.

EU officials say the changes are necessary to keep the bloc competitive amid geopolitical shifts, particularly disruptions caused by the new U.S. administration and the ongoing war in Ukraine. The new rules exempt 80% of small- to mid-sized EU businesses that are responsible for a small minority of emissions under the CSRD. They also limit climate and human rights reporting under the CSDDD and reduce reporting requirements in the EU Taxonomy, writes Corporate Knights.

The Institute for Energy Economics and Financial Analysis criticizes the omnibus package as “a backwards step” that will undermine the Clean Industrial Deal by dampening investor confidence in clean energy financing.

The Clean Industrial Deal includes measures to decarbonize heavy industry through government aid, electricity markets reform, “Buy European” quotas, emissions product labels, and new trade alliances, Corporate Knights writes. While some doubt the EU’s ability to enforce the deal across its 27 member states, a successful rollout “could potentially trigger a race to the top” with other large economies rushing to mimic Europe’s success, said industrial decarbonization expert Valerie Karplus, associate director of the Wilton E. Scott Institute for Energy Innovation at Carnegie Mellon University.

Germany’s industrial sector welcomed the Deal, reports Clean Energy Wire. The country is adjusting to a new coalition government that is expected to exclude the Green Party, marking a likely shift toward more restrained climate policies. However, experts suggest Germany’s overall climate strategy will remain largely unchanged.

“Only through targeted investment in climate-friendly industry and the pooling of European and national funds can the EU fulfil its role as a global pioneer in climate protection,” said Peter Leibinger, director of BDI, an industry association in Germany. “A comprehensive reduction in regulatory burden must be an absolute priority so that Europe can once again become a robust international competitor.”



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