There’s been a lot of talk about the EU Omnibus Proposal and how it’s cutting sustainability reporting by 80%. Some say it’s a relief for businesses drowning in ESG paperwork. Others worry it’s a step back for corporate transparency. The truth? It’s a bit of both.
For years, companies have been adjusting to stricter ESG rules, figuring out how to measure their impact, disclose their carbon footprint, and track supply chain risks. Now, just as businesses were getting used to these rules, the EU is rolling back many of them in the name of competitiveness.
So, what does this really mean? And how should companies react?
Less Reporting, Fewer Companies Affected
The biggest change is that far fewer companies will need to report under the Corporate Sustainability Reporting Directive (CSRD). Before, companies with 250+ employees had to report their ESG performance. Now, it only applies to companies with more than 1,000 employees and €50M in revenue. That means 80% of businesses that were preparing to report won’t have to anymore.
At first glance, this might seem like a win for businesses. Less paperwork, fewer costs, and more time to focus on actual sustainability instead of reporting. But there’s another side to this: ESG reporting wasn’t just about compliance—it was about accountability.
What About Supply Chains?
Another big change is that companies will only have to report on direct suppliers (Tier 1). Before, businesses were expected to look deeper into their supply chains, making sure their suppliers’ suppliers weren’t engaging in deforestation, forced labor, or other environmental and social risks. Now, they’re off the hook for anything beyond their first-tier partners.
For companies that already have strong supplier oversight, this won’t change much. But for those who relied on regulation to enforce accountability, this could be risky. Just because you don’t have to check deeper into your supply chain doesn’t mean investors, customers, or the media won’t ask about it later.
Is This the End of ESG in Europe?
Not at all. The EU Green Deal isn’t being canceled—it’s being recalibrated. The European Commission says this isn’t about deregulation, but about simplification. They argue that businesses need time to adjust and that cutting red tape will help drive green investment rather than slow it down.
In fact, the EU just announced a €100 billion Clean Industrial Deal, which is similar to the U.S. Inflation Reduction Act. So while reporting requirements are being scaled back, there’s still huge financial support for clean energy and decarbonization projects.
What Should Companies Do?
Even though the rules are changing, sustainability isn’t going away. If anything, companies that have spent years building strong ESG programs should stay the course—not because they have to, but because it’s good business.
Here’s why:
- Investors still care. BlackRock, Vanguard, and other institutional investors aren’t dropping ESG anytime soon. They’ll still expect companies to disclose sustainability risks, even if it’s voluntary.
- Customers are watching. More than ever, consumers expect businesses to take climate action, reduce waste, and treat workers fairly.
- ESG reporting could return. The EU’s legislative process is long and complicated. Just because rules are relaxed now doesn’t mean they won’t be tightened again later.
For companies that were scrambling to meet CSRD, CSDDD, or EU Taxonomy requirements, this buys some time. But for businesses serious about sustainability, this is a moment to lead—to show that ESG isn’t just about compliance but about long-term strategy.
The world isn’t going backward on sustainability. The companies that understand this and keep moving forward will be the ones that thrive.