Would an omnibus legislation reduce the administrative burden and increase the competitiveness of European businesses?

The European Commission President has recently indicated that a new “omnibus legislation” may be introduced to cut red tape and reduce bureaucracy. As presented, the idea would be to consolidate certain EU obligations within the ESG area into one legal instrument, an omnibus legislation. In this context, the EU Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation and the EU Corporate Sustainability Due Diligence Directive have specifically been referenced. A proposal is planned to be presented during 2025.

How an omnibus legislation would look like and what it would cover remains unclear. To our understanding, the Commission believes that the content of the three legal instruments is principally fine as is. The omnibus legislation would instead be the result of a review of the data required to be collected and reported to reduce its scope, to remove unnecessary reporting requirements and to avoid overlaps. Following the introduction of a massive number of rules and regulations in this area during the last few years adding to the administrative burden of companies, the current EU focus on competitiveness, better regulation and reduction of administrative burdens (including reporting requirements), is more than welcome, as is the ambition to avoid overlapping requirements. Combined with an ambition to secure predictability and clear rules and regulations, these ambitions are excellent and exactly right.

As the three legal instruments are vastly different, we are not certain that an unprejudiced reopening of the legislative acts is the best way to reach these ambitions. The instruments have a different scope, focus areas and key requirements; one instrument focusing on external reporting, another on performance metrics and the third on due diligence requirements. In addition, the companies falling under the scope of application of the instruments differ. Due to these differences, it will not be an easy task to consolidate the rules into one single legislative act. The Commission and the co-legislators risk having to spend an unreasonable amount of time on endless legal technicalities. A reopening of the files also risk initiating a massive political discussion with requests to extend the scope of the legal instruments, as well as reintroducing proposals that were abandoned under previous negotiations, quite contrary to the Commission’s honorable ambition.

A better and more effective way forward for the EU legislators is to focus on targeted measures that will in practice lead to reduced burdens and simplification. Examples of meaningful measures include:

• Raised thresholds for the reporting requirements under the Corporate Sustainability Reporting Directive and the taxonomy, respectively. Such a measure would constitute a meaningful release of burden for a large group of companies.
• Pause the coming sector specific reporting requirements (ESRS). To be helpful, any reporting standards must focus on providing guidance to companies and must not include new or increased reporting requirements. Pausing the introduction of sector specific ESRS would also free up resources for EFRAG to be able to focus on the much needed work to simplify and improve existing standards.
• Review and revise existing performance metrics and data points to secure that the level of reporting requirements is proportionate, reasonable and relevant.
• Allowing companies extra time to mark up the financial statements and the sustainability report electronically according to ESEF, after the publication of the original annual reports.
• Clarification of and removal of current overlapping requirements, including requirements to report data on a legal entity basis for companies covered by a consolidated report.
• Secure reasonable and practical guidance under the new Corporate Sustainability Due Diligence Directive and contribute to harmonized implementation and transposition in the EU Member States.

Practical measures like these examples will be needed for a successful 25% reduction of the reporting burden of companies in line with the EU Commission’s ambition. The Confederation of Swedish Enterprise is ready to contribute to identifying relevant and practical measures to reduce the burden in a way that will strengthen and improve the competitiveness of European businesses.