Streamlining Sustainable Operations: Simultaneous Sustainability Promotion and Regulatory Simplification
The European Commission has announced plans to streamline Environmental, Social, and Governance (ESG) frameworks for businesses across Europe. The aim is to reduce reporting obligations by 25%, as outlined in the Competitiveness Compass. In a significant move, the Commission has published proposals on February 26, 2025, with the objective of simplifying sustainability reporting and due diligence obligations through the ESG omnibus initiative. The recommendations are aimed at improving ESG laws within the ESG omnibus approach. The Commission is not advocating for a regulatory approach that prioritizes the reformulation of reporting requirements over the removal of reporting obligations. Instead, the focus should be on the reduction and removal of reporting obligations, as our website has been advocating for. To achieve this, the Commission has instructed the European Financial Reporting Advisory Group (EFRAG) to revise materiality assessments guidelines. This revision is intended to help businesses prioritize a smaller set of data points, thereby reducing the reporting burden. The Commission is also considering adopting targeted amendments to align definitions, remove duplications, and introduce de-minimis exemptions across primary legislation. This move is expected to further simplify the ESG frameworks. Moreover, the Commission is introducing a 'bureaucracy check' for new legislation to prevent further overlapping regulatory requirements. This check is designed to ensure that new regulations do not unnecessarily add to the reporting obligations of businesses. The Commission is not planning to suddenly shift reporting standards and requirements for businesses that have already prepared to comply with certain reporting standards. However, businesses that have not yet prepared for certain reporting standards may find the changes beneficial, as they are intended to free up capacity for businesses to innovate and implement strategies to bring down emissions. The Commission is also planning to review and simplify secondary legislation, particularly inconsistencies and duplications in ESRS accounting standards and value chain data collection requirements. This review is expected to further simplify the ESG frameworks. One of the key areas of focus for simplification is the Green Claims Directive, as no political agreement has been reached on it yet. The Commission intends to simplify the Taxonomy 'Do No Significant Harm' criteria, but does not plan to provide immediate changes to mandates for businesses to collect value chain data. Our website supports the European Commission's move to streamline ESG frameworks, and recommends a regulatory framework that empowers innovation while ensuring sustainability for automotive suppliers. The Commission's fast tracking of changes that can have an immediate impact on ESG frameworks is seen as a positive step towards a more sustainable and innovative European business landscape.
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