Where next for the EU omnibus simplification package? Hogan Lovells offers you an ESG regulatory tracker to keep up-to-date

Last week we brought you a briefing on the EU omnibus simplification package.  Today we bring you a few more updates as the story develops.  

And a new tool to keep you abreast of the rapidly changing ESG regulatory landscape. 

1. French government makes suggestions for regulatory and administrative simplification

On 20 January 2025, the French government wrote to the European Commission outlining its suggestions to simplify regulatory complexity to promote competitiveness. It suggested changes to a number of ESG regulations, including introduction of (i) a new category for mid-caps, to allow them to benefit from certain administrative reliefs currently reserved for SMEs under the Corporate Sustainability Reporting Directive (CSRD), including a rule to cap supply chain reporting applicable to subcontractors for mid-caps to that applicable to SMEs. It also recommended a reduction in reporting data points to focus on climate objectives, amongst many other things. As a subsidiary option, the French authorities also confirmed they are open to a two-year postponement of the entry into force of the provisions of CSRD. They propose an indefinite postponement of the Corporate Sustainability Due Diligence Directive (CS3D) with a view to increasing application thresholds. 

2. ECOFIN meeting discusses “simplification, decluttering and regulatory burden reduction”

On Tuesday 21 January 2025, an Economic Financial Affairs (ECOFIN) Council meeting took place and “simplification, decluttering and regulatory burden reduction” was discussed.  The main results of the meeting confirmed that the most important areas on which the presidency will focus include “are streamlining the single market to strengthen the competitiveness of the European economy”.   It reported that Ministers strongly supported the prospect of reducing and simplifying reporting requirements and expressed a shared commitment for simplification as an effective way to improve the competitiveness of the EU economy.

Following the debate, it was confirmed in a press conference that the Commission confirmed an ambitious approach without losing the policy objectives of the ESG regulation.  The Commission will re-open legislation to eliminate inconsistencies and overlaps as it would not be possible to reach the 25% reduction in burden (and 35% for SMEs) without re-opening legislation.  This is only the beginning and simplification will be integrated into the Commission’s work  in the coming year.  

3. Davos launch 

At Davos, President von der Leyen laid out a plan which included making business easier across Europe.  She confirmed launching a “far-reaching simplification of our sustainable finance and due diligence rules” and referred to a single and simple framework across the EU dealing with corporate law, insolvency, labour law and taxation.

4. “A Competitive Compass for the EU” report leaked – an “unprecedented simplification effort”

Ahead of its publication on 29 January 2025, a draft of the European Commission’s “A Competitive Compass for the EU” report was leaked.  

According to the draft (and assuming no changes before publication), the EU intends to achieve its agreed policy objectives in the simplest, most targeted and least burdensome way.  Starting with a first Simplification Omnibus proposal next month, including a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy. It will address the trickle-down effect to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators and will propose a new definition next month for small mid-caps, enabling up to 31,000 companies to benefit from tailored regulatory simplification similar to SMEs. 

It remains unclear what the extent of the decluttering and simplification will be for ESG regulation, but there do seem to be indications that the omnibus will bring more than technical changes. We will bring you further news after the Commission meeting on 26 February.