Contentious EU Omnibus discussion muddles streamlining efforts
The European Commission's "Simplification Omnibus" proposal, intended to reduce administrative burdens and streamline sustainability reporting, has sparked concerns among investors and investor groups. The Institutional Investors Group on Climate Change (IIGCC) warns that the proposal could fragment corporate sustainability and due diligence systems, leading to parallel and overlapping reporting frameworks, increasing complexity rather than simplifying compliance for companies.
Key concerns include the potential weakening of transparency and comparability of sustainability information across corporations. The proposal suggests changes such as reducing the scope of mandatory sustainability reporting, with only companies employing more than 1000 individuals required to report mandatorily, while smaller companies would have a voluntary standard.
Another worry is the extension and strengthening of the “value chain cap,” which limits the extent to which companies subject to the Corporate Sustainability Reporting Directive (CSRD) can request information from their value chain partners. This could pose risks for investors who rely on consistent, clear, and comprehensive data across the value chain for their assessments.
Simplification efforts that prioritise reducing administrative burdens could inadvertently dilute the robustness and legal impact of sustainability reporting and due diligence frameworks established under EU Green Deal regulations. Stakeholders such as investors emphasise the importance that simplification should not come at the expense of legal clarity, data quality, or the ambition to achieve the EU’s sustainability objectives.
Hyewon Kong, sustainable investment director at Gresham House, has voiced concerns about the future of corporate transparency and sustainability reporting due to the proposals. Kong argues that reducing administrative burdens should not come at the expense of corporate accountability and sustainability progress.
The Centre-right European People's Party (EPP) has called for an "urgent procedure" on the stop-the-clock proposal, while the centre-left Socials and Democrats (S&D) have welcomed the principle of simplification but argue that the omnibus delivers deregulation rather than simplification.
If implemented, the omnibus proposals could hinder investors' access to decision-useful data and create legal uncertainty. The ongoing consultation process includes calls for evidence to strike a balance between eased compliance and the need for rigorous sustainability transparency critical for informed investment decisions.
Investor groups like IIGCC caution that while administrative simplification under the Omnibus may ease burdens on businesses, it must not compromise corporate transparency, sustainability reporting consistency, or the integrity of due diligence processes, which are crucial for sustainable investment decision-making. They advocate for maintaining high-quality, harmonized reporting standards and avoiding regulatory fragmentation that could impair market confidence.
- The Institional Investors Group on Climate Change (IIGCC) suggests that the European Commission's "Simplification Omnibus" proposal could potentially compromise the integrity of due diligence processes in environmental-science, such as climate-change, that are crucial for sustainable business and investment decision-making.
- If implemented, the omnibus proposals might pose risks for businesses and investors alike, as the potential weakening of transparency and comparability of sustainability information in the environment-al science sector could inadvertently dilute the robustness and legal impact of reporting frameworks, hindering investors' access to decision-useful data.
