A new initiative to consolidate various European Union environmental, social and governance (ESG) reporting obligations into a single regulation aims to simplify the regulatory landscape and enhance the EU’s competitiveness.
European Commission (Commission) President Ursula von der Leyen’s 8 November 2024 announcement of the initiative follows the Budapest Declaration, a 12-point plan by EU heads of state emphasising a “simplification revolution” for a “clear, simple and smart regulatory framework” in the EU.
Consolidation of Obligations
The Commission is seeking to reduce the regulatory burden by combining the following into a single omnibus regulation:
- Corporate Sustainability Reporting Directive (CSRD)
- EU Taxonomy Regulation
- Corporate Sustainability Due Diligence Directive (CS3D)
Commission President von der Leyen explained that the Commission is not seeking to drastically alter the substantive obligations imposed by these regulations, but rather to streamline the obligations to reduce the bureaucratic burden on in-scope companies.
In the Budapest Declaration, the Council of the European Union (Council) called on the Commission to present concrete proposals on reducing the reporting requirements by at least 25% in the first half of 2025. While it remains to be seen exactly how the Commission intends to achieve this goal with regard to ESG reporting, the latest announcement by Commission President von der Leyen suggests the Commission indeed intends to answer the Council’s call.
This streamlining initiative is part of the EU’s overall drive to enhance the competitiveness of the EU. Former European Central Bank president Mario Draghi’s “Future of European Competitiveness” report, published in September 2024, emphasised that the EU should implement a 25% reduction in reporting obligations. It advised that all new proposals should undergo a revamped competitiveness test with a robust methodology for measuring cumulative impacts, including compliance costs and administrative burdens.
The Council endorsed these recommendations in the Budapest Declaration, and Commission President von der Leyen referred to Draghi’s findings as “invaluable work” forming the basis for the Commission’s efforts to facilitate cross-border trade, innovation and investment.
The Commission’s plan to consolidate ESG reporting frameworks represents a significant step towards reducing regulatory complexity and enhancing competitiveness in the EU.
While the proposal remains high-level, it is being viewed as a potentially welcome reprieve for companies, given the often overlapping and complex interaction among the CSRD, EU Taxonomy Regulation and CS3D.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.