A fierce debate on Monday night showed that the controversial omnibus will struggle to reach consensus in the highly divided European Parliament.
Published on 26 February, the omnibus proposals drastically reduce the number of companies required to disclose vital climate data if implemented.
This “significant rollback” could hinder investors’ access to decision-useful data and creates legal uncertainty, according to Institutional Investors Group on Climate Change (IIGCC).
If enacted, the scope of companies captured under the CSRD would be reduced by as much as 80%, while a new ‘"stop the clock" proposal would give companies that were due to start reporting next year, or in 2027, an additional two years before they need to disclose.
CSDDD and the EU taxonomy would also be significantly weakened, according to the IIGCC.
Andreas Rashe, professor at Copenhagen Business School, argued that the bitterly divided political factions indicate a highly uncertain future for the proposals.
The divisions
Centre-right European People’s Party (EPP) have called for an "urgent procedure" on the stop-the-clock proposal. They have also said "more is needed" and that it is necessary to push for further changes in the upcoming negotiations.
The centre-left Socials and Democrats (S&D) welcomed the principle of simplification but said the omnibus delivers deregulation rather than simplification. MEP Lara Wolters said, “This is not a simplification of EU rules. This is the simplification of a debate.”
The Greens see the omnibus as a massive deregulation that undermines the green transition. They also stressed that it "puts off investors who were already on the path of change".
The European Conservatives and Reformist Group emphasised that the omnibus is a small and insufficient step, as indicated by one MEP, who said: "Cut, cut, cut, and once again cut. We have to throw a lot of Directives into the trash, where they belong." In a similar tone, the Europe of Sovereign Nations group suggested "removing obligations from all businesses" and that policymakers "need a chainsaw rather than a letter opener."
Rashe suggested two possible outcomes to the conflict: either EPP works with the extreme right to deliver additional radical changes, or the parties around the centre find a way to balance the proposals out and even “soften them”.
Investors voice concern
Investors and investor groups like the IIGCC have voiced concerns with the proposals in their current form.
"The European Commission’s ‘Simplification Omnibus’ proposal seeks to ease administrative burdens and enhance global competitiveness, however, it raises concerns about the future of corporate transparency and sustainability reporting,” said Hyewon Kong, sustainable investment director at Gresham House.
By introducing broad exemptions and postponements, the proposal risks “undermining critical sustainability objectives rather than improving reporting efficiency”, she added.
She highlighted the reduction of scope in CSRD and the postponement of CSDDD as two “pressing concerns” in the proposals.
"While reducing administrative burdens is an important goal, it should not come at the expense of corporate accountability and sustainability progress. Instead of limiting the scope of reporting, the EU should focus on streamlining processes and improving clarity without sacrificing the transparency that businesses, investors, and stakeholders rely on," she concluded.
