In this week’s newsletter, we touch upon the European Commission’s Omnibus proposals, which aim to simplify certain sustainability requirements for businesses to promote innovation and competitiveness in the EU. Enjoy!

Omnibus I and II Proposals

In February 2025, the European Commission presented the first two Omnibus proposals, the first deliverables in a package of so-called Omnibus proposals, which promote simplification by addressing overlaps and interactions between different EU laws, as well as disproportionate rules. By addressing aspects of finance reporting requirements, sustainability due diligence, EU taxonomy, carbon adjustment mechanisms and investment programmes, the proposals seek to stimulate innovation and competition amongst businesses in the European economy.

What the Omnibus proposals are about

The Omnibus packages were elaborated on the priorities laid out by the European Commission in its Communication of Simplification and Implementation, laying out a roadmap with ambitious policy goals for the next 5 years. The first proposal aims to revise the sustainability reporting requirements for three regulations adopted as part of the Green Deal: the Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation, and the Corporate Sustainability Due Diligence Directive. In particular, the proposal aims to simplify certain reporting requirements for smaller companies and redefines those for larger companies, which are likely to have a greater impact on the climate and the environment, by delaying certain deadlines and making other aspects voluntary.

The second policy proposal, on the other hand, seeks to stimulate capital allocation to European businesses through amendments in the use of investment programmes, most notably InvestEU – the EU’s largest fund for public and private investment in the clean and digital transitions. The changes would increase the EU’s investment capacity, make it easier for Member States to contribute, and simplify the reporting requirements for recipients, stimulating investment and innovation.

Alongside the two Omnibus proposals that the Commission presented at the end of February 2025, several more proposals are expected, including one on reporting requirements for small mid-caps, a digital package for consistent data protection and cybersecurity rules, and a proposal for simplification of the Common Agricultural Policy (CAP). Overall, the measures are expected to bring significant advantages to European businesses, benefitting in particular SMEs.

Why addressing simplification matters

Overall, the proposals are intended to foster simplification to promote the competitiveness of the European economy. According to the European Commission, a better implementation of sustainability rules reduces administrative requirements by 35% for SMEs, cutting about €6.3 billion in administrative costs annually. Additionally, by simplifying reporting for recipients of funds and as well as promoting an additional €50 billion annually in public and private investments.

Indeed, simplification has become a buzzword of the von der Leyen II Commission. Reducing red tape and reporting, ensuring better enforcement and faster permitting are all expected to make business easier and faster in the EU. The most recent analysis of the European economy, such as the Draghi report, has underlined that the increased complexity of regulation and the challenges in implementing European rules are impacting competitiveness significantly and limiting the bloc’s economic potential and prosperity. While the EU remains a hub of innovation, complexity limits commercialisation and scaling-up, undermining the EU’s ability to maintain a competitive edge.

An example are digital technologies, where European SMEs and start-ups are expected to play an increasingly important role. Developing critical technologies such as AI and quantum technologies is the key to increasing competitiveness, ensuring a clean transition, promoting economic security and defence, and ultimately securing the prosperity of the Union. However, according to research, a major obstacle for SMEs and start-ups that are developing and deploying these technologies is the fragmented and complex European regulatory system. This fragmentation increases administrative burdens and makes investment harder. It is a major obstacle for European businesses to scale up to the same extent as their counterparts in other countries, such as the US, and affects the EU’s ability to become a strong international actor in the tech race. To build a strong industrial base, regulatory certainty through simplification is therefore crucial.

Initial reactions and next steps

While the proposals will now have to be subject to review by the Council of Ministers and the European Parliament, several points of concern have been raised. According to some research reported on by experts at the World Economic Forum, changing reporting requirements might lead to regulatory uncertainty and increased bureaucracy, as smaller businesses have to navigate new rules while larger businesses consolidate their market power. Some also fear that the new rules, which eliminate certain reporting requirements or make them voluntary, might undermine sustainability efforts by weakening corporate accountability and increasing inconsistency in reporting.

Nonetheless, the general opinion remains split. Those in favour of the Omnibus proposals have instead noted that deregulation will not necessarily de-prioritise sustainability. Engaging with international standards will be the key to the long-term success of companies, and even in the absence of strict European rules, market rules are expected to drive sustainability forward.

In the Council of Ministers and the European Parliament, the proposals have been welcomed with mixed reactions. At a meeting of the Competitiveness Council on 12 March 2025, the Ministers of EU Member States initially welcomed the proposals and focused the discussion on other areas of European legislation that could benefit from similar simplification measures beyond those indicated by the Commission. Debates on the packages at the European Parliament were more divided, with some parties lamenting that the initiatives did not go ‘far enough’ and others commenting that the proposals were promoting ‘deregulation’ rather than ‘simplification’. As co-legislators, the Council of Ministers and European Parliament will now be entrusted with amending the proposal and finding a common position for adoption.

Still, the path to adoption seems to be a long one. The proposals are expected to be subject to significant changes, reflecting the debates in the European institutions. In the meantime, the European Commission can continue promoting its simplification efforts through other initiatives and continue engaging effectively with stakeholders and the industry to promote a shared vision that can foster European innovation and competitiveness.