A proposed simplification of European corporate sustainability policies (CSRD and taxonomy) is raising concerns that it could weaken environmental pressure and hinder the EU's progress toward carbon neutrality by reducing transparency and allowing companies to evade responsibilities, ultimately impacting sustainable investment and the transition to a green economy. Strong regulations are seen as crucial for maintaining Europe's leadership in ecological transition and fostering innovation. The debate highlights the tension between economic competitiveness and climate commitments, with some arguing that ambitious standards are necessary for long-term sustainability and attracting investment in responsible savings and green finance.
Following the publication of the Draghi Report and the European Commission’s definition of a “Competitiveness Compass,” a simplification initiative has been launched. It is based on two "omnibus" regulations—texts aimed at simplifying, harmonizing, or adapting several existing regulations. Among the targeted policies are corporate sustainability policies, particularly the CSRD, CS3D, and the green taxonomy.
As the climate crisis becomes increasingly urgent, could this simplification lead to a step backward in the fight for a sustainable economy?
The CSRD is not just another directive increasing corporate costs—it is a key instrument ensuring that as many EU businesses as possible are held accountable for their sustainability efforts. It introduces the concept of double materiality, which assesses both the impact a company has on its environment and the impact of environmental factors on the company.
Addressing financial markets' blindness to environmental dimensions, the CSRD requires companies to publish detailed information on their environmental, social, and governance (ESG) impacts. It also forces them to disclose their dependencies on existing social and environmental conditions. This transparency is essential to directing capital toward genuinely sustainable projects and preventing greenwashing.
But the CSRD goes beyond transparency. It sends a strong signal to investors, governments, and citizens: Europe is committed to fully integrating sustainability into its economic model. The 2015 Paris Agreement, the UN’s 2030 goals, and the European Green Deal all rely on frameworks like the CSRD to ensure accountability. Without strong regulation, Europe risks losing its leadership in ecological transition and missing its goal of carbon neutrality by 2050.
This is not an ideological stance—it is an acknowledgment that sustainability is essential for economic sovereignty, competitiveness, investment, and innovation. It is an opportunity to build the industrial, scientific, and economic leaders of tomorrow.
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The European taxonomy is just as crucial. It serves as the reference guide for determining what is considered sustainable and what is not. Though it is a regulatory rather than a physical reality, the taxonomy provides a stable, well-defined, and shared framework.
Its goal? To help investors identify activities that genuinely contribute to ecological transition and to combat greenwashing.
Initially focused on renewable energy and low-carbon technologies, the taxonomy has sparked debate—particularly regarding the inclusion of natural gas, which was ultimately considered a transitional energy source under certain conditions. This illustrates its political dimension, where scientific objectivity was expected.
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The concept of omnibus simplification involves reducing regulations, cutting administrative costs, and making rules more accessible. On paper, it seems efficient, relevant, intelligent, and balanced. The goal is to prevent excessive constraints relative to the stakes involved. Small businesses (which make up two-thirds of French enterprises) do not have the same impact as large corporations and should not face the same regulatory burdens.
However, upon closer inspection, the situation is more complex. This approach poses serious risks because it comes at a critical moment when Europe is striving to accelerate its energy and ecological transition. It also comes at a time when there is a strong temptation to weaken the regulatory framework for this transition. Lowering requirements means stepping back in a race where every step is crucial for achieving carbon neutrality.
Some companies already bypass or downplay their impact through greenwashing strategies. Current regulations—though imperfect—at least force them to acknowledge and report their responsibilities.
Thus, reducing the scope of the CSRD and the Taxonomy, as proposed by the Commission, could allow a significant portion of the private sector to evade its responsibilities.
Economic competitiveness is a key issue for the EU, but its definition needs clarification. Should the European market be driven solely by corporate interests, or should it focus on innovation, sustainability, and citizens' well-being?
The idea that relaxing regulations could attract more businesses and foster growth is often put forward. However, this approach fails to fully consider climate challenges and the innovation potential of European enterprises.
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The debate surrounding the CSRD has sparked differing views, with some advocating for its revision or even repeal. This reflects a desire to ease corporate constraints but also raises concerns about balancing economic competitiveness with climate commitments. In the current context, where ecological transition is imperative, ambitious standards could enhance the European economy’s attractiveness.
The European Union can rightfully claim to be a leader in regulation. Its approach—though sometimes slow and imperfect—is rooted in collective responsibility, rigor, and ambition.
The CSRD and taxonomy not only impact European businesses but are already influencing global regulations. By establishing these frameworks, Europe sets an example for other nations to follow.
Take the EU Emissions Trading System (EU ETS) as an example. Since its inception in 2005, it has continuously evolved, adapting to economic and environmental realities while staying true to its emission reduction goals. Today, it is one of the most effective mechanisms in the fight against climate change. This demonstrates that ambitious regulations, even when refined over time, are not only necessary but also achievable.
The "Omnibus" simplification of the CSRD and European taxonomy is not just a technical matter—it is a decisive choice. We cannot afford to jeopardize our future for short-term economic considerations. As investors, we have a responsibility to uphold strong and ambitious regulations. Europe must remain a model of sustainability and transparency. Only by doing so can we ensure the EU’s competitiveness, sovereignty, continued investment in innovation, and environmental protection. European ambition should not shrink in the face of immediate economic interests. It must strengthen, assert itself, and lead the way toward a sustainable future for all.
On 22 October 2025, the European Parliament rejected the negotiating mandate for the “omnibus” directive package aimed at simplifying the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and related rules, by 318 votes against, 309 in favour, with 34 abstentions.
The vote forces the EU legislative process back into renegotiation: the Parliament will vote again on amendments on 13 November before entering trilogue talks.
For investors and companies alike, this means that the regulatory horizon remains uncertain: the proposed reduction in scope of reporting and due-diligence obligations has been put on hold, and the timing and breadth of the simplification measures may shift. At Homaio, we continue to monitor these developments closely — given that our business model, centred on regulated carbon-emission quota markets (ETS), depends on a stable and credible European sustainability-framework.
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