Experts react to the EU Omnibus Proposal: A divisive shift in sustainability regulations

The EU Omnibus Proposal, unveiled by the European Commission, has sparked mixed reactions among industry experts and business leaders. The proposal, aimed at simplifying sustainability regulations and enhancing competitiveness, could see significant rollbacks in reporting obligations under key frameworks like the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, and the Corporate Sustainability Due Diligence Directive (CSDDD).

One of the most contentious changes is the increase in the CSRD threshold, with the number of companies required to report on Environmental, Social, and Governance (ESG) matters slashed by around 80 per cent.

Businesses with fewer than 1,000 employees would now be excluded, a sharp increase from the initial 250-employee threshold. Reporting requirements would also be delayed by two years, and sector-specific ESG standards have been scrapped entirely.

This dramatic shift has drawn strong reactions from key figures in the business and ESG sectors.

Mark Wirth, Partner at Zampa Partners, voices his concerns on LinkedIn, calling the proposal a ‘’major rollback” on Europe’s sustainability rules. Speaking exclusively to MaltaCEOs.mt, he elaborates on the mixed implications of these changes.

“The EU’s decision to ease the sustainability reporting requirements is, in my view, a double-edged sword. On one hand, reducing red tape helps businesses remain competitive in a challenging global economy, especially when the US has also de-regulated. On the other hand, scaling back transparency obligations could slow progress on corporate accountability and climate action, and could be demoralising for those companies that have invested heavily during the last few years to prepare for sustainability reporting.”

Mr Wirth acknowledges the need for streamlined regulations but questioned whether excluding 80 per cent of companies was the right approach.

“While I understand and somewhat agree that the regulations should be simplified, reducing the number of reporting companies by such a wide margin may not necessarily be the best way forward.”

Rachel Decelis, ESG Lead at KPMG, provides a slightly different perspective. While she recognises the benefits of simplifying the reporting process, she warns against losing sight of the long-term benefits of ESG compliance.

“The EU has framed this proposal as a way to create a more proportionate, risk-based reporting framework, but the move has also been met with criticism. ESG reporting was originally designed to enhance transparency and standardisation, helping businesses mitigate risks, like those related to climate change, and unlock benefits like lower energy costs, better access to capital, and improved talent attraction and retention. These advantages remain highly relevant to Maltese businesses, regardless of regulatory requirements.”

Ms Decelis urges business leaders to continue prioritising sustainability as a core part of their strategy, regardless of changing regulations.

“Sustainability reporting can be an important part of a company’s strategy to support the green transition. Companies that embed ESG strategically will be better positioned to adapt, grow, and attract investment in a changing business landscape.”

As the legislative process unfolds over the coming months, the final scope of the changes remains uncertain. But one thing is clear: The debate on balancing simplification with accountability is only just beginning.