Less Red Tape, Same Green Goals? The EU’s ESG Reporting Revamp Explained

As companies across Europe scramble to keep up with ever-evolving ESG requirements, the European Commission’s latest regulatory proposal offers something rare: simplification.

With the “Simplification Omnibus”, this new initiative is part of a broader strategy to reduce administrative burdens on businesses while staying the course toward the EU’s long-term climate goals. But what does this actually mean for companies, investors, and the future of sustainable finance in Europe?

Let’s dive into what may be changing— and what may not.

The Context: ESG Reporting’s Growing Complexity

Over the past few years, ESG reporting requirements in the EU have surged in scope and complexity. With the Corporate Sustainability Reporting Directive (CSRD) coming into force, and an ever-expanding web of European Sustainability Reporting Standards (ESRS), businesses have found themselves managing dozens — if not hundreds — of individual ESG indicators.

While these changes were designed to standardize sustainability disclosures and improve transparency for investors, many companies — particularly SMEs — have struggled to keep pace. Industry groups have voiced concerns about resource strain, lack of data availability, and unclear timelines.

Here's where the European Commission’s “Simplification Omnibus" comes in.

What’s in the Simplification Omnibus?

The Omnibus package introduces several proposals to streamline and rationalize ESG-related rules. While the full text is still under review, key highlights include:

Delayed Sector-Specific Standards

The timeline for implementing detailed sector-specific ESRS has been pushed back, giving companies more breathing room to prepare. This delay is aimed at improving quality and practicality based on real-world feedback.

Scaled Reporting for SMEs

Recognizing the disproportionate burden on smaller firms, the proposal introduces tailored reporting frameworks for SMEs — a shift toward proportionality without sacrificing disclosure quality.

Materiality Made Simpler

Double materiality — the idea that companies must assess both how ESG issues affect them and how they impact the world — is still required, but with reduced documentation and fewer data points expected for immaterial topics.

Reduced Redundancies with Other EU Laws

Where ESG disclosures overlap with other regulations (e.g., SFDR or EU Taxonomy), the goal is to harmonize rather than duplicate. Think: one input, multiple outputs.

What Does This Mean for Companies?

While this might sound like bureaucratic fine-tuning, these changes could fundamentally reshape how companies approach ESG:

Operational Relief

Many sustainability teams are small and resource-constrained. Simplified frameworks can reduce the volume of data to collect, freeing up time for strategy and implementation.

Better Integration with Finance

With fewer compliance-specific hurdles, ESG data can be more seamlessly integrated into financial systems, ERPs, and risk models — making sustainability a core part of business intelligence.

Improved Data Quality (Potentially)

Counterintuitively, simplifying standards could lead to better data. Companies can focus on what’s truly material, rather than chasing box-ticking metrics that aren’t meaningful.

That said, ambiguity remains. Looser rules could invite inconsistent interpretations and make it harder for investors to compare disclosures.

What Does This Mean for Investors?

For asset managers, analysts, and ESG data users, the impact is more nuanced.

• Comparability May Suffer: More flexibility means more variability in how firms report — potentially making apples-to-apples comparisons harder.
• Materiality Judgments Will Matter More: Investors will need to dig into why a company chose to report (or not report) on certain ESG issues.
• Greater Need for External Data & Analytics: As disclosures become less standardized, tools that provide context, benchmarks, or third-party verification will become essential.

The bottom line? Investors will need to do more homework — or rely more heavily on platforms that translate messy data into actionable insights.

Is This a Step Backwards?

Some critics argue that simplifying ESG disclosures dilutes the EU’s leadership in sustainable finance. But the Commission’s framing is clear: this isn’t about relaxing standards — it’s about making them more usable, scalable, and globally competitive.

Key sustainability goals — like achieving net-zero emissions by 2050, promoting transparency, and combating greenwashing — remain intact. What’s changing is how we get there.

Think of it less like tearing down the scaffolding and more like rebuilding it for actual use.

Looking Ahead: What Companies Should Do Now

If you’re reporting under CSRD — or plan to — here are a few steps to consider in light of these changes:

1. Map Your Current ESG Workflow Against the New Proposals
   Where could complexity be reduced? What indicators might be deprioritized?
2. Invest in Materiality Assessment Tools
   With more flexibility comes more responsibility. Make sure your materiality process is well-documented and justifiable.
3. Watch for National Transpositions
   EU regulations often leave room for interpretation. Track how your member state will implement these changes.
4. Engage Stakeholders Proactively
   Whether it’s investors or internal execs, align early on your ESG priorities under the new framework.

Final Thoughts

The “Simplification Omnibus” is a signal: the EU isn’t backing away from sustainability — it’s trying to make it more practical. For companies and investors alike, this moment is less about doing less, and more about doing ESG smarter.

At Datia, we’re committed to helping financial institutions and corporates navigate regulatory complexity while maintaining data quality and compliance confidence. Whether rules expand or simplify, our platform evolves with you.

Let’s discuss and learn how to be proactive with your sustainable finance process by booking a meeting with us now!