European Commission simplifies rules on sustainability

The European Commission has announced sweeping changes to the EU’s green regulations in an effort to simplify sustainability reporting requirements and ease administrative burdens on businesses while maintaining environmental and human rights objectives.

“Simplification promised, simplification delivered!” announced Ursula von der Leyen, President of the European Commission.

“We are presenting our first proposal for far-reaching simplification. EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence and taxonomy. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals. And more simplification is on the way.”

The proposals, unveiled today, significantly reduce the number of companies required to report on their environmental impact.

Under the new plan, only companies with over 1,000 employees will be obligated to disclose sustainability information, raising the threshold from the current 250-employee requirement. This change would exempt approximately 40,000 companies—80% of those originally covered—significantly reducing the regulatory scope.

Additionally, reporting requirements for companies still under the mandate will be delayed by two years, pushing implementation to 2028.

The EU Taxonomy reporting obligations will also be simplified, focusing primarily on the largest businesses while allowing smaller companies to report voluntarily if they wish to access sustainable finance.

Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy, noted: “We are taking concrete steps to cut red tape and make EU rules more accessible and effective for citizens and businesses.

“Today’s package is the first step of our far-reaching simplification efforts across all sectors of legislation. We can show that Europe is not only an incredible market to invest, produce, sell and consume but also a simple market.”

The proposed revisions extend to due diligence requirements, which will now focus only on direct business partners, rather than the entire supply chain. This adjustment aims to minimise compliance costs, particularly for small and medium-sized enterprises. Companies will also have more time to comply, with the largest firms now expected to meet sustainability due diligence requirements by July 2028—one year later than originally planned.

The European Commission has framed these reforms as a necessary step to boost EU competitiveness and unlock investment, estimating total cost savings of €6.3 billion per year while mobilising an additional €50 billion in public and private investment. However, environmental groups and some EU member states have raised concerns that these changes could undermine the bloc’s climate goals by reducing transparency and corporate accountability.

The proposals will now go through negotiations in the European Parliament and with EU member states before they can be adopted. As the legislative process unfolds, debates are expected to intensify over whether the EU’s bid to reduce bureaucracy will come at the cost of its green ambitions.

As the European Commission advances its regulatory simplification agenda, further analysis of these changes will be critical. Next week, Asset Finance Connect will publish a detailed review of key aspects of the report, assessing its implications for businesses, investors, and policymakers.