"Von der Leyen’s ‘Omnibus’: a year of sustainable simplification as it approaches the final stage"

The process began with the streamlined approval of the ‘stop the clock’ directive, which froze the application timelines for the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

The negotiations continue around the change in content of these two directives following the agreement reached in the European Parliament. While the Council reached its position (‘general approach’) in June, the situation in Parliament had become uncertain, following rapporteur Warborn’s (EPP) rejection of the report on October 22. With the agreement reached in the November 13 plenary session, the green light has been given to start the ‘trilogues’ or the inter-institutional negotiations that will allow the simplification process to be completed by the end of the year.

The text approved by Parliament holds notable political weight. Apart from being the first ‘Omnibus’ presented by the Commission in the current context of regulatory simplification, the agreement sets a significant precedent, as it was approved thanks to the support of far-right political groups, breaking the centrist coalition (‘Der Leyen coalition’).

This means that some topics for which there are conflicting positions in the European Parliament – the CSRD application threshold and the obligation for companies to publish transition plans, for instance – have been resolved in a way that could complicate trilogue negotiations, as the text moves away from what the Council approved.

Although the ‘Omnibus’ is a step in the right direction, many feel that it is not free of complications, and in some respects, lacks ambition. The European sustainable finance framework goes beyond the CSRD and CSDDD, and requires more profound, pragmatic reforms, such as the revision of the disclosure standards (ESRS) or the simplification of the European taxonomy reporting.

Nevertheless, the proposed simplification of the reporting directive is overly ambitious regarding the reduction in the number of companies required to report once it enters into force. Parliament has proposed raising the threshold from companies with 1,000 employees to those with 1,750 employees, as well as the previously proposed limit of €450 million in turnover. Under this proposal, just over 500 companies in Spain would be subject to the requirement. Having said that, a question that remains is whether companies that were already publishing will stop doing so, or whether they will continue to publish voluntarily, even if they are not ultimately subject to the revised directive. It also remains to be seen how Spain will transpose the directive, taking current regulations into account.

The availability of companies’ sustainability data has become a critical issue for financial institutions given that it directly impacts banks’ ability to comply with their own regulatory, supervisory and risk management requirements. In this new context, we feel that profound modifications in prudential banking regulations will need to be introduced around sustainability in order to adapt these requirements and align them with the ‘Omnibus’ simplification.

We must also not forget that while the ‘Omnibus’ is significant in terms of reducing the administrative burden for companies, it is only one of many existing levers to promote competitiveness in Europe. Sustainability in itself is a source of opportunities that will only be realized if the regulatory framework provides the right incentives to encourage innovation and the development of technologies necessary for the transition. A framework is needed that ensures the profitability and bankability of the transactions that will finance the transformation of the various industry sectors toward sustainable business models.

Due to all of the above, we believe that we must defend the benefits of the simplification proposed by the Commission and encourage legislators to continue working to achieve a more pragmatic regulatory framework. In this regard, we emphasize the need to simplify the banking regulation for ESG issues, as well as the development of industrial policies that support the transition, as essential levers to maintain the competitiveness of our business community and Europe’s leadership in sustainability.