Von der Leyen prepares bonfire of EU green reporting rules

Two months into her second term, Ursula von der Leyen is preparing to dismantle large parts of the environmental regulatory architecture she spent her first mandate building. On Wednesday the European Commission unveils its competitive compass, a strategic framework intended to revive Europe's flagging industrial base. Its first concrete deliverable, an omnibus simplification package due on 26 February, will reopen the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive and the EU Taxonomy, three pillars of the Green Deal that are barely a year into their phased implementation.

The competitive compass and the omnibus plan

The competitive compass is billed as a shift from rule-setting to implementation and growth. A Commission spokesperson said simplification was "crucial to achieving the European Green Deal's ambitious goals" and that the importance of lighter rules was "widely recognised across political lines". Von der Leyen has promised a 25% reduction in reporting obligations by the end of June. The omnibus mechanism allows multiple laws to be amended in a single legislative vehicle, accelerating a process that would otherwise take years.

The political calculation is explicit. European industry groups have argued for months that compliance costs are eroding competitiveness against American and Chinese rivals who face no equivalent obligations. The European People's Party, von der Leyen's own parliamentary family, campaigned on simplification before her re-election. The centre-right group now wants the reporting rules to apply only to companies with more than 1,000 employees and a two-year delay to the Carbon Border Adjustment Mechanism, the EU's carbon tariff on imports.

What the legislation targets

The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose greenhouse gas emissions, water use, climate risks to working conditions, chemical leakages and supply-chain human rights compliance. The Corporate Sustainability Due Diligence Directive (CSDDD) goes further, obliging firms to identify and mitigate adverse impacts across their value chains. The EU Taxonomy classifies which economic activities count as green, directing capital toward the transition.

When fully phased in, the regime will cover large listed companies from 2025, small and mid-sized enterprises from 2026 and non-EU companies with significant European turnover from 2028. The first reporting deadline for the largest firms arrived this month. A Commission spokesperson confirmed that "other files are being considered" beyond the three named directives, suggesting the February package may be broader than advertised.

Business pressure and the cost argument

The numbers cited by industry are striking. METI, a French lobby representing 6,200 mid-sized companies, estimated that CSRD compliance could cost an average firm up to €800,000 in the first two years. Florence Naillat, the organisation's deputy general delegate, told Politico in November that "the number of data points [in] this directive is completely unreasonable", especially for companies without the financial depth of large multinationals. BusinessEurope, the EU's biggest corporate lobby, published a position paper last week listing 68 regulatory reduction proposals ranging from packaging waste rules to produce safety standards.

Member states have amplified the pressure. France's centrist government wants the due diligence law delayed indefinitely. Olaf Scholz, Germany's Social Democratic chancellor, has asked for a two-year postponement of reporting obligations. For Kuzmanova at the Cambridge Institute for Sustainability Leadership, the focus on delays "is very telling" and indicates that "this is not about competitiveness and providing support to European businesses … delaying is not simplifying. It is not making anyone's life easier."

Political divisions within the centre-right

The EPP's demands reveal a fracture within von der Leyen's political base. The party's push to restrict scope to companies above 1,000 employees would exempt the vast majority of European firms from the most onerous requirements. Its call to delay the Carbon Border Adjustment Mechanism, a flagship measure to prevent carbon leakage, suggests the simplification agenda extends well beyond reporting paperwork. Conservative forces within the Parliament and Council have long argued that the Green Deal's regulatory density is self-defeating if it drives production abroad.

Von der Leyen's response has been to insist that environmental objectives remain unchanged. The Commission frames simplification as a technical exercise: fewer data points, streamlined templates, aligned definitions. Critics counter that the distinction between process and substance collapses when the data required to verify green claims is the very thing being cut.

Legal uncertainty and phased implementation

A central objection comes from the Greens in the European Parliament. In a letter to von der Leyen dated 13 January, they wrote that "changing the EU reporting framework that has only recently been adopted and is yet to be fully implemented would create more legal uncertainty". The CSRD entered force in 2023. Its first application began last year. Companies have spent millions building reporting systems, hiring sustainability officers and auditing supply chains on the assumption that the rules were settled.

The phased timeline means most affected businesses have not yet reported. Large listed companies face their first deadline this year. SMEs have until 2026. Non-EU firms have until 2028. Rewriting the rulebook now forces companies to decide whether to invest in compliance for a regime that may change before their reporting date arrives.

Corporate and green opposition

Not all business backs the package. Unilever, Nestlé and Primark warned in a joint statement on 17 January that "investment and competitiveness are founded on policy certainty and legal predictability" and that the omnibus "risks undermining both of these". These companies have already embedded the directives into their strategies. For them, stability is more valuable than further reduction.

The NGO community argues that the Commission lacks proper feedback on how the legislation works in practice. The Greens' letter noted that "the European Commission still lacks proper feedback from all relevant stakeholders and Member states on the application of new legislation". Kuzmanova's warning of a "deregulation wave" reflects a broader fear that the omnibus is a proof of concept: if the Commission can reopen laws months after they take effect, no regulatory settlement is durable.

Why the taxonomy matters

The EU Taxonomy is the least discussed but potentially most consequential target. It determines which activities qualify as green for investment purposes, shaping capital flows across the continent. Simplifying its criteria could expand the pool of "green" assets, lowering financing costs for a wider range of projects. It could also dilute the label's credibility, undermining the very market the taxonomy was designed to create. The Commission has not specified which taxonomy elements are under review.