The European Commission’s Omnibus package, aimed at providing more harmonisation for European markets and boosting EU industry, has divided stakeholders over how to balance environmental goals with economic imperatives.

The initiative, launched in February to reduce administrative burdens on European businesses, has ignited a heated debate between sustainability advocates and those pushing for greater industrial competitiveness.

At a Brussels policy debate this week, hosted by Euractiv, representatives from the European Commission, Parliament, industry associations, and civil society organisations offered contrasting perspectives on the reforms that would significantly alter corporate sustainability reporting and due diligence requirements.

“We are talking about an area where our competitiveness agenda intersects with sustainability imperatives. And these two are not in opposition,” argued Dan Dionisie, Head of Unit Company Law, DG JUST, European Commission. “In fact, if done right, sustainability due diligence can enhance competitiveness. But it’s, of course, a matter of balance and finding the good balance is not easy.”

The omnibus package proposes substantial changes to key pieces of sustainability legislation, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy.

Critics have voiced concerns that these modifications could undermine corporate accountability and hinder progress toward EU climate goals.

Parliament divided on approach

The European Parliament remains divided on the appropriate approach, with Green MEPs warning that simplification must not lead to deregulation.

“From the Greens’ side, we say yes to simplification, but we say no to deregulation,” said Kira Marie Peter-Hansen, a Green MEP from Denmark.

She criticised the proposal for moving away from a risk-based approach to value chains, arguing that “this is actually making it more burdensome.” Peter-Hansen also expressed frustration about the haste and lack of impact assessment in the process: “I’ve never seen such a messy legislative process… doing a fast-track procedure, presenting legislation with no impact assessment yet again.”

Lukas Mandl, an Austrian MEP from the European People’s Party (EPP), offered a more favourable assessment of the omnibus initiative, though he suggested it could go further.

“It’s about time that Europe’s Commission and Parliament develop more freedom for industry,” Mandl said. “The content [of the omnibus package] is good, but not yet good enough.” He highlighted growing distrust toward EU-level regulation within the business community.

‘Stop-the-clock’ welcomed by industry

Industry representatives welcomed the “stop-the-clock” approach taken by the European Commission, which pauses the implementation of certain reporting requirements while reforms are considered.

Bertram Kawlath, president of the Association of Machinery and Equipment Manufacturers in Europe (VDMA), praised the initiative: “EU companies and especially our member companies are being stifled by the burden of bureaucracy, and we are longing for freedom to get back to innovation.”

Kawlath revealed that bureaucratic costs amount to around 6% of turnover for machinery sector companies – “more than the usual profit of those companies” – and described the omnibus as “extremely important” for providing relief.

“The omnibus was extremely important for companies because with a stop-the-clock approach, companies would have had to report or collect 600 data points for CSR from early January to be able to report in the next years,” he explained.

For small and medium-sized enterprises (SMEs), which make up the backbone of European industry, the reforms are particularly significant. Sophia Zakari, director of enterprise and legal affairs at SME United, emphasised that “simplification is not about deregulation, but it’s about proportionality, about clarification.”

“The fact that we drafted legislation not tailored to SMEs and still asking them for information made them suffer in their competitiveness because the legislation and the whole landscape were way too complex for them,” Zakari noted.

SMEs in the supply chain

A central concern in the debate was how larger companies’ reporting requirements affect SMEs in their supply chains. Despite SMEs technically being outside the scope of directives like the CSDDD, participants agreed that in practice, they often bear significant reporting burdens as suppliers to larger companies.

The Commission’s Dionisie sought to clarify that the CSDDD includes “specific safeguards to prevent the trickling down of burden onto smaller business partners in the value chain. So basically, the companies that do due diligence, the large ones, have to go to the place in the value chain where the impacts are and not burden the intermediaries in the value chain.”

However, Zakari countered that “the reality is that SMEs will always be impacted by EU legislation because they are in the supply chain. So, thinking that we just exclude them from the scope and then everything is fine – it’s not true.”

This was echoed by Kawlath, who shared experiences from his own manufacturing company: “We export 80% in 93 countries. We import from 17 countries. We have around 500 suppliers in 17 countries with tens of thousands of different articles managed in our small company by six persons in the purchasing department.”

Sustainability with competitiveness

The debate repeatedly returned to how Europe can maintain its sustainability leadership while remaining competitive globally.

Lina Strandvåg Nagell, deputy director and head of policy at Bellona, an environmental NGO, cautioned against reducing sustainability reporting requirements: “We would actually have a significant reduction in competition and opportunities for sustainable investments. Again, not a race to the top at all.”

The international dimension of Europe’s competitiveness challenges featured prominently, with Kawlath sharing insights from recent discussions in the United States: “I tried to discuss tariffs and said, How could the EU work with the tariffs? And everybody I spoke to told me it’s non-tariff barriers. I ask, what are the non-tariff barriers of the EU? And everybody told me it’s CBAM, it´s the CSDDD, it’s deforestation regulations…”.

Finding a workable balance

As the legislative process continues, the European Parliament will play a crucial role in shaping the final form of the omnibus package. MEP Peter-Hansen suggested that Parliament may seek more clarity for businesses while maintaining sustainability ambitions.

Mandl expressed confidence that improvements would be made during the parliamentary process: “Under the leadership of [EPP] in the European Parliament, I’m pretty confident that we can, not delete, but dilute, the omnibus.”

VDMA’s Bertram Kawlath offered a closing perspective that seemed to capture a potential middle ground: “If we get rid of 600 data points, reduce them by 80%, it’s still 120 data points, which also SMEs will report on. So, not getting rid of all reporting, but make it more feasible.”

As the EU institutions proceed with deliberations on the omnibus package, the challenge remains finding a balance that maintains Europe’s leadership on sustainability while addressing legitimate concerns about administrative burdens and global competitiveness.

Sophia Zakari of SME United summarised the sentiment shared by many participants: “We are all on the same page when it comes to legal certainty. And this is extremely important for European SMEs. I think we also all agree that simplification must be reached and that there is an emergency.”

The debate underscored that while there may be broad agreement on the need for simplification, perspectives differ dramatically on how far reforms should go and whether they risk undermining sustainability progress.

As Green MEP Peter-Hansen observed, “No matter what we politically believe about the content of EU legislation, we need to ensure that it’s good legislation with quality, that we do impact assessments, that we do stakeholder involvement also when it’s annoying, and that we ensure a proper evaluation, so that we have legal certainty of the quality of our legislation.”

With global competition intensifying and climate challenges mounting, the EU’s ability to strike this balance may prove decisive for both its economic future and its aspirations for environmental leadership.

[Edited By Brian Maguire | Euractiv’s Advocacy Lab ]