The European Commission (EC) is moving forwards with plans to drastically reduce sustainability reporting requirements for businesses, including shipping companies, operating within the European Union (EU). The Omnibus Simplification Package, unveiled in late February 2025, is designed to cut red tape with the goal of enhancing EU competitiveness on a changing global stage. It has all but put the brakes on the European Green Deal, a set of policy initiatives that aim to make the EU climate-neutral by 2050.

Since the Green Deal was first introduced in 2020, the EU has rolled out a series of regulations, starting with the Taxonomy for Sustainable Activities. In 2023, they adopted the Corporate Sustainability Reporting Directive (CSRD), which created requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions in accordance with the European Sustainability Reporting Standards (ESRS). And in 2024, they adopted the Corporate Sustainability Due Diligence Directive (CSDDD), which created additional reporting requirements, as well as legal liability, for companies in relation to their value chain.

Cutting red tape

The Omnibus Simplification Package aims to streamline reporting by focusing obligations on larger companies with significant environmental and social impacts. Key measures include making sustainability reporting more efficient, simplifying due diligence for responsible business practices, strengthening the carbon border adjustment mechanism for fairer trade, and unlocking opportunities in European investment programmes.

The CSRD deadline, initially due to take effect this year, has now been delayed to 2028, while the CSDDD will now take effect from July 2028, which is a year later than planned. The EC has also scaled back the scope of the CSRD meaning only companies with more than 1,000 employees and EUR50 million in turnover will need to report on carbon emissions.

Reducing the impact on SMEs

Speaking to ICS Leadership Insights, Caroline May, EMEA Head of Environment, Health and Safety, Sustainability Partner, and Co-Head ESG EMEA at Norton Rose Fulbright LLP, stressed that the Omnibus Simplification Package was not solely a response to recent geopolitical events. “Even now CSRD has not been implemented in all Member States,” she said.

The purpose of the Omnibus package announcement was not just to push back the reporting deadlines but also to “simplify some of the concepts and reduce the number of companies that need to report”. She explained: “It is estimated that up to 90 per cent of the companies that were required to report originally may fall away.

That would leave us with just the very largest companies needing to comply, while the delayed reporting timetable gives more time to clarify what is needed and prepare.”

“The overall aim is to reduce the impact on SMEs while focusing on those with the most emissions, with the idea that it will have a trickle-down effect, with the requirements reduced for those with less environmental impact from their operations.”

Green Deal not dead

Also speaking to ICS Leadership Insights, Peter Suasso de Lima de Prado, Founder of Bluespar, a sustainability consultancy, believes that despite the recent pushback, the world is still very much moving forwards on more stringent sustainability reporting legislation.

This, he explained, is for two reasons. Firstly, it is because the directive serves as an extra dimension of financial reporting, which in turn helps investors and insurers better understand and manage risk and opportunity. “You need more information than just profit and loss and a balance sheet – you need to understand what makes your business tick, the threats and opportunities, and how the business is impacting the world outside as well as how the world outside is affecting the business.”

Secondly, these directives are occurring globally, with financial reporting regulations in many countries increasingly bringing in ESG disclosures. China, for example, is currently developing similar sustainability reporting regulations to the EU. This makes it harder to avoid, as
businesses that trade with companies based within those vicinities will be bound by the same rules. “I believe in 10 years’ time we will be looking at this as we do now to financial reporting,” added Suasso de Lima de Prado.

More uncertainty

Much of the confusion centres around requirements such as the double materiality assessment (DMA), which Suasso de Lima Prado explained incorporates two components: financial materiality and impact materiality – the latter of which is a new concept to many companies.

“Impact materiality is about gaining an understanding [of] where your business positively or negatively affects the environment and its value chain. Whatever outcome in terms of streamlining sustainability reporting directives in the EU, this will be a useful exercise that can positively impact your business.”

He added: “There are challenges, especially on the data side, simply because many of us do not have the systems for that yet – they may have operational information for example but normally not on sustainability. It is always better to take a slow approach and get it right than to try and find quick fixes.”

However, May said that more changes could be coming to the directive, adding to future uncertainty. But she added: “Companies that have started to prepare for the new legislation by collating data and reviewing their supply chains should continue to do so. Companies also stand
to benefit from knowing what their environmental impacts are and how they can mitigate them leading to greater efficiencies and often cost savings.”

May stressed the need for “greater certainty” on the regulatory framework – something which would allow operators and investors to plan for the changes still looking to be implemented in the not-too distant future.