Omnibus proposal impact on climate risk reporting

A lot has been written about the EU #Omnibus proposal, but personally, I find it deeply disappointing. 😞 While framed as a simplification, it guts corporate sustainability reporting at a time when we need more transparency, not less. Where do things stand? The European Commission has proposed rolling back the Corporate Sustainability Reporting Directive (CSRD), raising the threshold so that only firms with 1,000+ employees and either €50M in revenue or €25M in assets must comply. This exempts nearly 80% of companies, drastically reducing CSRD’s scope. The argument? Less red tape. The reality? A step backward for corporate accountability. This contradicts what rigorous research has shown. A 2022 paper in Journal of Accounting Research, "Real Effects of a Widespread CSR Reporting Mandate" by Peter Fiechter, Joerg-Markus Hitz, and Nico Lehmann, examines exactly this. 📚 Their findings? ✅ Mandatory reporting led to real CSR improvements, not just greenwashing. Firms didn’t just disclose more; they launched sustainability projects, improved governance, and linked executive pay to CSR. ✅ The biggest improvements came from firms previously lagging on sustainability. Those with low pre-existing CSR engagement saw the strongest gains. ✅ Firms acted before the mandate took effect. Anticipating regulatory pressure, peer benchmarking, and stakeholder scrutiny, companies improved CSR well in advance. ✅ Social improvements were stronger than environmental ones. While labor practices and governance advanced, environmental impact remained limited—suggesting more, not less, policy support is needed. ✅ Real CSR investments had financial costs. Increased CSR activity led to short-term profitability hits, confirming these were real commitments, not box-ticking exercises. So what does this mean for Omnibus? If we scale back CSRD, we risk reversing these expected real gains. Companies that were just getting serious may now step back, and those that lacked incentives before will have even less reason to act. At a time when corporate sustainability should be accelerating, the EU is taking a major step in the wrong direction. Instead of diluting reporting, we should be strengthening it. Transparency drives action. Weakening disclosure doesn’t just ease compliance—it removes accountability, stakeholder pressure, and market forces that push firms to do better. Do we really want to trade long-term progress for short-term “competitiveness”? Because if this proposal moves forward, that’s exactly what will happen. Full paper here: https://lnkd.in/e7gBvXYw #Sustainability #ESG #CorporateAccountability #CSRD

Christine Lagarde (ECB) warns against weakening the #CSRD. In a recent letter to the European Parliament, she is crystal clear about the risks of the #omnibus: "The proposed reduction in the scope of undertakings subject to sustainability reporting requirements under the CSRD would limit the availability of firm-level data, thereby weakening the Eurosystem’s ability to perform a granular assessment of climate-related financial risks on its balance sheet and within its collateral framework." She stresses that the omnibus must "strike the right balance between retaining the benefits of sustainability reporting for the European economy and the financial system while also ensuring that the requirements are proportionate." Descoping 80%-94% of companies from the CSRD does not strike the right balance - to the contrary, it creates long-term risks for the European economy. 👉 Our analysis of the Commission, Council and EPP proposals shows a pragmatic compromise: A 500-employee threshold would fully do the job. It would bring 6,800 firms back into scope, and cost savings would still be very substantial when not requiring limited assurance for mid-sized firms (https://lnkd.in/d999FfV4). The EPP, and Rapporteur Mr. Warborn, should take note of Lagarde's opinion. After all, it is her job to keep price stability and thereby ensure competitiveness...

🚨 The EU’s “Omnibus” reform is a sustainability mistake in the making 🌍 The EU wants to cut red tape in corporate sustainability reporting. But instead of smarter rules, we’re getting weaker ones. Under the current proposal: 🔶 Only large, listed companies will report their sustainability impacts. 🔶 Small and medium-sized companies? Off the hook. 🔶 Financial institutions? Left in the dark. This shifts the costs of sustainability in two harmful ways: ❗ Cost 1: Investors and banks lose access to data on companies’ environmental risks. This undermines the entire green finance agenda. ❗ Cost 2: The social and ecological impacts of business emissions, supply chain abuse, and biodiversity loss are pushed back onto workers, communities and the planet. All in the name of “simplification”? No thanks. We need a regulatory system that: ✅ Protects people and nature ✅ Gives financial actors the tools to support the transition ✅ Makes polluters pay — not hide 📢 The EU Omnibus must be rebalanced. Simplification should serve sustainability, not silence it. 👉 Here is the article: https://lnkd.in/eiRcANSe I recently joined Green Central Banking’s Sustainability Omnibus Podcast, to also discuss the Commission’s Omnibus proposal to make sweeping changes to the EU’s sustainability reporting rules: 🎙️ https://lnkd.in/eCD5a858