All Aboard the Omnibus, Next Stop Deregulation

Author

Tim Mohin
28 Feb

What’s in this week’s newsletter:

  • The long-awaited EU omnibus aims to scale back reporting by 80%.

  • Europe’s Clean Industrial Deal adds €100 billion to clean tech - similar to the US IRA. 

  • The net zero economy is booming, with countries that invested seeing dividends.

  • Trump aims cuts at EPA and Transportation programs.

  • GreenPeace and the US Department of Agriculture sued.

  • Biodiversity talks resume in Rome, the main sticking point (you guessed it) money. 

  • This is our 200th edition, and we share our thanks and reflections. 

Since launching in 2019, the EU Green Deal has set the global standard for climate and sustainability progress. But five years later, with a stagnating economy and a political shift to the right, the EU is reconsidering its approach to increase economic competitiveness.

Last September, former Italian Prime Minister Mario Draghi issued ‘The Future of European Competitiveness,’ outlining a strategy for the EU to revive its economy. This led to the Budapest Declaration, which called for aggressive simplification of regulations. As Europe started to implement this approach, their “Green Deal” regulations drew attention. First up were the reporting rules: The Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy - which the new omnibus proposal aims to simplify.

EU Commission Vice-President Teresa Ribera said, “What we need to avoid is using the word simplification to mean deregulation,” saying that the EU will continue its Green Deal despite the omnibus. EU Commission President Ursula Von der Leyen echoed that, saying the rules would be reopened to simplify but not deregulate. Here is a breakdown of the omnibus proposals:

Corporate Sustainability Reporting Directive (CSRD):

  • Fewer companies and more time: Large companies are already producing CSRD reports and the Omnibus proposal will not impact this group - estimated at about 7,000 firms. The proposal would restrict the next round of companies due to report in 2026 and 2027 to companies with more than 1,000 employees and €50M in revenue. This smaller group will report in 2028 rather than 2026, and the companies covered by CSRD will be reduced by 80%.

  • Reduced Data Points: The proposal aims to reduce the number of required data points in the European Sustainability Reporting Standards (ESRS) and shift the focus to quantitative rather than narrative reporting.

  • No Sector-Specific Standards: Originally expected in future updates, standards for specific industrial sectors would be scrapped.

  • Limited Supply Chain Disclosure: Companies will only be able to request data from value chain partners with 1,000+ employees, exempting most small suppliers.

  • No More Reasonable Assurance: The proposal would keep “limited assurance” but scrap a requirement for reasonable assurance (a higher level of verification).

  • Voluntary Reporting for Small Companies: Smaller companies can still report through voluntary small and medium enterprise (SME) standards. 

Corporate Sustainability Due Diligence Directive (CSDDD):

  • Delayed Implementation: EU member states would have until 2027 to adopt (transpose) the regulation and until 2028 for full adoption.

  • Tier 1 Suppliers Only: Due diligence would only apply to direct (Tier 1) suppliers, excluding suppliers deeper in the value chain. Companies would be barred from requesting disclosures from small-cap suppliers.

  • Longer Cycles: Due diligence checks across the value chain would occur every five years instead of annually.

  • Financial Institutions Exempt: Banks and other financial entities will no longer be required to conduct due diligence.

EU Taxonomy:

  • Higher Thresholds, Fewer Companies: Mandatory reporting now applies to companies with 1,000+ employees, cutting the number of impacted companies by 80%.

  • Simplified Reporting: The number of required data points will be cut by 70%.

Carbon Border Adjustment Mechanism (CBAM):

  • Smaller Importers Exempt: Companies importing under 50 tonnes of covered goods annually and SMEs would not be subject to CBAM. They claim this would reduce the number of companies reporting by 90% while still covering 99% of emissions.

  • Easier Compliance: Simplified calculations and reporting requirements aim to reduce administrative burden.

The EU claims these proposals will save annual administrative costs of around €6.3 billion while still meeting the goals of the Green Deal. The EU also released an additional omnibus designed to simplify and cut red tape for sustainable investing.

This timeline might be the most important takeaway: As an example, the approval process for the original CSRD policy took more than two years to approve. There are tough negotiations ahead, so expect a lengthy and uncertain process - while, in the meantime, all of these policies remain in place. 

To help unpack the omnibus, I will participate in a BCG webinar next week - sign up for it here.  

The EU’s Clean Industrial Deal

The EU also announced their €100 billion Clean Industrial Deal. Mimicking the Biden-era Inflation Reduction Act (IRA), the policy aims to support EU-made clean manufacturing, reduce energy costs, and cut emissions by 90% by 2040. 

More specifically, the Clean Industrial Deal will aim to help decarbonize ‘hard-to-abate’ sectors like steel and cement, invest in cleantech and circularity, and increase demand for clean products. Teresa Ribera called it the “EU’s business plan to tackle the climate crisis.”

Net Zero Economy Booming

Countries that have invested heavily in the energy transition are now seeing huge returns. Their cleantech sectors have grown at a faster rate than their economies in general. A recent report revealed that China's cleantech sector made up 10% of its economy in 2024 and grew at three times the pace of its economy, accounting for a quarter of GDP growth. 

Another new report found that the UK’s green sector is also growing at triple the rate of the country’s economy, providing high-paying jobs and increasing energy security. One of the researchers of the report, CBI’s Louise Hellem, said: “It is clear, you can’t have growth without green – 2025 is the year when the rubber really hits the road, where inaction is indisputably costlier than action.”

More Climate Court Cases

The oil and gas company Energy Transfer sued Greenpeace in a North Dakota court for its role in the protests over the construction of the Dakota Access Pipeline. Greenpeace’s interim director, Sushma Raman, said, “This trial is a critical test of the future of the First Amendment, both freedom of speech and peaceful protest under the Trump administration and beyond.” Energy Transfer seeks $300M in damages - 10 times Greenpeace’s annual budget.

On the other side of the ledger, environmental groups and organic farmers have joined together to sue the US government for removing climate data from the Agriculture Department’s website. The farmers argue that the pages were critical for adaptation measures. Earthjustice lawyer Peter Lehner said, “You can purge a website of the words climate change, but that doesn’t mean climate change goes away.” The suit asks the government to restore the pages and prevent them from being taken down again.

Trump Turns to Transport

Some EPA climate funding was unfrozen this week, allowing school districts access to money to buy electric school buses. However, the Trump administration is now focused on the Department of Transportation (DOT) to roll back emissions limits, cancel a high-speed railway project in California, and eliminate New York City’s congestion charge. 

In previous administrations, the Secretary of Transportation announced new infrastructure projects. However, Secretary Sean Duffy is doing the opposite: “What Duffy is doing right now is just killing things. It’s a very different approach,” said Yonah Freemark of the Urban Institute.

Biodiversity Talks Resume

The so-called Global Biodiversity Framework Fund has the backing of some leading nations. However, without USAID funding, a lot of which went to nature restoration projects, it’s unclear if other countries will be as eager to pledge investment in this “make or break” meeting. 

200th Edition Reflection

This is our 200th edition of ESG and Climate News. Thank you to our ever-growing community of loyal readers!

Over the past four years, barely missing a week, we have reported on plenty of ups and downs in the sustainability world. But never has the pendulum swung as far and as fast as it has in the past few months. 

You can forgive yourself for feeling whiplash from the 180-degree turn in the issues we cover. The new Trump Administration's furious dismantling of US federal policy,, coupled with the EU's deregulatory action, has led many sustainability professionals to doubt and despair.

Drawing on the arc of change in my forty years in this field, I see a lot of progress, and there are solid reasons for optimism.

Here are three stories from the archive marking recent progress that endures:

  • The SEC’s Ripple Effect: Back in March 2022, the SEC proposed a climate disclosure rule. After three years of debate and litigation, the rule was withdrawn, but its legacy paved the way for six U.S. states to develop their own climate reporting proposals, with California’s set to come into force next year. All told, these state policies will cover more emissions and risks than the doomed SEC rule. 

National laws can change, but we cannot change the laws of physics. Case in point, the costs of natural disasters fueled by climate change amounted to more than 2% of the GDP in the US last year - before the LA fires. Sustainability professionals, driven by altruism, will endure this dark season and continue their hard work to make the world better for our children and grandchildren.   

Thanks to all who subscribe and read this newsletter every week. For Andy and me, it is a labor of love, and we look forward to bringing you the next 200 editions and beyond. 

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

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