The EU’s Sustainability Reporting Framework at a Crossroads
GAIZKA ORMAZABAL Grupo Santander Chair of Financial Institutions and Corporate Governance
Sustainability reporting has become a defining element of the European regulatory landscape. Through the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), the EU aims to provide more consistent and comprehensive information on environmental and social matters. As implementation moved forward, however, concerns arose about the scope and complexity of the reporting obligations, particularly for companies with extensive value chains or limited reporting capacity.
In February 2025, the European Commission introduced the “Simplification Omnibus” package, seeking to ease administrative burdens. The proposal included raising thresholds to limit the number of companies subject to the CSRD, postponing sector-specific ESRS, and streamlining the volume of required datapoints. These initiatives reflected broader debates about proportionality and regulatory burden, but also a growing concern about Europe’s competitiveness. In this regard, the discussion echoes arguments advanced in the Draghi Report, which highlighted the need to reassess regulatory and administrative requirements in light of the intense competitive pressures faced by European firms in global markets.
The legislative process quickly showed how sensitive the topic had become. On October 13, 2025, the Parliament’s Legal Affairs Committee adopted a compromise position. When it reached the plenary on October 22-23, the negotiating mandate was rejected by a narrow margin, preventing the start of “trilogue” negotiations. A revised mandate was approved on November 13, enabling discussions with the council and commission. Finally, on December 16, 2025, the European Parliament formally adopted a revised legislative package amending the CSRD (along with the Corporate Sustainability Due Diligence Directive), following months of complex negotiations.
With the adoption of the revised package, a clearer pattern has emerged. Adjustments have focused on targeted refinements, with little appetite to alter the CSRD fundamentally. The changes adopted operate largely at the margins — clarifying requirements, adjusting timelines, and reducing datapoints — rather than revising the directive’s core structure or objectives.
The debate around the Omnibus package reflects a genuine tension. Supporters of simplification argue that compliance is resource-intensive and may impose disproportionate burdens on smaller firms or on companies facing complex data-collection demands. Member States concerned about competitiveness have similarly questioned whether the current requirements strike the right balance, particularly in an environment where European companies face mounting pressure from global competitors. Opponents, however, warn that excessive simplification could weaken the transparency objectives that motivated the CSRD. They note that firms have already invested heavily in preparing for the new framework and worry that frequent revisions could create uncertainty and hinder comparability. Under this view, maintaining coherence and stability is essential.
The debate around the Omnibus Package also raises a broader question: what role will Europe play in shaping global sustainability reporting going forward? For some time, the CSRD was viewed through the lens of the “Brussels Effect,” with the expectation that Europe’s market size and regulatory ambition might influence global practice. The directive’s extraterritorial reach reinforced this perception.
Recent developments, however, point to a more complex landscape. Within the EU, the push for simplification underscores the practical challenges of implementing one of the world’s most comprehensive reporting regimes. At the same time, a growing number of countries are engaging with the standards issued by the International Sustainability Standards Board (ISSB), which adopt a “single materiality” perspective — focused on information relevant to shareholder value — in contrast with the EU’s double-materiality approach, which also considers a company’s impacts on society and the environment. The ISSB standards, which build on voluntary frameworks such as SASB and TCFD, have been taken up or considered in jurisdictions such as the UK, Australia, Japan, and Brazil(1). Meanwhile, the United States does not currently appear inclined to introduce mandatory sustainability reporting at the federal level, adding to the fragmentation of the global reporting environment.
The emerging picture is one of coexisting approaches: the EU’s double-materiality model, on the one hand, and the ISSB’s single-materiality baseline, on the other. The Omnibus discussions unfold within this evolving context. Depending on the final adjustments, they may affect how the European model is perceived relative to international alternatives and how easily firms can navigate between different regimes.
Seen in this light, the refinement of reporting obligations within the EU forms part of a broader process of convergence and differentiation. Some simplification may facilitate interoperability with global standards, while Europe’s commitment to double materiality ensures that its framework retains a distinct identity. How these models will coexist — and which will exert greater influence on global practice — remains uncertain.
What is clear is that the evolution of sustainability reporting will be shaped both by Europe’s internal decisions and by international regulatory and market dynamics. As the Omnibus process advances, corporate directors would be well advised to monitor these developments closely, as they are likely to influence the future architecture of corporate transparency within and beyond Europe.
(1)SASB (Sustainability Accounting Standards Board) developed industry-specific standards to help companies disclose financially material sustainability information to investors. TCFD (Task Force on Climate-related Financial Disclosures), created by the Financial Stability Board, established a widely used framework for reporting on climate-related risks and opportunities. Both initiatives have been incorporated into the ISSB’s global sustainability standards.
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