The Simplification Paradox: what is happening with the EU’s Omnibus proposal?

The EU’s Omnibus simplification package remains in legislative process, with differing voices and opinions coming out as it remains behind closed doors.

On May 19, over 90 economists from across the European Union issued a statement urging the EU to uphold and implement the Corporate Sustainability Due Diligence Directive (CSDDD) amid the broader European Green Deal (Jäger, Durán & Schmidt 2025). They argue that these initiatives are essential for fostering an economy that respects human rights, environmental standards, and climate commitments, both within Europe and globally.

The statement also challenges the notion that sustainability regulations hinder EU competitiveness, attributing economic challenges to factors such as energy price crises, declining global demand, and underinvestment in public infrastructure. They caution against conflating unnecessary bureaucracy with essential public regulations that ensure product quality, occupational safety, and environmental protection.

Citing a study by the London School of Economics, the economists point out that the implementation costs of due diligence obligations for large companies average just 0.009% of revenues.

Elsewhere, one study has found that 48% of German firms were delaying investments due to legal uncertainty around unclear due diligence obligations (JARO 2025) and the EU Ombudswoman has opened an inquiry into the Commission's alleged non-compliance with the Better Regulation Guidelines (Rasche 2025).

A draft opinion from the European Parliament's Committee on Employment and Social Affairs also pushes back significantly against the omnibus, stating: "unilaterally removing about 80% of the enterprises currently covered by the CSRD is an unfounded move. It punishes frontrunners who have already put in place extensive sustainability measures and threatens the many new jobs and small enterprises that have been created around sustainability reporting" (EMPL 2025).

What the outcome will be when the committee reconvenes in October remains to be seen. While some, such as those outlined above, decry the Omnibus, others have seized on it, even calling for further deregulation in areas such as deforestation (Abnett 2025). Reception remains highly polarized.

The explicit narrative amidst all of this is that compliance is definitively a cost that has a linear and predictable relationship to competitiveness. Less compliance leads to improved profitability and therefore improved competitivity. Research from the IMD’s World Competitiveness Rankings suggests, however, that the EU’s competitiveness is comparably fine (IMD Business School 2024).

Moreover, increasing profits through the reduction of spending on reporting does not automatically improve business competitiveness. In fact, unless that excess capital is reinvested into productive capacities, competitivity will by and large remain the same. This requires decision-making consensus and supportive infrastructure. It is not by any means guaranteed.

As suggested here, we see ESG data as market intelligence. The broad scope-as originally intended from the CSRD-would have achieved increased market intelligence for both businesses and investors.

Businesses would be able to identify risks and opportunities across supply networks, conduct accurate analysis of any resource inefficiencies (and take corrective action), and build stakeholder confidence (never mind to actually begin to trend towards more sustainable forms of business).

For investors, more data would improve analysis at every stage of the investment process. Integrating ESG factors into investment decision-making can, according to the Institute for Sustainable Finance, lead to higher risk-adjusted returns (2025), precisely because you are making your analysis richer.

There is also a mutually beneficial and reinforcing relationship between investors and businesses, where investors benefit from increased data sources and ways of seeing, and businesses can access increased investment and stakeholder confidence as a result of this.

Of course, simplification is needed. Reporting requirements would be more burdensome for smaller businesses. Alignment at a technical level would allow for productivity gains (as well as more data alignment for better analysis and investment), but it seems that these are less scope issues than they are technical ones, and the thing about technical innovation is that it thrives in complexity.

The Paradox of Simplification

What the EU Omnibus has managed to achieve is to make the process of simplification complicated. It has done this because it has made an inextricable link between reporting and it being a definitive cost. It is hard not to suggest that this is narrative more than it is a reality, especially given that there has not been enough time to study the real-world consequences of due diligence and disclosure requirements.

What this paradox does is miss the point entirely: innovation thrives in complexity. Markets do not thrive in uncertainty. Indeed, a large reception from business has been the difficulty in future planning, or, if the Omnibus proposals go ahead, wasted time on resources preparing for disclosure requirements.

The paradox of simplification should also make us ask: is less data really less or more complicated? Isn’t knowing about something less complicated than not knowing? Or perhaps ignorance really is bliss.

What Do Investors Think?

For investors, increased disclosure translates into more usable data-data that enhances decision-making. That’s why many are dissatisfied with the reduced scope of the CSRD. Some view the narrowed scope as a “key area of concern” (McNally 2025) warning that it restricts access to high-quality data and undermines comparability and reliability across companies. Others highlight the growing reliance on estimates and third-party data providers as a result.

The PRI has recommended reinstating a 500-employee threshold, a position also supported by the European Central Bank (ECB). Eurosif suggests an alternative approach: creating a new category for mid-sized companies (250–500 employees) with a “tailored and simplified” set of ESRS requirements. Broadly, investors support the revision of the ESRS, provided it is done in a “smart” way-where streamlining does not compromise data availability or interoperability with global standards (McNally 2025).

The Commission should have engaged more closely with these investor perspectives before shaping the Omnibus proposal. These responses make it clear that “simplification” brings real costs for investors-costs that have not been accounted for in the Commission’s own impact assessments.

Innovation in the time of Omnibus

One of the key things missing from this discussion is the role of innovation, especially the use of software, AI, and automation to solve, at a technical level, the problems of data alignment, acquisition, sharing, reporting, and analysis.

The EU’s current idea of simplification does not consider the key role of private sector solutions to legislative challenges. The market will-and almost certainly has-responded to the conditions set out before it with technological solutions utilising the latest in technology. Of course, the act of simplification will be a balancing act, and will require an iterative process led by feedback from industry, but allowing the private sector to respond, as it does best, will help solve some of these problems.

At Harvest, we believe in More with less, rather than less of everything.

We exist to help private market investors turn ESG from a compliance exercise into a strategic advantage. We give GPs, LPs, and portfolio companies the clarity, confidence, and tools they need to collect better data, make smarter decisions, and deliver more meaningful outcomes.

We have designed a data solution to solve the connected problems of fragmented, incompatible, and complex data needs for ESG in private markets- thereby reducing the significant time and resource burden traditionally spent on manual data collection, validation, and reporting.

Our solution-and solutions like ours-could well be the key to solving some of the contended issues set out in the Omnibus, reducing the reporting burden not by restricting the scope, but by streamlining and improving the processes surrounding data.

Sources

Abnett, K. (2025, May 26). Eleven countries demand EU weakens deforestation law further, document shows. https://www.msn.com/en-us/news/world/eleven-countries-demand-eu-weakens-deforestation-law-further-document-shows/ar-AA1Fuejk?ocid=BingNewsSerp

European Parliament, & Committee on Employment and Social Affairs (EMPL). (2025). DRAFT OPINION of the Committee on Employment and Social Affairs for the Committee on Legal Affairs on the proposal for a directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements. In Committee on Legal Affairs, European Parliament. https://www.europarl.europa.eu/meetdocs/2024_2029/plmrep/COMMITTEES/EMPL/PA/2025/06-04/1320994EN.pdf

IMD Business School. (2024, September 17). WCR-Rankings - IMD business school for management and leadership courses. IMD Business School for Management and Leadership Courses. https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-competitiveness-ranking/rankings/wcr-rankings/#_tab_Rank

ISF - ESG Factors in Investing. (2025, June 4). https://smith.queensu.ca/centres/isf/resources/primer-series/esg-factors.php?utm_source=chatgpt.com

JARO Institut für Nachhaltigkeit und Digitalisierung e.V. (2025). YouGov survey data: omnibus [Press release]. JARO Institute Press Information. https://jaro-institut.de/wp-content/uploads/2025/06/JARO_PI_YouGovStudie_04062025_EN.pdf

Jäger, J., Durán, G., Schmidt, L., (2025). AK Wien, Mario Draghi, European Commission, German Institute for Economic Research (DIW), London School of Economics (LSE), & European Commission. Economists’ Statement – 19 May 2025 BEYOND SHORT-TERM PROFITS: Why the EU must defend the Corporate Sustainability Due Diligence Directive and the Green Deal. https://corporatejustice.org/wp-content/uploads/2025/05/EN-Economists-Statement-with-signatories-19-May-2025.pdf

McNally, F., (2025, May 21). Investors warn of data gaps and costs under proposed CSRD scope. Responsible Investor. https://www.responsible-investor.com/investors-warn-of-data-gaps-and-costs-under-proposed-csrd-scope/?utm_source=newsletter-daily&utm_medium=email&utm_campaign=ri-daily-bronze&utm_content=21-05-2025

Rasche, A. (2025, May 26). The omnibus proposal - good outcomes depend on solid process. https://www.linkedin.com/pulse/omnibus-proposal-good-outcomes-depend-solid-process-andreas-rasche-goucf/