In the changing landscape of global sustainability, the European Union’s decision on the Omnibus 1 package has implications that extend far beyond the borders of Europe.

As the EU grapples with its sustainability framework, the world watches closely, particularly in light of the deregulation agenda of the current United States administration. Countries across Asia and other global trading partners are observing the potential ripple effects of this decision.

The backdrop of this situation is a dramatic one. Shortly after Donald Trump’s re-election, EU Commission president Ursula von der Leyen announced an “omnibus” package aimed at revising the EU’s recently adopted sustainability framework.

This framework, which includes the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive, was intended to be a cornerstone of the EU’s commitment to sustainability. Yet, what was presented as a step towards streamlining and simplification has instead opened Pandora’s box, revealing deep divisions about the EU’s green ambitions.

The current EU Commission, led by the conservative European People’s Party (EPP), is leaning in favour of a dilution of the sustainability framework. Until now, political negotiations have injected complexity into legislative texts, making them difficult to interpret and implement. For instance, the Council’s proposal on climate transition plans has diluted ambitions and introduced inconsistent language, raising questions about the commitment to simplification and clarity.

Numbers game

One of the most contentious issues is the scope of application for the Corporate Sustainability Due Diligence Directive (CSDDD). The debate over whether to apply the directive to companies with 1,000, 3,000, or 5,000+ employees has lacked any impact assessment. It’s as if policymakers are playing bingo.

This absence of evidence-based decision-making is troubling, especially when we don’t know the impacts on high-risk sectors involved. The Council’s approach of adopting the lowest common denominator among member states risks undermining the directive’s effectiveness and the EU’s sustainability goals.

Large Swedish companies have publicly expressed concern that political factors, rather than technical or economic challenges, pose the greatest threat to their competitiveness and transition efforts. The EU risks penalising proactive companies while rewarding those that have ignored sustainability risks. In essence, by aligning legislation with the laggards, the EU slows down the transition it should seek to accelerate.

The scientific evidence is unequivocal: the risks associated with climate change and unsustainable practices are not dissipating. However, the current discourse focuses predominantly on compliance costs for companies, with scant attention paid to the potential benefits. Moreover, there is little consideration of the financial burden of inaction for states and citizens over the next two decades.

Regrettably, the conservative forces within the EPP appear to be steering the debate towards a cultural clash against green initiatives and ESG principles. This trajectory aligns with the desires of far-right factions seeking to dismantle the EU Green Deal.

As soon as the European Parliament votes on its position in October, attention will inevitably turn to the trilogues involving the Council, the Parliament, and the Commission. These discussions, set to commence in November, represent a critical juncture.

Now is the moment to correct the course and prevent adverse outcomes for the competitiveness of EU companies in the medium and long term.

Julia Otten is senior policy officer at law firm Frank Bold.