An effective ESG framework: Supporting sustainability while reducing regulatory complexity

While reporting and due diligence requirements play a key role in driving positive change, the current patchwork of European ESG (Environment, Social and Governance) regulations burdens companies with excessive data collection and compliance efforts, diverting resources from impactful action. As the European Commission moves to streamline ESG frameworks, automotive suppliers are calling for a regulatory framework that empowers innovation while ensuring sustainability.

CLEPA welcomes the Commission’s ambition to cut reporting obligations for firms by 25%, as expressed in the Competitiveness Compass. This reduction must be implemented effectively to free up capacity for companies to innovate, implement strategies to bring down emissions, increase circularity, and create positive social impact. 

Reforming the current framework should focus on the removal and reduction of reporting obligations rather than the reformulation of reporting requirements in the Corporate Sustainability Reporting Directive and Taxonomy Regulation, and fast track changes that can have an immediate impact. The European Commission should also provide companies with more time to comply with mandates to collect value chain data. Businesses that have already prepared to comply with certain reporting standards should not suddenly face shifts in reporting standards and requirements that create additional complexity and costs.

CLEPA’s key recommendations for ESG Omnibus approach:

• Adopt targeted amendments to align definitions, remove duplications or highly ineffective provisions, and introduce and/or increase effective de-minimis exemptions across primary legislation. 
• Review and simplify secondary legislation, particularly inconsistencies and duplications across ESRS accounting standards and value chain data collection requirements as well as simplification of Taxonomy “Do No Significant Harm” criteria. The European Commission should instruct the European Financial Reporting Advisory Group (EFRAG) to revise materiality assessments guidelines to help companies prioritise a significantly smaller set of data points. 
• Introduce a “bureaucracy check” for new legislation to prevent further overlapping regulatory requirements. A priority should be simplifying the Green Claims Directive, on which no political agreement has been reached yet.

For more information, please contact communications@clepa.be