EU Corporate Sustainability Regulations Should Not Be Severely Diluted, Says Lagarde

The European Commission has announced an omnibus regulation aimed at streamlining corporate sustainability reporting requirements across the bloc. This move, initiated in November 2021, focuses on aligning the Corporate Sustainability Reporting Directive (CSRD) with the Corporate Sustainability Due Diligence Directive (CSDDD).

According to a letter penned by Christine Lagarde, president of the European Central Bank (ECB), the proposed changes could potentially hinder the Eurosystem's ability to implement measures related to climate change and sustainability. Lagarde's concerns stem from the fact that the amendments could weaken transparency and potentially curb the EU's ambitions to spur private investment in green projects.

The proposed regulation seeks to simplify the reporting rules by postponing requirements for companies set to report in 2026 or 2027 by two years. It also removes around 80% of companies from the scope of the CSRD rules, with reporting applying only to companies with over 1,000 employees and a turnover of €50mn or a balance sheet of more than €25mn. Sector-specific reporting standards were also removed in the EU omnibus proposal.

Notably, some investors and companies are expressing concerns about the potential rollback of the EU's reporting rules, fearing that the simplification could weaken transparency. The ECB, in particular, is concerned about the impact of these changes on its ability to perform a granular assessment of climate-related financial risks.

The ECB has already incorporated a climate factor in its collateral framework to manage financial risk from climate change. The bank's ability to perform a detailed analysis of climate-related financial risks could be weakened due to the proposed reduction in the scope of sustainability reporting.

The plans have significant implications for the ECB's attempts to incorporate climate change considerations into its monetary policy framework for the Eurosystem. Climate change has profound implications for price stability through its impact on the structure and cyclical dynamics of the economy and financial system.

The European Commission believes the current regulations are burdensome for companies and is seeking to simplify them. Other omnibus packages to streamline other rules may follow later in 2025.

Christine Lagarde's letter was addressed to European parliamentarians, expressing her concern about the plans. The member states planning to amend their corporate sustainability reporting laws include Germany, France, and Italy; the respective national central banks are the Deutsche Bundesbank (Germany), Banque de France (France), and Banca d'Italia (Italy).

The page was last updated on August 21, 2025. Companies could report on a voluntary basis using sustainable reporting standards developed by the EU's standards body, the European Financial Reporting Advisory Group. The European Commission's announcement of the process to streamline and align ESG reporting rules was made by Ursula von der Leyen.

As the EU moves forward with its plans to simplify corporate sustainability reporting, it remains to be seen how these changes will impact transparency, investment in green projects, and the Eurosystem's ability to assess and manage climate-related financial risks.

EU Corporate Sustainability Regulations Should Not Be Severely Diluted, Says Lagarde