The proposed changes under the Omnibus package risk increasing the misalignment between the EU taxonomy and the CSRD, encouraging greenwashing, and weakening the EU’s sustainable investment rules
The European Commission’s push for simplification may end up weakening one of the key pillars of sustainable finance. While the Omnibus package presented on February 26 introduces a solid and beneficial framework, some of the proposed changes have raised serious concerns among sustainability experts.
The EU Platform on Sustainable Finance has issued a strong warning: while EU taxonomy simplification is welcome, shrinking its scope or misaligning it with the Corporate Sustainability Reporting Directive (CSRD) could open the door to greenwashing and dilute the EU’s leadership in sustainable investment regulation.
These concerns are detailed in the recently published Platform response to the draft taxonomy delegated act consultation.
Risks of EU taxonomy simplification, according to the Platform
The EU taxonomy is a central tool for sustainable finance, designed to channel capital toward green investments and close the funding gap. In just two years, it has already helped drive €530 billion in climate mitigation and adaptation efforts, particularly in the energy, automotive, and real estate sectors.
It translates environmental performance into measurable financial metrics, boosting transparency and helping to track capital flows, engage the private sector, and support a well-managed green transition.
How the Omnibus package would change the EU taxonomy
With the Omnibus package, the European Commission has launched a broader effort to reduce administrative burdens on businesses in order to preserve industrial competitiveness.
Key proposed changes to the taxonomy include:
- cutting corporate reporting obligations by one-third
- simplifying the Green Asset Ratio (GAR), a key sustainable finance indicator
- making “Do No Significant Harm” (DNSH) criteria more practical, easing compliance
- improving access to sustainable finance for SMEs by removing red tape
A narrower scope could lead to data loss
To achieve the 33% reduction in reporting burdens, the Commission proposes shrinking the CSRD’s application scope by 80%. Additionally, it would allow some companies currently reporting under CSRD to instead use simplified taxonomy-based disclosures.
According to the Platform, these two changes combined could result in a “significant data loss,” reduce the taxonomy’s effectiveness, and create inconsistencies between the taxonomy and the CSRD.
“This adds unnecessary complexity to the reporting framework, increases risks for financial market participants, and may trigger more ad hoc data requests, adding further confusion and increasing the risk of greenwashing, which could undermine the framework’s core purpose of capital mobilization for sustainable investments,” the Platform warns.
Materiality thresholds could weaken the tool’s purpose
In the past, the Platform supported introducing thresholds to ease the double materiality reporting obligation, especially for companies with only partial alignment to the taxonomy.
However, the current EU taxonomy simplification proposal, by combining those thresholds with a reduced scope, could “seriously undermine the taxonomy’s role as an innovative tool to steer investment and track capital flows – the very reason it was created,” the Platform notes.
