This week, Brussels will decide on regulations that could shape Europe’s economic future. For many, this is about whether the EU remains on track to be the first net-zero continent and a global green tech hub—or whether key frameworks like the CSRD and CSDDD will be weakened over competitiveness concerns.
But the strategic stakes are much higher. This is ultimately about the resilience of Europe’s economy - resilience in the facing of growing global economic competitiveness; and resilience in the face of escalating risks from climate change and nature loss.
While concerns over competitiveness are real and urgent, the answer is not to abandon the regulatory frameworks that have just been rolled-out but to optimize them—ensuring they enable resilience and value creation - for the European economy as a whole and for every business and financial institution that powers it - rather than unnecessary complexity. Regulation should not be cumbersome and costly; and it should be a tool for companies to build resilience, a differentiated position in an increasingly competitive global market, attract investment, and drive long-term growth.
From Burden to Blessing: The Promise of Non-Financial Data
For years, corporate reporting has expanded in scope and complexity, leading to growing frustration among businesses. But instead of seeing it only as a bureaucratic burden, we must also recognize its strategic potential as an enabler of resilience, competitiveness and growth. A well-structured, efficient system for non-financial data is not just a regulatory necessity—it is a driver of smarter decision-making, risk mitigation, and competitive advantage. Transparency is the foundation of investor confidence, and clear, reliable disclosures are critical to aligning capital with sustainable economic growth.
CSRD, far from being a box-ticking exercise, is a blueprint for integrating sustainability into corporate strategy. Companies such as SAP have already demonstrated the benefits of this approach by integrating environmental performance tracking alongside financial metrics through their Green Ledger software. Similarly, the CSDDD anchors responsible business practices into law, reinforcing the importance of resilient supply chains that prioritize long-term stability over short-term cost-cutting.
Businesses that fail to recognize these shifts risk being blindsided by climate shocks, geopolitical instability, and supply chain disruptions. Providing non-financial data should not be seen as just a compliance exercise. It is an enabler of competitive advantage through strong business and financial system resilience. Forward-thinking companies that leverage sustainability reporting effectively are securing long-term viability, attracting investors, and staying ahead of evolving market expectations.
The Case for Simplification: Aligning with Global Standards
Despite its benefits, the current European reporting framework is undeniably complex. A consensus is emerging that simplification is necessary—but this must be pursued in a way that maintains the integrity of sustainability goals while reducing administrative burdens. In the first instance, concerns about corporate reporting being a source of long-term structural disadvantage, can be addressed by better aligning the architecture of Europe’s reporting frameworks more closely with the International Sustainability Standards Board (ISSB) tasked in 2021 with providing a global baseline for corporate sustainability reporting. Mirroring the structure of specific reporting requirements can contribute significantly to simplification while also leaving European policy makers and regulators the flexibility to layer into this architecture additional policy priorities, including double materiality as an example.
This dimension of simplification might be as follows:
- “Pairing” European Sustainability Reporting Standards (ESRS) with corresponding ISSB and GRI standards (cross-cutting, topical and sector-specific standards) to cover impacts, risks and opportunities as already articulated in CSRD;
- Consolidating ESRS nature and biodiversity standards (currently ESRS E2 - E5) into one integrated standard covering nature-related issues beyond climate and encouraging the ISSB to take the same approach. This would also align with the approach recommended by the Taskforce on Nature-related Financial Disclosures, now voluntarily used by over 500 organisations globally;
- Temporarily pausing the implementation of non-climate-related standards (ESRS E2–E5) and European social standards (ESRS S1–S4) until they can be aligned with global frameworks and the ongoing work of the ISSB, GRI and others in these topic areas, reducing unnecessary complexity;
- Encouraging greater coordination between EFRAG and ISSB in developing sector-specific reporting standards, particularly given the review now underway by the ISSB in relation to its SASB sector standards, to avoid duplication of effort.
- Reducing the scope of regulatory coverage by narrowing reporting requirements for medium and small-sized enterprises (SMEs), ensuring that sustainability disclosures do not become disproportionately costly for those least able to prepare such requirements.
By implementing these reforms, Europe can streamline reporting processes, reduce costs, and ensure that sustainability frameworks enhance—rather than hinder—business performance and economic resilience.
A New Era: The Shift to Impact Accounting
Looking ahead, Europe must embrace Impact Accounting as the logical evolution of corporate reporting. Under Target 15 of the Global Biodiversity Framework, large multinational companies will be required to integrate impact metrics into their disclosures by 2030. This approach enhances traditional financial reporting by incorporating natural, social, and human capital alongside financial capital.
The benefits are clear:
- Impact Accounting generates value for businesses, rather than being a compliance-driven exercise. It provides actionable insights that drive decision-making and long-term planning
- It builds on existing systems. ensuring that financial teams already have the necessary expertise to integrate it seamlessly into current reporting structures
- It speaks the language of investors, making it an essential tool for attracting capital and maintaining competitiveness in a market increasingly driven by sustainability considerations.
Critics argue that impact accounting is too complex—but this is a misconception. With clear governance rules and new digital tools making data collection and analysis more efficient, businesses can implement impact accounting at a lower cost than commonly assumed.
The Political Reality: Addressing Concerns from Industry and Policymakers
Despite these opportunities, there is growing political pressure to delay or scale back sustainability regulations. The European People’s Party (EPP) and other policymakers argue that excessive regulation is undermining Europe’s competitiveness, slowing productivity, and imposing disproportionate burdens on SMEs. They highlight the widening economic gap between the EU and the U.S., as well as the increasing costs of energy and trade disruptions caused by geopolitical instability.
Their concerns are not without merit. More than half of European SMEs cite regulatory obstacles as a primary challenge, and there is legitimate frustration over overlapping and conflicting requirements. However, the response must not be to abandon sustainability reporting altogether but rather to refine it intelligently. The European Commission has already announced steps to cut administrative burdens, including a 25% reduction in reporting obligations for large companies and a 35% reduction for SMEs. These are welcome moves, but further streamlining is needed to ensure reporting requirements remain fit for purpose.
Rather than pausing CSRD and CSDDD for two years—as some have proposed—a more effective approach would be to focus on harmonization, eliminate redundancies, and introduce digital solutions that make compliance more efficient. Additionally, an “omnibus simplification package” should clarify reporting obligations and prevent unnecessary duplication, particularly for SMEs.
The Path Forward: Seizing the Opportunity
Europe stands at a crossroads. The regulatory decisions made in Brussels will shape the continent’s economic future—determining whether Europe remains a leader in sustainability and innovation or falls behind in a rapidly changing global economy. The choice is not between sustainability and competitiveness. The real challenge is making sustainability a competitive advantage.
The right approach to corporate reporting reform must:
- Preserve transparency and sustainability commitments to maintain investor trust and long-term resilience
- Simplify reporting requirements by aligning with global standards and eliminating unnecessary complexity
- Prioritize Impact Accounting to make reporting more meaningful and decision-useful for businesses. Ensure SMEs are not overburdened while maintaining strong accountability for large corporations.
The era of short-term, reactionary policymaking must end. European businesses and policymakers must work together to turn reporting from a perceived menace into a tool for long-term value creation. By embracing smart, streamlined, and future-proof sustainability reporting, Europe can drive innovation, attract investment, and lead the world in sustainable business practices.
The time to act is now. The opportunity is ours to seize.
