The European Central Bank (ECB) has issued a sharp warning over the European Commission’s proposed amendments to sustainability reporting laws, raising concerns that removing 80% of companies from the Corporate Sustainability Reporting Directive (CSRD) could undermine financial stability and hamper progress toward the EU’s climate goals.
According to ESG Today, in a newly released opinion, the ECB acknowledged the Commission’s goal of reducing regulatory burdens through its Omnibus I package but said the planned changes would significantly limit the availability of critical environmental, social and governance (ESG) data.
Among the most controversial proposals is the revision of the CSRD’s coverage threshold, lifting it from 250 to 1,000 employees and requiring firms to exceed €50m in net turnover. This change would remove tens of thousands of companies from the mandatory sustainability reporting framework introduced to replace the Non-Financial Reporting Directive (NFRD).
The CSRD was intended to vastly expand corporate transparency, increasing the number of companies required to report from 12,000 to over 50,000. Built on detailed European Sustainability Reporting Standards (ESRS), the directive aims to give investors a clearer picture of how businesses impact and are affected by climate change, biodiversity loss and social issues. The Omnibus reforms would significantly dilute these ambitions, with the ECB estimating that major greenhouse gas emitters, including fossil fuel companies, could fall outside the new scope.
The ECB warned that reduced access to standardised ESG data would impair market participants’ ability to assess sustainability-related risks and make informed investment decisions. “This amendment could significantly limit stakeholders’ access to important information,” the ECB stated, cautioning against “unwanted outcomes” such as the erosion of transparency around GHG emissions and ESG risk exposure in financial institutions.
The ECB further highlighted that ESG risk is not necessarily linked to company size, and that excluding smaller firms could blindside regulators and investors to emerging risks. It recommended revising the threshold to include companies with 500–1,000 employees under simplified but mandatory sustainability reporting standards, tailored to their operational capacity.
While the Commission proposed introducing voluntary standards for SMEs, the ECB voiced concern that this could lead to self-selection and greenwashing. “Only companies performing well may choose to report,” it said, warning that cherry-picking data could distort the overall picture and hinder effective risk analysis.
The ECB also pushed back on the decision to scrap plans for sector-specific reporting standards. It argued that such standards are vital for benchmarking companies within the same sector, particularly in assessing their transition strategies. In lieu of formal standards, it urged the Commission to consider sector-specific guidelines to support consistency across industries.
Regarding revisions to the ESRS, the ECB agreed with efforts to reduce excessive reporting requirements but insisted that essential data must remain intact. It called for the preservation of climate-related indicators (ESRS E1) and biodiversity and ecosystems data (ESRS E4), citing their importance to prudential oversight and monetary policy.
Additionally, the ECB raised concerns over data gaps that could emerge if third-country companies are held to different reporting obligations than EU-based firms, arguing this could place European businesses at a competitive disadvantage. It recommended eliminating this particular proposal from the Omnibus package.
In sum, the ECB’s intervention underscores the tension between regulatory simplification and the need for robust, standardised ESG data. It supports streamlining measures but stresses that efforts must not come at the cost of transparency, data quality, or long-term financial and environmental stability.
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