The European Commission is re-evaluating core elements of its flagship Green Deal policies in response to mounting concerns over rising costs and Europe’s ability to compete with global economic powerhouses such as China and the United States.
This reassessment, which includes potential adjustments to key sustainability directives, comes as businesses and industry groups voice frustrations over regulatory burdens and economic challenges.
At meetings held in February 2025, Commission officials engaged with industry stakeholders to gather feedback on proposed modifications to sustainability legislation slated to take effect this year.
The discussions followed a report from the European Commission’s executive arm, which emphasised the need to reduce red tape and tackle Europe’s longstanding productivity challenges while advancing decarbonisation to boost economic growth.
The Commission’s Competitiveness Compass document starkly noted that Europe has struggled to keep pace with other major economies due to persistent gaps in productivity.
“The European Union (EU) must urgently tackle long-standing barriers and structural weaknesses that hold it back. For over two decades, Europe hasn’t been able to keep pace with other major economies,” the document stated.
Simplifying Sustainability Legislation
The European Union’s Competitiveness Compass outlines a comprehensive strategy to boost economic growth and global competitiveness. Key measures include lowering regulatory barriers, streamlining trade and investment flows within member states, and improving worker training programmes. One of the central proposals expected this month is the “omnibus” package, designed to simplify sustainability laws by reducing companies’ reporting requirements.
Two flagship policies under review are the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). These landmark climate initiatives require companies to report on their social and environmental impacts. Although initially phased in for Europe’s largest companies, these directives are set to expand to mid-sized businesses and, indirectly, to smaller suppliers.
The European Union’s taxonomy, which defines criteria for economic activities aligned with the bloc’s 2050 net-zero trajectory, is also under review. Further changes to sustainability regulations may follow later this year.
Pushback Against Policies
The CSRD and CSDDD have drawn criticism for their perceived cost burdens and business constraints. Industry groups and several member states, including France and Germany, have called for delays or relaxations of these regulations. Right-wing political parties across Europe have also voiced opposition, blaming climate policies for inflation, declining competitiveness, and economic stagnation.
In response to growing resistance, the Commission has already made concessions. For example, the implementation of the EU Deforestation Regulation (EUDR), which mandates due diligence on raw materials sourced from deforested lands, was postponed by a year following opposition from businesses and foreign governments.
The American Chamber of Commerce to the EU (AmCham EU) described the upcoming simplifications as a critical test of Europe’s commitment to easing regulatory burdens.
“Investors need a clear signal that Europe understands the severity of the economic situation and the role that the regulatory framework plays,” said Malte Lohan, AmCham EU’s chief executive.
While some stakeholders push for deregulation, others argue that the existing rules are crucial for promoting long-term investment and sustainability. Several multinational corporations, including Nestle, Mars, and Unilever, have urged the Commission not to dilute current policies.
In a letter to European Commission President Ursula von der Leyen, these companies highlighted the importance of “policy certainty and legal predictability” for maintaining competitiveness.
Investor groups, representing USD 6.8 trillion in assets, echoed this sentiment. Organisations like the Institutional Investors Group on Climate Change stressed that the current rules help redirect capital toward a sustainable and competitive net-zero economy.
Balancing Pragmatism With Ambition
As the European Green Deal—considered a cornerstone achievement of von der Leyen’s first term—faces increasing scrutiny, its future hangs in the balance.
Critics argue that excessive ambition risks undermining Europe’s economic strength, while proponents emphasise that scaling back could derail progress on climate goals.
Von der Leyen, entering her second term as Commission president, defended the bloc’s approach to the green transition.
Acknowledging the unprecedented nature of the shift, she said, “The green transition has never been done before. Europe is staying the course, but we need to be flexible and pragmatic.”
The path forward will require a delicate balancing act: reducing the regulatory burden on businesses while maintaining Europe’s commitment to sustainability and its competitive edge on the global stage.