EU Competitiveness Compass: key sustainability issues

The European Commission published its Competitiveness Compass on 29 January 2025 (see press release). 

The Compass is intended to guide the work of the new Commission in the coming five years and lists priority actions to boost the EU’s competitiveness. 

It also provides a roadmap to how the Commission intends to take forward the recommendations in the Draghi report on the future of EU competitiveness (see our previous blog post). 

The Compass sets out three core areas for action: 

• Innovation 
• Decarbonisation 
• Security 

The three core areas for action are complemented by five “horizontal enablers”:

• Simplification 
• Lowering barriers to the Single Market
• Financing competitiveness
• Promoting skills and quality jobs
• Better coordination of policies at EU and national level

This blog post focuses on sustainability issues and details on the Omnibus proposal. 

What does the Competitiveness Compass say about the Omnibus proposal?

The Competitiveness Compass confirms the target of cutting the administrative burden by at least 25% for all companies and by at least 35% for SMEs. 

There is a lot of emphasis on producing simpler rules, as well as speeding up administrative procedures.

The Compass says that the Commission will deliver an “unprecedented simplification effort”:

• This will start next month [February ] with the first of a series of Simplification Omnibus packages.  
• The first Omnibus “will, among others, cover a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy”. 
• The Commission “will ensure better alignment of the requirements with the needs of investors, proportionate timelines, financial metrics that do not discourage investments in smaller companies in transition, and obligations proportionate to the scale of activities of different companies. It will notably address the trickle-down effect to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators.” 
• A new definition of small mid-caps will be proposed soon for companies that are bigger than SMEs but smaller than large companies. 
• The Commission is also preparing a simplification of the Carbon Border Adjustment Mechanism (CBAM) for smaller market players and will assess (as part of the CBAM review in 2025) the possibility of extending the scope to further sectors and downstream products.

So we now know that the first Omnibus package will definitely cover the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the Taxonomy Regulation - although the reference to “among others” implies there might be other regulations targeted as well in that first package.  

The Compass clearly states that the Commission will “stay the course” on its decarbonisation goals, with a target of a 90% reduction in greenhouse gas emissions by 2040. In a press conference after the announcement, the European Commission’s president Ursula von der Leyen denied suggestions that the EU’s climate targets would be undermined: “We stay the course. The goals are cast in stone…The goals stay, the objective stays, but we want to reach it better and faster. And for that, we have to reduce complexity” (see here).

According to various press reports (see here) and posts on LinkedIn (see here), the European Commission plans hold a Simplification Roundtable on 6 February with various stakeholders, including companies, trade associations and NGOs.  The agenda starts with a keynote speech by Valdis Dombrovskis (the European Commissioner for Implementation and Simplification), followed by a discussion on the CSRD, Taxonomy, CSDDD and CBAM. Apparently, focus will be placed on small mid-caps and paperless reporting. 

The Compass makes it clear that the first Omnibus package (which is still expected on 26 February 2025) is just the start: “In the course of the year and throughout the mandate, the Commission will continue to present simplification measures, based on dialogue with stakeholders.” 

Valdis Dombrovskis, the Commissioner for Implementation and Simplification, is coordinating the Commission’s work in this area and is steering a screening of existing EU legislation (aka the “EU acquis”) to identify ways to simplify, consolidate and codify legislation. Each Commissioner will hold regular implementation dialogues with stakeholders twice a year to understand implementation issues, hear business concerns and identify opportunities for simplification and burden reduction. The Compass also says that Commission will hold “reality checks” with stakeholders to feed into the stress testing of EU regulation. Greater attention will be paid to assessing the costs of proposed delegated and implementing acts, with a new SME and competitiveness check in impact assessments for new initiatives. 

More detail of the Commission’s overall approach to simplification will be set out in a “Chapeau Communication” entitled “A simpler and faster Europe: Communication on implementation and simplification” (an early draft of which has been leaked). In this document, the Commission outlines a vision for simplifying and implementing EU regulations more effectively. It lays out an ambitious agenda to reduce the complexity and administrative burden of current and future rules to boost competitiveness. It emphasises the need for collaboration among EU institutions, Member States, and stakeholders to simplify the regulatory environment. The current draft (which is subject to change) includes details of how the Commission intends to work more closely with Member States to support them in implementing EU law correctly and on time, as well as how the Commission intends to work more closely with external stakeholders (including industry) to obtain feedback on practical difficulties. 

This Chapeau Communication - which is expected to be published as part of the first Omnibus package on 26 February - makes it clear that the Commission’s new zeal for simplification, reducing reporting burdens and cutting red tape is a top priority for the next five years and will apply to every Commissioner – this is not limited to sustainability matters.  

What does the Competitiveness Compass say about other sustainability issues?

One of the three core areas for action to increase the EU’s competitiveness is decarbonisation. 

The Compass identifies high energy prices as a key challenge and sets out areas for intervention to facilitate access to clean, affordable energy. 

One of the key measures envisaged is the Clean Industrial Deal, which is expected to be published on 26 February 2025 and will set out a “competitiveness-driven approach to decarbonisation”, to make the EU an attractive location for manufacturing (including for energy intensive industries) and promoting clean tech and new circular business models. 

There will also be an Industrial Decarbonisation Accelerator Act to extend accelerated permitting to more (e.g. energy intensive) sectors in transition. The procedures for Important Projects of Common European Interest (IPCEIs), as well as for the energy infrastructure Projects of Common Interest, will be made simpler and faster.

The Compass says Europe must invest more in modernising and expanding its network of energy transmission and distribution infrastructure, accelerating investment in electricity, hydrogen and carbon dioxide transport networks as well as storage systems.

The Commission is planning to publish action plans for energy intensive sectors, such as steel, metals, and chemicals – which it says are the backbone of the European manufacturing system but which are the most vulnerable in this phase of the transition.

The Commission sees resource efficiency and boosting circular use of materials as way to help decarbonisation and competitiveness. It wants the EU to create a single market for waste, secondary and reusable materials, to increase efficiency and expand recycling - with a Circular Economy Act proposal expected in 2026. This will be accompanied by the roll out of eco-design requirements on important product groups.

We can also expect a European Water Resilience Strategy,  a revision of the REACH Regulation and a European Climate Adaptation Plan. 

Competitiveness Compass - key dates

2025

• Omnibus simplification and definition of small mid-caps – 26 February 2025
• Clean Industrial Deal – 26 February 2025
• Industrial Action Plan – Q1 2025
• Water Resilience Strategy – Q2 2025 
• Sustainable Transport Investment Plan – Q3 2025
• Industrial Decarbonisation Accelerator Act – Q4 2025
• Chemicals industry package - Q4 2025
• Steel and metals action plan – Spring 2025
• Amendment of Climate Law – sometime in 2025
• Carbon Border Adjustment Mechanism review – sometime in 2025

2026

• Circular Economy Act – Q4 2026
• European Climate Adaptation Plan – sometime in 2026

Further reading

For more information on the Omnibus package and the new Commission’s general direction of travel on sustainability matters, see our previous blog posts:

• EU Omnibus Regulation: what do we know so far?
• What does the new European Commission have in store for sustainability?

We are keeping a close eye on developments and will let clients know as soon as the Omnibus simplification package has been published.