Guest post by: Laura Zizzo, Founder & Chief Strategy Officer, Manifest Climate

Framing the Omnibus I package as driving ‘competitiveness’ misses a key point about competitive advantage in the 21st century.

Last month, the EU officially passed the Omnibus I simplification package, significantly scaling back its proposed climate disclosure regulations. This is a big deal: more than 90% of the companies that previously fell under the scope of the CSRD (one of the major regulations included in the Omnibus proposal) are now exempt from reporting requirements.

Dig into the language surrounding the package and one word appears again and again: competitive.

The package itself sits within the Commission’s broader “Competitiveness Compass” agenda. Marilena Raouna, Cyprus’s Deputy Minister for European Affairs (the country holds the Council’s rotating Presidency), declared that the move would improve EU competitiveness: “With today’s decision, we are delivering on our commitment for a European Union which is more competitive.”

The EU Council also presented the agreement as an attempt to “boost EU competitiveness,” arguing that it simplifies rules and removes unnecessary administrative hurdles for companies already navigating a difficult geopolitical climate.

The implication here is that lifting disclosure requirements frees companies from administrative burden. And there is truth to this. Compliance requires time, budget, and expertise. Many sustainability professionals have been frustrated that the majority of their effort goes toward reporting and documentation rather than making much-needed progress toward sustainable business outcomes.

EU leaders are not wrong to argue that removing overlapping disclosure requirements gives companies more room to focus on what’s material to the business. If companies redirect the resources they had previously assigned to compliance into innovation, efficiency, and risk management, they may indeed see better results.

This is what business groups have leaned on in their lobbying for Omnibus I. They have made the claim that a more competitive market is one with fewer fragmented rules, lower administrative costs, and faster approvals. AmCham EU, a lobbying group for American businesses in the EU, described Omnibus I as “critical for enhancing Europe’s competitiveness for business” and necessary for the continent’s ability to attract investment and drive growth.

But in repeatedly linking competitiveness to the removal of sustainability-related requirements (even if those requirements are “only” about disclosure), the EU and those who lobbied for Omnibus I might unintentionally be sending the message that sustainability is at odds with competitiveness.

This is far from the truth. Sustainability, particularly when integrated with business strategy and financial decision-making, is in fact a driver of competitiveness. Companies that demonstrate strong governance, efficiency, and risk management over a long time horizon tend to be rewarded by the market. Plenty of studies have found that investors use ESG metrics as proxies for management quality and competitive strength. Many studies also find a positive correlation between ESG and financial performance.

This is the real context in which we should evaluate disclosure requirements. While some companies may see sustainability reporting as an unnecessary compliance exercise, it is ultimately a mechanism for transparency that supports more efficient capital allocation. Simplification may be helpful and necessary, but we must be careful not to confuse the need for consolidation with the need to move away from sustainability reporting and risk management entirely.

The European Central Bank has warned that several measures introduced under Omnibus will “significantly reduce transparency for investors and other market participants.” A joint statement from Eurosif, the Institutional Investors Group on Climate Change (IIGCC), and the Principles for Responsible Investment (PRI), backed by more than 200 financial actors representing €6.6 trillion in assets under management, warned that reopening core sustainability regulations could weaken legal certainty and ultimately harm competitiveness.

These groups argue that policy stability and high-quality, comparable disclosures are prerequisites for efficient capital allocation. Weakening reporting in the name of short-term relief risks widening Europe’s estimated €750–800 billion annual investment gap for the green and digital transition.

It may be true that Omnibus I can free up efforts to focus on competitiveness. But in 2026, many companies will discover that sustainability — particularly as it relates to efficiency and long-term risk management — are the keys to competitive advantage in a changing economy and climate. Climate risk, biodiversity loss, supply chain fragility, and social instability are not theoretical concerns. They are operational and financial realities. Businesses that understand, measure, and manage sustainability risks and opportunities are better positioned to navigate volatility, protect margins, and access capital. In other words, they are better positioned to compete.

Companies that have fallen out of CSRD scope must understand that the removal of a reporting obligation does not remove the underlying risk. Whether they are subject to reporting requirements or not, companies will still find themselves subject to climate-related physical impacts, transition risks, litigation exposure, and reputational pressures.

Whether regulators demand disclosure or not, the discipline of reporting and the insights it often reveals are core components of good governance and effective strategy. Sustainability reporting, especially when properly integrated into financial reporting, is an exercise that forces organisations to quantify risk, identify inefficiencies, and uncover opportunities for cost savings and resilience.

Governments may be stepping back in their role as leaders of the transition to net zero, but this should only put more responsibility back onto corporate leaders. Competitiveness in 2026 will not be defined by how little a company reports, but by how well it manages risk and capitalizes on the opportunities of a changing economy and climate.

Sustainability and competitiveness are not at odds with each other. The companies that recognise that will emerge as winners.