The Omnibus I Directive and the EU Sustainable Finance Trilemma: Sustainability, Simplification and Harmonization

This article examines the balance that Directive (EU) 2026/470 (“Omnibus I Directive”) strikes between sustainability, simplification and harmonization. It analyzes the Directive’s amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D) against the simplification agenda developed in the Letta and Draghi Reports and in the Commission’s Competitiveness Compass. The article distinguishes genuine simplification of regulatory requirements from the contraction of their scope. Under the CSRD, several amendments reduce unnecessary complexity, but the substantial narrowing of mandatory reporting weakens the availability, comparability and assured quality of the company-level information on which the wider sustainable finance framework depends. The CS3D presents a more mixed picture: the revised due diligence process is more practicable, while higher thresholds, the repeal of the transition-plan obligation, and the removal of uniform civil liability conditions entail a more substantial retrenchment. The Directive also adopts a selective approach to harmonization, strengthening it for the core due diligence obligations while returning other matters to national law. The article traces these choices to a structural constraint: because maximum harmonization requires a degree of precision that itself generates compliance costs, simplification and harmonization have in significant part been reconciled by narrowing the class of undertakings subject to the regime rather than by calibrating the obligations imposed within it. The resulting trilemma between sustainability, simplification and harmonization would be more satisfactorily addressed through a more differentiated application of proportionality.