As geopolitical shifts challenge Europe’s economic reliance on the U.S., Brussels is under growing pressure to reform its regulatory framework to support competitiveness and sustainability. A recent analysis argues that current ESG-focused regulations—specifically the Corporate Sustainability Reporting Directive (CSRD) and the Supply Chain Due Diligence Directive (CSDDD)—are overly burdensome, especially for small and mid-sized companies. The article calls for urgent regulatory reform to unlock innovation, green growth, and progress toward Europe’s carbon neutral strategy. 

The CSRD was introduced to enhance transparency in ESG reporting, but critics say it forces smaller companies to divert resources away from practical sustainability efforts toward complex compliance requirements. By requiring vast disclosures on ESG performance, the regulation disproportionately affects businesses without the capacity of larger corporations. Streamlining the CSRD’s scope for smaller companies would enable them to focus on real environmental action, not just paperwork. 

Similarly, the CSDDD, which mandates businesses to conduct comprehensive supply chain audits and accountability, is flagged as too ambitious without phased implementation. A delay in enforcement until 2028 is recommended, allowing companies time to adapt and remain globally competitive. Critics argue that the directive, in its current form, risks driving production out of Europe due to high compliance costs. 

The broader concern is that excessive regulation is stifling innovation in green tech, clean energy, and manufacturing—sectors essential to the EU’s ESG and carbon neutral strategy. Advocates suggest that instead of mandating complex disclosures, Brussels should pivot toward incentives and flexible sustainability frameworks that support growth and decarbonization simultaneously. 

By scaling back regulatory complexity and extending timelines, the EU could maintain its ESG leadership while bolstering its economic resilience. In a rapidly evolving global market, prioritizing competitiveness alongside environmental responsibility is vital for Europe’s long-term sustainability and carbon neutrality goals. 

Sources: 

https://gript.ie/for-europe-to-survive-without-the-us-brussels-must-cut-red-tape/ 

https://www.theparliamentmagazine.eu/news/article/cutting-red-tape-or-cutting-corners-the-eu-simplification-dilemma  

https://ec.europa.eu/commission/presscorner/detail/en/ip_19_1148