Brussels must act now to prevent European businesses from falling behind. The EU’s regulatory environment has become increasingly burdensome, with sustainability reporting requirements straining resources and stifling growth. In recent years, Europe has piggybacked off America’s economic growth, but as the US distances itself from the EU, Europe must learn to go it alone. That means it needs economic growth, and fast. As Brussels embarks on its ‘simplification agenda,’ it should look first at ways to liberate growing European businesses from unnecessary red tape which has built up in recent years.
To unlock European competitiveness, the Corporate Sustainability Reporting Directive (CSRD) should be simplified for smaller companies, and the Supply Chain Due Diligence Directive (CSDDD) should be postponed until 2028. These changes will allow businesses to shift their focus from compliance to innovation, particularly in green technology, while maintaining Europe’s commitment to sustainability. A regulatory reset is essential for Europe to remain a global leader without suffocating its own industries.
Initially, the CSRD was intended to encourage transparency and responsible business practices. But in its current form, it forces even small companies to dedicate massive resources to compliance instead of actual sustainability efforts. Large corporations may have the infrastructure to handle these reporting requirements, but smaller businesses struggle under the weight of complex paperwork. The CSRD requires companies to report on a vast range of environmental, social, and governance (ESG) factors, making compliance a costly and time-consuming process. Reducing the CSRD’s scope for smaller companies would help them focus on practical sustainability solutions rather than drowning in red tape.
The CSDDD is another well-intentioned policy that risks backfiring. By forcing businesses to map and take responsibility for every aspect of their supply chains, this directive imposes costs so high companies often either relocate production outside of Europe or simply cannot compete globally. While supply chain due diligence is important, businesses need time to implement these changes in a way which does not compromise their ability to remain competitive. Postponing the directive’s implementation to 2028 would give businesses the time they need to adapt without sacrificing their competitiveness in the global market.
The unintended consequences of these regulations are already being felt. Many businesses are shifting resources away from innovation and towards compliance, hindering Europe’s ability to lead in key sectors such as clean energy, digital technology, and manufacturing. The reality is that excessive regulation doesn’t just burden businesses—it also weakens Europe’s position in the global economy.
Instead of piling on more bureaucracy, Brussels should focus on creating an environment where companies can thrive. The EU should take a measured approach that balances sustainability with competitiveness. This means focusing on incentives rather than excessive mandates, supporting businesses in their green transition without suffocating them with paperwork. A more flexible approach to sustainability reporting, along with a realistic timeline for supply chain due diligence, would empower companies to lead in innovation rather than getting caught in a web of compliance.
Moreover, reducing regulatory complexity would also make the EU a more attractive place for investment. With the US and China ramping up their own industrial policies, Europe cannot afford to burden its companies with unnecessary costs while global competitors move ahead. A smarter, streamlined regulatory framework would send a strong signal that Europe is serious about maintaining its economic leadership.
Europe has an opportunity to lead the world in green innovation, but that won’t happen if businesses are tied up in regulatory knots. A more pragmatic approach to regulation would allow companies to focus on what really matters—developing clean technologies, creating jobs, and driving sustainable growth.
By scaling back the CSRD for smaller businesses and delaying the CSDDD until 2028, the EU can strike the right balance between sustainability and competitiveness. Brussels must act now to ensure that European companies remain leaders on the global stage. It’s time to choose competitiveness over complexity.
Lika Kobeshavidze is an analytical journalist and a writing fellow with Young Voices Europe, specialising in EU policy and regional security in Europe. She is currently based in Lund, Sweden, pursuing advanced studies in European Studies.