German Businesses Support EU's Relaxation of ESG Reporting Amid Bureaucratic Cost Concerns

German companies have broadly welcomed the European Union’s recent approval of the Omnibus Initiative, which eases environmental, social, and governance (ESG) sustainability reporting requirements. The initiative, adopted as part of reforms to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), now applies only to companies with at least 1,000 employees and net annual revenues exceeding 450 million euros, with even higher thresholds for supply chain reporting.

According to a January 2026 report by the German Business Panel (GBP) based on nearly 2,000 companies, more than one-third of medium and large enterprises are pushing for further reductions in reporting obligations. Many perceive ESG reporting as a bureaucratic burden that diverts resources away from investments and product innovation. The study found that 68.7% of companies postponed investments, and 25.4% declined foreign business relationships due to bureaucratic constraints.

Professor Dr. Jannis Bischof, head of the GBP, observed that the original rules were widely viewed as bureaucratic formalities rather than business opportunities, fueling dissatisfaction and political pressure that the EU has attempted to address with this legislative reform. While support for the Omnibus Initiative has exceeded 50% throughout 2025, roughly two-thirds of still-reporting companies find the regulations burdensome.

The controversial easing has raised concerns that it could undermine competitiveness for companies committed to sustainability, balancing the goal of reducing bureaucracy with promoting greater corporate responsibility.

Separately, broader bureaucratic costs in Germany remain high. An Ifo Institute study estimates that bureaucracy costs the German economy up to 146 billion euros annually, including direct and indirect losses. Chancellor Friedrich Merz has acknowledged that bureaucracy-related costs continue to be unacceptably high despite government efforts.

Political voices like Sahra Wagenknecht, founder of the BSW, have sharply criticized the state of bureaucracy in the country, labeling the 62.5 billion-euro annual cost as "a killer of economic growth." She condemned ineffective regulations and called for a substantial reduction in bureaucratic burdens on businesses.

The EU's ESG reporting reforms mark a significant step toward alleviating bureaucratic pressures on German companies, though many businesses and policymakers see more work ahead to reconcile sustainability ambitions with operational efficiency.