The recent Omnibus simplification package aims to streamline sustainability and EU investment rules while aligning with globally acknowledged standards such as the ISSB’s IFRS S1 and S2. On the surface, this looks promising: less red tape, fewer compliance headaches, and more consistent tools. The reality is more complex. Regulatory convergence, while potentially transformative, also introduces unexpected complications.
Imagine a single framework, standard, and source of truth for sustainability reporting, with uniform topics, metrics, and one-size-fits-all requirements across sectors and industries. It sounds efficient, but the flaws quickly emerge. The most pressing is contextual materiality: Sustainability issues are highly dependent on context, and a uniform approach risks oversimplifying or overlooking critical nuances, potentially leading to misleading comparisons.
Sector and geographic variability deepen this challenge. Different regions, and even industries within the same region, face distinct sustainability risks and regulatory conditions. A universal framework would struggle to capture these differences accurately. Stakeholder diversity adds another layer, as different groups highlight different responsible investment priorities. Uniform standards may fail to reflect what matters most to each audience.
Subjectivity in interpretation is another barrier. Even with established frameworks, what one firm views as “good” or “sufficient” may fall short of another’s expectations. This variation in perception and reporting makes the idea of a truly uniform sustainability scoring or reporting system difficult to achieve.
There is also the risk of limiting innovation. As sustainability disclosures gain momentum, innovation and differentiation push firms to find meaningful solutions aligned with their strategies. A rigid framework could shift the focus from driving impact to chasing scores, discouraging approaches that fall outside conventional metrics.
At the same time, a broader mix of sustainability frameworks can encourage participation. When firms can choose how and what to report based on their context and materiality, they are more likely to engage in meaningful disclosure.
Materiality remains the anchor of sustainability reporting. It helps firms focus on what is most relevant, making the process more practical and valuable. According to KPMG’s Survey of Sustainability Reporting 2024, released before the Omnibus package, many companies were already adopting CSRD measures voluntarily.
The report found that 96% of the world’s largest 250 companies and 79% of the 5,800 surveyed were reporting on sustainability, showing strong demand for sustainability transparency.
While alignment and interoperability can reduce costs and reporting burdens, enforcing a single, one-size-fits-all standard risks doing more harm than good. A flexible, context-sensitive approach that respects materiality, supports innovation, and accommodates diverse stakeholder priorities is far more effective in driving meaningful sustainability progress.
This philosophy underpins our platform. We offer maximum flexibility, enabling clients to set up fully tailored datasets that match their needs. This can extend down to the portfolio company level, ensuring that data collection captures what matters most, whether social and environmental indicators or governance metrics. This granularity improves accuracy, strengthens analysis, and supports more meaningful reporting across diverse portfolios, creating tangible value for businesses today and for a sustainable tomorrow.
