The European Union is in danger of undermining its global leadership on sustainable business regulation by weakening key environmental reporting rules under the guise of improving competitiveness, according to MEP Lara Wolters, as reported in an interview with The Ethical Corporation Magazine.

Wolters, a Dutch member of the European Parliament involved in corporate transparency debates since 2019, warned that the EU risks “shooting itself in the foot” by reducing the scope of major sustainability legislation.

She said the growing political focus on “competitiveness,” amplified by the 2024 Draghi report on EU economic performance, has increasingly become a justification for deregulation rather than simplification.

“Unfortunately, ‘competitiveness’ and ‘simplification’ are being used interchangeably,” Wolters said, adding that in practice, the debate often translates into “slashing rules.”

Her comments follow reforms to the EU’s sustainability framework, bundled under the so-called Omnibus bill, which came into force in March and significantly reduced the scope of several reporting obligations.

One of the most affected measures is the Corporate Sustainability Reporting Directive (CSRD), originally designed to cover more than 50,000 companies across the EU. Under the revised rules, Wolters said, roughly 80% of companies previously expected to report in the 2024 financial year are now excluded.

While business groups have argued the changes reduce administrative burdens and improve global competitiveness, Wolters said she has not encountered strong industry support for removing companies entirely from the scope of reporting.

Instead, she said, many firms that had already adapted to the requirements now prefer to continue with them rather than abandon the framework.

Supporters of the reforms argue that they introduce more gradual implementation timelines and reduce regulatory pressure on companies competing with less regulated firms outside the EU.

However, Wolters warned that the changes are creating gaps in corporate transparency that investors and consumers will ultimately have to fill with “less reliable data,” often sourced from external providers outside the EU.

She also criticized what she described as an “aggressive campaign” by parts of the business community and said political decision-makers bear responsibility for reframing sustainability rules as obstacles to growth.

Comparisons with the United States, frequently used in competitiveness debates, are misleading, she argued, pointing to differences in labour protection, inequality, and environmental standards.

“I would much rather live and work in Europe,” Wolters said, while stressing that sustainability rules still need refinement rather than dismantling.

She pointed to the upcoming review of the Sustainable Finance Disclosure Regulation (SFDR) as an opportunity for lawmakers to strike a balance between ambition and practicality, ensuring financial products remain credible without discouraging investment.

For Wolters, the broader challenge is ensuring that sustainability policy continues to reward responsible companies while exposing those that fall short.

“I want it to be clear who the really ambitious companies are and who the laggards are,” she said, adding that Europe’s long-term goal should be to encourage a “race to the top” rather than regulatory dilution.