EU Plans to Slash Red Tape for Medium-Sized Companies

‘These are cosmetic fixes, not systemic solutions,’ said CCIA Europe’s privacy and safety lead, Claudia Canelles Quaron.

European Union flags outside the EU headquarters in Brussels on Apr 5, 2024. Virginia Mayo/The Canadian Press/AP

The European Commission is creating a new category of companies that will be exempted from some rules as part of its ongoing effort to slash red tape.

On May 21, the EU said it is proposing to classify companies with fewer than 750 employees and up to 150 million euros ($163 million) in turnover as “small mid-caps.”

The creation of the new category of company means that they are granted exemption from some laws on data protection and net-zero rules.

The EU said that when companies grow beyond 250 employees, they become large enterprises under the current rules and face a sharp increase in compliance obligations.

It said that this “cliff-edge” can discourage growth and limit competitiveness.

There are nearly 38,000 companies now potentially classed as small mid-caps in the EU.

Some of the measures include simplifying the record-keeping obligation in the EU’s 2018 personal data GDPR law.

About 10,000 small businesses will no longer have to fill out EU climate paperwork for selling or importing items such as used cars with air-con gas, under the new rules planned for 2026.

“Cutting red tape and simplifying rules means giving businesses the freedom to innovate, grow, and create jobs,” Executive Vice-President for Prosperity and Industrial Strategy Stéphane Séjourné said in a statement.

The tech lobby group Computer and Communications Industry Association (CCIA) Europe said that the changes were too minor.

“Easing GDPR requirements for small and mid-sized companies may offer limited relief, but this minor change falls far short of addressing the deeper structural issues that plague the EU’s data protection framework,” said CCIA Europe’s privacy and safety lead, Claudia Canelles Quaron.

“At best, today’s proposal will ease GDPR burdens for just 0.2 percent of EU companies. While well-intentioned, its limited scope means it won’t meaningfully strengthen Europe’s dwindling digital competitiveness. These are cosmetic fixes, not systemic solutions.”

The EU Commission has already proposed reforms to the law to reduce red tape for European businesses.

The call from the EU’s biggest economies comes as the bloc rolls out its “Simplification Omnibus,” which aims to enable the 27-nation alliance to compete with countries such as the United States and China.

On Feb. 25, European Commission President Ursula von der Leyen said EU companies will benefit from streamlined rules.

“This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonization goals. And more simplification is on the way,” she said.

The European Commission, the bloc’s executive arm, aims to reduce reporting burdens by 25 percent in an initial wave of measures in the first half of 2025.

It said this would translate into savings of 40 billion euros ($42 billion) for European companies.

France and Germany recently called on the EU to scrap a supply chain audit law.

The Corporate Sustainability Due Diligence Directive (CSDDD), approved in May 2024, establishes far-reaching mandatory human rights and environmental obligations on both EU and non-EU companies meeting certain turnover thresholds, starting from 2027.

While requiring companies to make environmental and human rights checks on their direct suppliers, the law also forms part of the European Green Deal. Companies will be required to adopt and implement a climate mitigation transition plan as part of their business model, compatible with “the limiting of global warming” to 1.5 degrees Celsius (2.7 degrees Fahrenheit) “in line with the Paris Agreement,” according to the CSDDD.

French President Emmanuel Macron said on May 19 that the law should be taken off the table. French companies, backed by Macron, have previously criticized the law as “overtly punitive.”

U.S. President Donald Trump has also committed to a red tape-cutting strategy after establishing the Department of Government Efficiency (DOGE) in January to root out fraud, waste, and abuse within the federal government.

The task force has a deadline to complete its work by July 4, 2026, but senior presidential adviser and Tesla boss Elon Musk said earlier this month that it may remain for the president’s entire second term.