The current EU debate about competitiveness is often framed as a choice between regulation and growth. But the more accurate story is a shift in how regulation is expected to work: not simply “less,” but simpler where it burdens, stronger where it fragments, and more adaptive where technology moves faster than rulemaking.
A recent policy narrative highlights two roles of regulation that can look contradictory at first glance. On one hand, inconsistent and restrictive rules – especially when they diverge across Member States – raise costs and slow scaling for innovative firms. On the other hand, the very same fragmentation is also a reason to regulate: harmonisation can remove cross-border barriers and make the Single Market function more like a true home market for growth companies.
The core tension: reducing burden vs. reducing fragmentation
Much of the attention has focused on “regulatory burden” – overlap, inconsistency, frequent change, and disproportionate impact on smaller firms. The critique is not only that rules exist, but that the flow and accumulation of rules creates complexity, cost, and uncertainty, particularly when national implementation diverges or adds extra layers.
At the same time, the scaling problem is repeatedly linked to heterogeneous national regimes. The argument is that innovation struggles to translate into commercial scale when companies must rebuild compliance, legal structures, and operating models as they cross borders. In that framing, the solution is not merely to simplify; it is also to reduce legal and market fragmentation, even if that requires new harmonising measures.
What “simplification” is starting to mean in practice
The EU’s emerging simplification agenda is being operationalised through concrete reforms aimed at administrative burden and reporting load, with early emphasis on sustainability-related regimes. A first “omnibus” package focuses on amending parts of the sustainability reporting and due diligence framework and adjusting timing for certain requirements – signalling that simplification may often come through clarification, sequencing, and proportionality, not wholesale rollback.
This matters for legal teams because it changes the compliance challenge. Instead of a steady-state “implement once” model, many organisations are now in a world of rolling change: shifting timelines, evolving guidance, and iterative amendments designed to reduce load while preserving policy outcomes.
Why “deregulation” is the wrong mental model
Describing the agenda as deregulation misses the dual-track reality. The simplification strand is paired with an explicit push to deepen the Single Market – through better enforcement, removal of remaining barriers, and, crucially, further harmonisation to address fragmentation. In other words, the direction of travel is closer to regulatory redesign than deregulation.
One illustration is the recurring concept of an optional, cross-border-friendly legal framework for innovative firms – an idea presented as a way to reduce costs of scaling, improve portability of certifications, and enable passporting-like benefits inside the Single Market. In parallel, EU-level plans point toward proposing a “28th legal regime” to harmonise aspects of corporate, insolvency, and tax rules and reduce the cost of failure.
The real operating question for companies: can you reduce burden with one hand while adding new requirements with the other?
This is where execution risk lives. A competitiveness agenda that aims to simplify and harmonise at the same time can only work if the system becomes better at:
- filtering and stress-testing new initiatives before they add cost,
- removing overlaps and contradictions in existing frameworks,
- preventing inconsistent national implementation and “gold-plating,”
- and accelerating administrative procedures through digitalisation and better data.
The practical implication for businesses is that compliance advantage will increasingly come from operating-model capability, not legal interpretation alone: regulatory intelligence, change management, data readiness, and governance that can absorb frequent updates without destabilising delivery.
What legal and compliance leaders should do now
1) Reframe “regulatory risk” as a fragmentation-and-change problem
Treat the highest-cost risk not as a single regulation, but as the combination of (a) overlapping frameworks, (b) moving requirements, and (c) inconsistent national implementation. Build a view of where fragmentation creates duplicated legal work and where harmonisation could actually lower total cost.
2) Build a simplification-ready compliance architecture
As rules are clarified and timelines shift, organisations that rely on manual reporting and bespoke local processes will struggle. Prioritise modular policies, reusable controls, and data pipelines that can flex as requirements change – especially in high-change domains like sustainability reporting and due diligence.
3) Prepare for “innovation-friendly regulation” tools
Policy thinking increasingly points toward flexibility instruments – regulatory sandboxes, experimentation clauses, and sunset clauses – to keep frameworks aligned with technological change. That signals a need for legal teams to develop playbooks for controlled experimentation that still meets governance and accountability expectations.
A pragmatic 90-day agenda
- Map your regulatory burden hotspots (where overlap and frequent change create the most cost).
- Identify your fragmentation hotspots (where national divergence forces rework across markets).
- Stand up a lightweight “regulatory change engine” (intake → impact assessment → design → implementation → evidence).
- Pressure-test proportionality for smaller entities and business units, anticipating that scaling requirements to risk and size will become more common.
Bottom line
The competitiveness agenda is best understood as regulatory transformation: simplifying and stabilising what has become overly burdensome, while using harmonisation to reduce fragmentation that blocks scale – and adding flexibility so regulation can move with technology. For organisations, the differentiator won’t be who reads the rule first; it will be who can operationalise change repeatedly, across jurisdictions, with the least friction.
