European finance faces a sustainability paradox: the European Sustainability Reporting Standards (ESRS), the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy regulation and ESG initiatives, enable companies to demonstrate their commitment to sustainability, but the complexity of reporting can overwhelm even the most dedicated compliance teams.
Across EU member states, banks and businesses are being overwhelmed by a flood of overlapping green regulations and financial rules, resulting in data duplication, inconsistent reports, and spiraling compliance costs.
In this article, we envision a smarter path forward: a unified, AI-powered compliance ecosystem that turns today’s regulatory fragmentation into a unified AI tool serving different regulations tomorrow’s efficiency.
The growing complexity and fragmentation in compliance and sustainability reporting
European financial institutions operate under an extraordinarily complex patchwork of regulations. Each new rule, whether it pertains to sustainability (e.g., CSRD and the EU Taxonomy regulation), anti-money laundering (AML), investor protection (MiFID), or other areas, comes with its reporting requirements and data collection obligations.
These frameworks often request similar or identical information in varying formats and frequencies. The result? Duplicative data collection and contradictory reports frustrate compliance teams and confuse stakeholders.
This complexity has real costs. Taking Luxembourg’s financial sector as an example, regulatory compliance spending increased to an estimated €548 million in 2019, with nearly 38% of banks’ total investment used to meet regulatory requirements. A figure that rises to 52% in smaller banks. (Source: Survey of EY – ABBL 2020)
The burden isn’t just a one-off: compliance investments per institution grew about 16% annually from 2015 to 2020. These figures underscore a troubling trend, where compliance is eating into budgets at a rate that outpaces most revenue lines.
Luxembourg is just one example; across Europe, the story is similar. A recent survey for the CEE region found that over half of financial institutions saw their AML compliance costs jump by more than 10% in just two years.
Inefficiencies and rising costs: an example of CSRD and EU Taxonomy reporting
Why are costs so high? One reason is the inefficiency of the siloed compliance architectures. Each regulation is often the responsibility of a different project or team, who each work separately to produce their own reports.
Data confirm that fragmented approaches lead to inconsistent standards and duplicate work, and EU regulators are beginning to acknowledge the problem: in the first half of 2025, European Commission President Ursula von der Leyen announced an Omnibus package proposing amendments to the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy regulation, and the Corporate Sustainability Due Diligence Directive (CSDDD). The aim is to reduce red tape, while maintaining the green commitments of the European Green Deal, in a move that implicitly recognizes that today’s compliance landscape has become too intricate even for regulators’ liking.
The inefficiencies have shown so far tangible consequences with CSRD and EU Taxonomy compliance proving to be resource-intensive – a 2024 government-backed study found some companies had to assign up to 50 staff to gather sustainability data, and 15 companies reported spending £50,000–£100,000 on consultants just for the first year of EU Taxonomy reporting.
Similarly, large corporations preparing for CSRD expect to pay £200,000–£600,000 on implementation efforts. These are significant figures, especially when considering that much of this work duplicates what companies are already doing for other frameworks (e.g. overlapping climate data for both the EU Taxonomy and CSRD).
An important step towards solving inefficiencies has been taken with the AI solution for reporting on the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy (see TAXO TOOL for more information). Streamlining the reporting process by integrating AI-supported functions such as the calculation of Technical Screening Criteria, the extraction of data from documents to answer questionnaires and the integration of data on climate and geological risks improves the efficacy of reporting enormously.
Towards efficiency in data and reporting
Excessive and duplicative reporting obligations currently burden Europe’s financial sector. Banks are repeatedly forced into extensive third-party data collection efforts due to the absence of robust centralized databases, resulting in repeated client outreach and quality assurance processes. These duplications create administrative overload, gradually erode client responsiveness, and reduce data reliability. Financial institutions find themselves producing multiple near-identical datasets, leading to unnecessary resource strain.
It’s now time to ask us a big question: can AI be a key enabler to rethink our fragmented compliance architectures?
Rethinking compliance management
Exploring today’s AI capabilities for an integrated, data-centric compliance or regulatory solution
As a continuously evolving AI company, Dydon AI is exploring the potential of today’s AI capabilities for a cross-framework compliance approach. By adopting advanced artificial intelligence, banks and financial institutions can transition from fragmented compliance silos to an integrated, data-centric regulatory management approach.
One-Time Data Capture: Eliminate Redundancy
With intelligent AI platforms and tools, compliance-related data — from annual reports, to ESG reporting to financial documents — can be captured once at the source. Utilizing sophisticated document processing, institutions would maintain a continuously updated, centralized data repository. This single source of truth eliminates repetitive client requests and ensures consistency across all reporting activities.
Policy Gap Mapping: Checking internal readiness and compliance with regulations
Through advanced natural language processing (NLP) and semantic knowledge graphs, AI platforms can automatically identify and compare different regulatory frameworks and internal policies.
Automated Multi-Reporting: Efficient and Precise
The unified data repository could enable organisations to automatically complete questionnaires for various reporting requirements (e.g. CSRD, EU Taxonomy, Pillar 3 or MIFID II) and identify gaps where data is missing or where internal policies do not align with regulations. Today’s AI capabilities can significantly reduce the need for manual effort and error, and adapt much faster to regulatory updates, substantially lowering compliance costs and reducing the operational burden.
Shaping a new future in ESG and compliance together
Achieving this vision requires a collaborative shift in mindset and practice across the European financial industry. Regulatory authorities can actively support integrated compliance solutions, encouraging innovation that directly translates into improved compliance outcomes. A unified compliance intelligence system would continuously learn from collective industry experiences, refining accuracy and efficiency over time.
Can you imagine if in the future integrating a new regulatory requirement would be as easy as installing a software update?
This adaptive ecosystem can transform compliance from a cost center into a strategic advantage, promoting transparency, sustainability, and market integrity.
Are you working in a sustainability or compliance team?
Your Role: Join the Conversation
At Dydon AI, we are committed to helping to make this vision a reality. But we need your insights, experiences, and challenges to shape effective solutions. We invite compliance officers, risk managers, sustainable finance experts, financial executives, and regulatory professionals to join this crucial dialogue.
What compliance challenges are your teams facing? What regulatory overlaps cause significant frustration?
The regulatory landscape doesn’t need to remain that burdensome. Together, through innovation and intelligent technology, we can transform compliance complexity into efficiency, cut carbon emissions, reach your sustainability goals, and enable more economic growth.
Whether navigating sustainability reporting requirements, understanding your Green Asset Ratio, or managing regulatory overlaps, your challenges inspire our innovations—reach out, share your story, and let’s solve these challenges together!
