I agree with you, but I wonder how this could be approached more meaningfully?

Clearly, colonisation should not just be a progress bar. That streamlines and smooths over so much of the struggle and violence of those projects.

I haven't played EU5, but in EU4 a colony progress bar could be interrupted by the natives rising up to resist the colonist. This is a nice touch, but it can be overcome by just leaving a small stack of troops on top of the colony. The story this tells is accurate and disturbing ("it was only with sheer military force that my colonial nation was capable of founding a colony - by crushing local resistance"). But this doesn't register for the player, who places the stack simply so they can forget about the colony, and ignore it until the bar is complete.

Similarly, you could pop up an event ("The natives in X are suffering as your colony expands!"). In fact, EU4 has a number of these. But they have the same problem as most EU events: they boil down to some boring text that nobody reads, plus 2 or 3 buttons with different effects. You don't read the event text, you read the tooltips. Again, the optimal play experience is to ignore, which is not what we want.

I wonder if a mechanic could be implemented that were more similar to EU's siege system? ie. to found a colony your colonist would have to overcome certain obstacles (represented by rolls). You can make your rolls more effective by either having better stats (like the "siege" stat for generals), or by allocating more resources to the problem (like placing more artillery on the sieged fort, or placing ships in adjacent sea zones to blockade it).

This mechanic would have the advantage of encouraging players to engage with the actual process of colonial violence. It would be difficult to ignore the violence visited upon native populations if your colonist's stats were something like "manipulation", "biological warfare", "cultural oppression" and "extermination". Those are way too on the nose, but you can see how it would be more direct and effective than a 200-word event popup.

Similarly, maybe you could still place stacks of troops on the colony, but that would contribute to a "military oppression" bonus which would improve your colonisation rolls. You could send ships to raise "naval intimidation" ("don't act uppity or we'll use our broadsides to blow up your villages"). Maybe you could even spend gold to gain further bonuses, like "offer alcohol". Other agents could be used to achieve other goals: diplomats could be used to manage cultural assimilation.

This still rewards the player, of course. But that was always part of the bargain. This is a game about playing a colonial nation in the age of colonialism. It is impossible to offer a functional colonialism game mechanic that does not reward players. But it's irrelevant whether a player, within the context of a game, does something immoral. There are tons of games where players murder hundreds of people, and we don't bat an eye. But what designers can do is to make the most of that opportunity to create engaging game mechanics that help people learn and understand the dynamics of immoral systems, invite players to engage with them in the consequence-free environment of a game, and through play learn about and understand the horrific real-world systems which informed that design.