Current ESG Regulatory Landscape
Since the start of 2025, we've observed a significant shift in the EU ESG regulatory landscape—from uncertainty to rollback.
Although the Corporate Sustainability Reporting Directive (CSRD) entered into application in 2024 and has already been transposed into national legislation by several EU Member States, and the Corporate Sustainability Due Diligence Directive (CSDDD) was enacted in July 2024, the European Commission introduced the Omnibus package in February 2025. This package proposes postponing the application dates and introducing substantive amendments to both the CSRD and CSDDD, as well as to the EU Taxonomy Regulation and the Carbon Border Adjustment Mechanism (CBAM). These developments have left many companies in uncertainty around how to proceed with their ESG strategies.
While the EU co-legislators agreed in April this year to postpone the application dates for the CSRD and CSDDD, they now face the challenging task of debating the European Commission's proposed substantive amendments aimed at scaling back sustainability obligations. These discussions will be influenced by geopolitical tensions, political debate within the Council of Member States, and expected differing views among various parties within the EU co-legislators. Additionally, there is significant pressure from EU businesses, industries and other stakeholders.
Whereas the simplification proposals aim to reduce the regulatory burden, they may also dilute the ambitious goals of the Green Deal. The challenge will be to balance the competitiveness of European economies with the objective to achieve significant sustainability improvements.
Latest Developments
EFRAG
As part of its Omnibus package, The Commission has announced the revision of its Delegated Regulation on European Sustainability Reporting Standards (ESRS) in order to make sustainability reporting more efficient and less burdensome. This includes limiting the information required from smaller companies and simplifying the standards for larger companies.
On April 25, 2025, EFRAG announced that it officially submitted its work plan to the European Commission, detailing the steps it will take to revise and simplify the ESRS under the CSRD. EFRAG plans to publish the Exposure Drafts (EDs) amending the ESRS by the end of July 2025. A public consultation will follow immediately after their release, with the aim of delivering its technical advice on the draft amendments by the end of October 2025.
ECB
On 8 May 2025, the European Central Bank (ECB) issued an opinion on the proposed amendments in the Omnibus package concerning corporate sustainability reporting and due diligence requirements. The ECB emphasized particularly the following points:
- The importance of streamlining sustainability reporting to ensure that compliance costs remain proportionate;
- The need for robust and comparable sustainability data;
- The urgency for EU co-legislators to reach an agreement on the Omnibus proposals, ideally by the end of 2025;
- The inclusion of large undertakings with more than 500 employees, rather than limiting the scope to those with over 1,000 employees;
- The necessity of robust verification processes for sustainability reporting, including audit requirements to ensure the credibility and reliability of reported information;
- The adoption of sector-specific guidelines to promote a common approach to implementing the ESRS within individual sectors;
- The need for clear and high-quality transition plans for climate change mitigation, along with effective implementation of these plans;
- The retention of the review clause in the CSDDD, while proposing an extended timeline for the Commission to prepare its report.
EUROPEAN COMMISSION
- Single Market Strategy & Omnibus IV Package
On 21t May 2025, the European Commission unveiled two far-reaching initiatives aimed at easing the EU's legal and regulatory landscape for trading and investing in the EU: the 𝗦𝗶𝗻𝗴𝗹𝗲 𝗠𝗮𝗿𝗸𝗲𝘁 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 & 𝗢𝗺𝗻𝗶𝗯𝘂𝘀 𝗜𝗩 𝗣𝗮𝗰𝗸𝗮𝗴𝗲.
- Introducing a new category of companies - 𝗦𝗺𝗮𝗹𝗹 𝗠𝗶𝗱-𝗖𝗮𝗽 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 (𝗦𝗠𝗖𝘀), which applies to companies with fewer than 750 employees and a turnover of up to €150 million or total assets of up to €129 million.
- Extending SME benefits to 𝗦𝗺𝗮𝗹𝗹 𝗠𝗶𝗱-𝗖𝗮𝗽 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 (𝗦𝗠𝗖𝘀)
- Tackling the "terrible ten" most harmful barriers to intra-EU trade and investment in the EU.
- Enhancing support for digitalisation – such as the Single Digital Gateway & Digital Product Passport - and competitiveness.
- Harmonising and simplifying EU rules across EU Member States.
- Streamlining the business environment through developing and implementing digital tools.
COUNCIL OF THE EU
On 23 June 2025, the Council of the EU adopted its negotiating position on the Omnibus proposal 2025/0045(COD), which aims to simplify and reduce sustainability reporting and due diligence requirements for companies. In its mandate, the Council advocates for a further narrowing of the scope and obligations under both the CSRD and CSDDD, significantly scaling back the requirements compared to the Commission's original proposal.
The Council's position notably tightens the applicability thresholds:
- CSRD
Scope
1,000 employees and €450 million in net turnover
Review clause
For the Commission to consider the possibility of establishing a "simplified reporting regime" when considering extending the scope of the CSRD.
- CSDDD
Scope
5,000 employees and €1.5 billion in net turnover
Due Diligence
- Only due diligence on direct business partners, unless the company has "reasonably available information" of adverse impacts further down the value chain, shifting from an "entity-based approach" to a "risk-based approach".
- Delay of the deadline for transposition of the CSDDD by a year to July 2028.
- Climate transition plans - proposal to delay the deadline to adopt a plan with 2 years.
What Does This Mean for Businesses?
Amidst the regulatory uncertainties and possible rollbacks of mandatory compliance, some clients are considering voluntary compliance with the CSRD. They aim to maintain their sustainability credentials, build investor trust, and gain a competitive edge in the market. However, others prefer to adopt a wait-and-see approach.
As the EU redefines its ESG framework, companies must stay agile. Whether they're considering voluntary compliance or reassessing their sustainability roadmap, now is the time to evaluate their strategies.
How Can We Help You?
How are these developments influencing your ESG approach? Are you adapting your strategy or waiting for regulatory clarity?
At Fieldfisher, our ESG team is dedicated to closely monitoring market dynamics and evolving stakeholder expectations. By combining this insight with our deep expertise and up-to-date knowledge of regulatory developments, we help clients confidently navigate the shifting ESG landscape. Our mission is to ensure they not only remain compliant but are also strategically positioned to leverage sustainability as a driver of long-term value and competitive advantage.
We're also pleased to share that our insights on recent developments in the EU ESG landscape have been featured in the latest edition of ESG Outlook Spring–Summer 2025: Practitioner Insights, published by Thomson Reuters on its renowned Practical Law platform.
This article was written in partnership with the IBJ
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
