A Turning Point in Europe’s ESG Regulation

In July 2025, EU institutions are expected to vote on major revisions to the CSRD, EU Taxonomy, and related instruments through the so-called OMNIBUS proposal. While simplification is the stated goal, the global momentum on sustainability tells a more nuanced story: the frameworks are evolving—but not retreating.

Key Updates at a Glance

1. ESRS: Fewer Data Points, Clearer Priorities

• EFRAG has proposed a reduction of over 50% in mandatory ESRS datapoints.
  
  
• A streamlined double materiality assessment with simpler logic and fewer scoring steps.
  
  
• Alignment of ESRS E1 (climate) with financial reporting boundaries (“financial control” approach).
  
  
• Introduction of non-binding guidelines for voluntary areas.
  
  
• Flexible reporting layouts including executive summaries and annexes.
  
  

2. EU Taxonomy: Targeted Relief for Companies

• No reporting required for non-material activities (<10% of turnover, CapEx, or OpEx).
  
  
• Non-financial firms are exempt from CapEx taxonomy alignment for non-core operations.
  
  
• Financial firms can skip detailed taxonomy KPIs for two years.
  
  
• Standardized templates and reduced data granularity (–64% for corporates, –89% for financials).
  
  
• Simplified DNSH criteria related to pollution and chemical use.
  
  

3. CBAM: Parliament and Council Reach Agreement

• Clearer responsibilities for importers and traders.
  
  
• Streamlined emissions reports and registration workflows.
  
  
• Stronger linkages to EU Emissions Trading System (ETS).
  
  
• CBAM implementation proceeds on schedule for full launch in 2026.
  
  

4. CSRD Thresholds: A New “Medium-Sized” Category Proposed

As part of the ongoing debate surrounding the EU’s Omnibus Directive, several political groups in the European Parliament have proposed amendments to the current CSRD applicability thresholds. These proposals stand in sharp contrast to the positions held by the Council of the EU (1,000 employees / €450 million turnover) and the conservative EPP group (3,000 employees / €450 million turnover).

To reduce the burden on SMEs while still ensuring transparency, the Socialists & Democrats (S&D), the Greens (The Greens/EFA), and the liberal Renew Europe group have put forward the idea of introducing a new category of “medium-sized companies” with simplified reporting obligations:

Members of Renew Europe suggests that companies with 500–1,000 employees should report under simplified sustainability standards (S-ESRS), with audit requirements being introduced gradually over a five-year period. These companies would not be required to apply the full ESRS Set 1. The Socialists & Democrats proposes that companies with 250–500 employees should also benefit from a streamlined set of reporting requirements, but with mandatory assurance from the beginning.

In both proposals, the revenue threshold remains unchanged at €50 million. Companies that exceed both the turnover threshold and the respective employee headcount would still be required to apply the complete ESRS Set 1.

The Parliament aims to finalize its position by October 2025, with trilogue negotiations between Parliament, Council, and Commission expected to follow in November and December 2025. The outcome of these negotiations remains uncertain.

5. Investor Concerns: Balance Simplification with Integrity

• Associations like EFAMA and Eurosif warn against over-diluting CSRD.
  
  
• Emphasize preserving double materiality and data comparability.
  
  
• Argue that robust ESG disclosure is essential for financing Europe’s transition.
  
  

Strategic Relevance: ESG Is Not Slowing Down

While the EU debates thresholds and formatting, other regions are pressing ahead:

• Australia launches a Sustainable Finance Taxonomy.
  
  
• Spain introduces mandatory CO2 accounting.
  
  
• Denmark ties ESG risks to credit decisions via new banking laws.
  
  
• 35 countries progress toward ISSB alignment (IFRS Foundation).
  
  

In banking, ESG risk reporting is evolving beyond compliance. The European Banking Authority and the Basel Committee now expect climate risks to be embedded in core risk governance—even for smaller institutions.

What Does This Mean for Companies?

1. ESRS reporting will get leaner—but not optional.
   
   
2. Global ESG frameworks are converging.
   
   
3. Sustainability remains a strategic lever for resilience and competitiveness.
   
   

Fazit: Why Proactive ESG Still Wins

The OMNIBUS proposal marks a move toward pragmatism—but not a pullback. Companies that hoped for a full pause on ESG reporting should reconsider. Instead, this is a chance to:

• Build smart, scalable reporting systems that grow with future demands.
  
  
• Align with global norms now to avoid late-stage disruption.
  
  
• Stay credible with investors, regulators, and customers.
  
  

Simplification, yes—but simplification with intent. And in the long run, those who take ESG seriously today will be tomorrow’s frontrunners.

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