As discussions around simplification gain traction in Europe, global sustainability frameworks continue to evolve and expand. Key developments show that while thresholds and timelines are being reconsidered, the overall direction remains: forward.
EFRAG plans to reduce ESRS datapoints by over 50%, according to a draft report discussed this week. The final version will be sent to the European Commission tomorrow.
Key simplifications include:
– Reduced complexity of the double materiality assessment (e.g. less scoring, clearer materiality logic)
– Focus in ESRS E1 likely limited to financial control, aligning with financial disclosures
– Adjustments to Minimum Disclosure Requirements (fewer mandatory datapoints, clearer structure)
– Introduction of non-binding guidance sections (including within voluntary areas, pending legal review)
– More flexibility in report structure (e.g. executive summaries, use of appendices)
The exposure draft of the revised standards is expected by mid-July, with a final decision session scheduled for 25 July 2025. Afterwards, a consultation will follow. The standards are expected to be finalized end of November and then provided to the European Commission for review.
At EQS, we will ensure to bring the new standards live in our ESRS-Module once they are finalized.
While simplification is discussed in Brussels, other regions are moving ahead with implementation. Australia’s new Sustainable Finance Taxonomy sets a clear signal for green investment alignment in the Asia-Pacific region. In Europe, Denmark has introduced Lovforslag L 193, a new regulatory requirement mandating that banks integrate climate and ESG risks into their credit assessment processes. This includes ESG transition plans, documented governance for climate risk, and greater transparency on sustainable investments. Denmark thus positions itself at the forefront of EU-aligned sustainable finance, closely tied to CSRD, ESRS E1, and the EBA’s ESG risk guidance. Meanwhile, Spain has introduced new legal obligations tied to CO2 footprinting.
At the global level, 36 jurisdictions are making concrete progress on ISSB adoption, according to the IFRS Foundation. Global ESG harmonization is steadily becoming the norm, not the exception.
Recent developments in banking supervision make clear that ESG-related disclosure is moving beyond compliance. The latest interpretations of the EBA’s Pillar 3 ESG standards emphasize integration of sustainability into risk governance, transparency, and business decision-making. Importantly, the framework also applies to small and non-complex institutions, with proportional expectations tailored to their size and risk profile. ESG risk management is becoming a baseline expectation—across the entire banking sector. In parallel, the Basel Committee’s new voluntary framework for climate-related financial risks highlights the expectation that financial institutions embed climate risk assessments in their broader risk strategy.
Amid shifting regulatory timelines, companies continue to prioritize climate transition. BCG’s Climate Transition Barometer confirms that CO₂ reduction, target setting, and decarbonization planning remain central to business strategy and stakeholder dialogue. Investor and market pressure keeps climate action firmly on the boardroom agenda.
The European Parliament and Council have reached a political agreement to simplify the implementation of the Carbon Border Adjustment Mechanism (CBAM). The updated rules aim to improve the clarity and efficiency of the system designed to prevent carbon leakage in carbon-intensive sectors.
Key changes include:
– A simplified structure for reporting embedded emissions in imported goods
– Clarified obligations for importers and traders
– A more accessible registry and data submission process for operators
– Stronger alignment with the EU Emissions Trading System (ETS)
CBAM is a central tool in the EU’s Fit for 55 package and is gradually being phased in. This agreement lays the groundwork for smoother implementation ahead of the full operational start in 2026.
On 20 June, the European Commission first confirmed that it will withdraw its proposal for the Green Claims Directive, originally intended to regulate environmental marketing claims by requiring companies to substantiate them with verifiable evidence. Just a few days later, on 25 June, the Commission stated that it was never their intention to withdraw the law and that it still supports it. Therefore, it is still up to the member states in the Council of the EU to find a compromise, as well as Members of Parliament in the EP.
The European Commission has adopted a set of measures to simplify the application of the EU Taxonomy, aiming to reduce the administrative burden on companies while preserving core environmental and climate objectives.
Key simplifications include:
– Companies are exempt from assessing Taxonomy eligibility and alignment for activities that are financially non-material (below 10% of turnover, CapEx or OpEx for non-financial undertakings).
– Non-financial companies are no longer required to assess Taxonomy alignment for OpEx that is immaterial to their business model.
– For financial institutions, key indicators such as the Green Asset Ratio (GAR) are simplified, and detailed Taxonomy KPIs can be deferred for two years.
– Reporting templates are streamlined, reducing data points by 64% for non-financial companies and 89% for financial institutions.
– The “do no significant harm” (DNSH) criteria for pollution prevention related to chemicals are simplified.
The delegated act will now be reviewed by the European Parliament and Council, with a four-month scrutiny period, extendable by two months. The changes will apply from 1 January 2026, but companies may voluntarily apply them for the 2025 financial year.
Once the Council and Parliament agree to these changes, we will update our Taxonomy module in the Sustainability Cockpit to reflect the latest requirements.
Several parliamentary groups in the European Parliament have proposed amendments to the CSRD thresholds as part of the Omnibus debate. These proposals differ significantly from the thresholds suggested by the Council of Member States (1,000 employees / €450 million turnover) and the conservative EPP group (3,000 employees / €450 million turnover).
The Socialists (S&D), Greens (The Greens/EFA) and Liberals (Renew) all propose to introduce a new “medium-large” company category, which would be subject to simplified reporting requirements:
– Pascal Canfin (Renew): Companies with 500–1,000 employees would report according to simplified sustainability standards (S-ESRS), with a phased-in audit obligation over five years. No obligation to apply the full ESRS Set 1.
– Lara Wolters (S&D): Companies with 250–500 employees would apply a “simplified set of requirements,” but still have an audit obligation.
– Kira Marie Peter-Hansen (Greens): Similar proposal for a simplified reporting standard for companies with 250–500 employees.
In all proposals, the €50 million revenue threshold would remain unchanged, and companies above the upper employee threshold would apply the full ESRS Set 1.
The Parliament aims to adopt its position by October 2025, followed by trilogue negotiations with the Council in November and December 2025. The outcome remains open, with possible compromises across political groups.
A political agreement between Conservatives, Socialists, Liberals, and Greens seems likely. A more right-wing alignment could risk losing support for the Commission in Parliament, a scenario that the main parties may seek to avoid.
A group of major investor and business associations, including Eurosif, EFAMA, and Frank Bold, have issued a joint statement on the CSRD Omnibus initiative, calling for a balanced approach to simplification.
Key messages from the statement include:
– Support for reducing complexity and burden where justified, particularly for smaller companies.
– A clear warning against excessive deregulation that could weaken investor-relevant disclosures.
– Emphasis on the importance of maintaining the double materiality principle and preserving key transparency elements of the CSRD.
– The need for stable and comparable ESG data to support investment decisions, risk assessments, and transition financing.
The statement reflects growing concern among financial market participants that too far-reaching simplifications could undermine the purpose of the CSRD as a cornerstone of sustainable finance in Europe.
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