/>iLaunched in 2019, the EU Green Deal sets out a “plan to transform Europe’s economy, energy, transport, and industries for a more sustainable future”[1] by steering companies toward sustainability-oriented business models and achieving climate neutrality by 2050. As the flagship initiative of Ursula von der Leyen’s first Commission mandate, the EU Green Deal originally prioritized ambitious climate, environmental and social objectives. However, developments in early 2025 indicate a significant strategic shift within the EU, prioritizing competitiveness through its new “Competitiveness Compass” and reducing emphasis on the initial green agenda.
This shift is reflected in efforts to simplify regulatory requirements associated with the Green Deal, aiming to reduce compliance burdens on businesses, including two umbrella regulations:
- The Corporate Sustainability Reporting Directive (“CSRD”),[2] which requires companies to disclose detailed information about their environmental, social, and governance (“ESG”) impacts and risks within a formal sustainability statement issued annually.
- The Corporate Sustainability Due Diligence Directive (“CS3D”),[3] which requires companies to implement a climate mitigation transition plan as well as due diligence across their value chain.
Below is an overview of the key changes that are anticipated and the areas in which companies would be wise to focus their compliance efforts.
Where do we stand?
On February 26, 2025, the European Commission released an “Omnibus Proposal” aimed at simplifying EU regulations, boosting competitiveness, and attracting investment. This simplification package addresses a wide range of legislative areas, including amendments to the CSRD and CS3D.
To this end, and while “simplified versions” are being discussed, the timeline for implementing both directives has been impacted by the “stop-the-clock” directive,[4] which provides for the following changes:
- CSRD: A two-year postponement of entry into application. Consequently, EU entities and subgroups that qualify as a large undertaking or group[5] and were preparing for the implementation of CSRD – originally scheduled for 2026 as part of the second wave of CSRD implementation – now have until 2028 to publish their first sustainability statement.
- CS3D: A one-year postponement of the transposition deadline (from 2026 to 2027) and entry into application (from 2027 to 2028 for entities in the first wave of application[6]).
The Omnibus proposal also advocates for a drastic reduction in the regulatory requirements that are imposed under the directives, including:
- CSRD: The EU Commission has proposed excluding approximately 80% of companies that are not yet subject to mandatory reporting.
- CS3D: The EU Commission has proposed limiting the due diligence obligations by restricting value chain assessment to direct suppliers.
The political debate centers around balancing a reduction in regulatory burdens to boost competitiveness with maintaining strong sustainability standards to protect the environment and human rights, with the end goal of creating long-term value and returns for investors.
How to keep moving forward?
Companies will generally need to balance between two approaches:
- Focusing ongoing compliance efforts on mandatory requirements and concentrating investments on EU ESG regulations that are already in effect or soon to come into force.
- Using the additional time afforded by the extended CSRD and CS3D implementation timelines to better prepare for the upcoming regulatory changes, particularly the implementation of the CSRD double materiality assessment and the CS3D due diligence risk assessment, even though both may ultimately fall outside the scope of the revised legislations.
The delayed implementation of CSRD and CS3D provides companies with a valuable opportunity to strengthen their ESG strategies and adopt a robust, global methodology for establishing long-term ESG compliance. These opportunities include:
- Leveraging interoperability between the CSRD/ESRS framework and global sustainability reporting standards.
The European Sustainability Reporting Standards (“ESRS”) developed under the CSRD were intentionally designed to be interoperable with global frameworks, notably the IFRS Sustainability Disclosure Standards (“ISSB”) and the Global Reporting Initiative (“GRI”) Standards.
Operators can therefore rely on materials dedicated to interoperability between those standards, in particular those issued by the European Financial Reporting Advisory Group (“EFRAG”)[7] to advance their sustainability reporting while maintaining alignment with the core elements of the ESRS that should not be substantially amended or removed in the new set.
The EFRAG is expected to publish a revised version of the ESRS by October 31, 2025.
- Focusing on other EU legislation that relies on the same materiality assessment and supply chain due diligence methodology
One of the key challenges of CSRD and CS3D is the need for advanced compliance capabilities to collect and verify large amounts of data. This task becomes even more challenging when information must be gathered across multiple jurisdictions and complex supply chains.
To prepare for the CSRD and CS3D, companies that want to strengthen their compliance capabilities can benefit from implementing the compliance measures required by the EU Forced Labor Regulation (“FLR”)[8]. The FLR applies universally to all products sold in the EU, at any stage of a product’s lifecycle, including all components and raw materials. The FLR therefore requires strong due diligence practices and risk assessments throughout global supply chains, which can serve as a foundation for meeting the more extensive requirements of the CSRD and CS3D.
Companies can also use this risk-based general compliance approach to meet their compliance obligations under other sector- and product-specific EU regulations such as the Deforestation-free Products Regulation [9] or the Battery Regulation[10].
Ultimately, rather than viewing the change in deadline on CSRD and CS3D as a reason to abandon or suspend all ESG compliance efforts, companies can use the extra time before full implementation to create a solid foundation for efficient compliance with a range of evolving EU regulations, enabling them to streamline their global ESG strategies.
For further details and regular updates, you can refer to our EU Green Deal Tracker, which tracks developments on key sustainability-related legislative measures impacted by the new EU agenda, whether they are subject to revision or postponement.
[2] Directive (EU) 2022/2464 of December 14, 2022, on amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting.
[3] Directive (EU) 2024/1760 of June 13, 2024, on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859.
[4] Directive (EU) 2025/794 of the European Parliament and of the Council of 14 April 2025 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements
[5] Exceeding the following thresholds: 250 employees and, €50 million turnover or €25 million assets.
[6] EU companies and groups with more than 5000 employees and over €1.5 billion in global net turnover, and non-EU companies and groups with more than 3000 employees and over €1.5 billion in net global turnover
[7] https://www.efrag.org/en/sustainability-reporting/esrs-workstreams/interoperability
[8] Regulation (EU) 2024/3015 of November 27, 2024, on prohibiting products made with forced labour on the Union market and amending Directive (EU) 2019/1937.
[9] Regulation (EU) 2023/1115 of May 31, 2023, on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010.
[10] Regulation (EU) 2023/1542 of 12 July 2023 concerning batteries and waste batteries, amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and repealing Directive 2006/66/EC
