In a strategic shift, the EU has put key sustainability reporting rules on hold, including the ambitious Corporate Sustainability Reporting Directive (CSRD). The shift signals growing concern that complex ESG obligations are stalling business growth and innovation—raising questions about whether the EU is compromising its climate goals in favor of competitiveness. With over 1,000 data points originally required for disclosure, the CSRD faced mounting criticism from companies struggling to keep up. Now, the bloc is rethinking its green strategy—streamlining reporting rules, narrowing scope, and delaying timelines—all in an effort to ease regulatory pressure while still pushing for a sustainable future.
At the heart of the EU's policy shift are the extensive obligations introduced by the CSRD—requirements that many companies have flagged as overly complex, costly, and difficult to implement. Designed to standardize ESG disclosures across large companies operating in or with the EU, the directive aims to deliver greater transparency, accountability, and comparability in sustainability reporting—key to achieving a climate-neutral economy by 2050. Companies within scope are required to report on sustainability targets, indicators, and performance based on defined Standards.
The European Sustainability Reporting Standards (ESRS) outline more than 1000 data points, which companies would be obligated to assess. The data points must be in tagged digital format in order to allow for data comparison and analysis. The mere volume of data points is overwhelming for companies, a matter that has been criticized on the basis that the value they add is disproportional to the administrative effort required for assessment. However, the data points are not universally applicable across companies and sectors. A large percentage of data points is immaterial or unrelated to the activities of a reporting company, consequently limiting mandatory reporting on those data points. The CSRD introduced the concept of Double Materiality requiring companies to not only report on the impact that their own operations have on the environment and society but also on the risks and/or opportunities that sustainability developments may have on the business and its finances. The extent of the CSRD, in its latest form, was far reaching due to the level of the reporting obligation to the entire value chain of a company, inclusive of suppliers.
In April 2025, the EU Parliament hit pause on sustainability reporting, delaying the implementation of Green Deal measures, including the CSRD. This development is part of an effort to simplify the reporting regime, emphasizing the importance of enforcement within a realistic timeline thus allowing companies to comply with the reporting standards. The development is a result of communication with stakeholders who consider that the reporting system, as is, is complex and costly to implement. The goals of CSRD and the European Green Deal in general focus on the attraction of investments, the promotion of innovation and the funding of the transition towards a more sustainable economy. In an effort to create a favorable business environment within the EU, where companies are not hindered by excessive regulatory burdens, the European Commission has proposed significant amendments, to enable growth in a cost-effective manner. This development is intended to limit administrative costs for companies and to facilitate additional investment capacity to support the overarching sustainability goals.
The proposals of the EU Commission are not limited to the CSRD but are part of a wider package of reforms, including other green instruments such as the Corporate Sustainability Due Diligence Directive (CS3D). The proposals have been heralded as a much-needed simplification and streamlining of the reporting process, necessary in part due to repeated and connected obligations imposed on stakeholders within the various instruments. Nevertheless, the proposed amendments reduce the reach and extent of the CSRD. The first major change would be the reduction of the scope of reporting companies. The reporting requirements would apply to large undertakings with 1000+ employees, and either a turnover above €50 million or a balance sheet total above €25 million. The effect of this threshold change would reduce the scope of the CSRD by 80%. In addition, companies outside the scope would be able to report voluntarily, on lower standards. According to the EU Commission, that standard will act as a shield, by limiting the information that companies or banks falling into the scope of the CSRD can request from companies in their value chains with fewer than 1000 employees. Another critical change proposed is the postponement of reporting by two years. Several EU member states have already transposed the CSRD into national law and would need to amend according to the finalized changes, once approved. Cyprus has yet to transpose the CSRD into national law.
The developments are a sign of the EU backpedaling on the sustainability transformation, in the interest of competitiveness. On one hand, the proposed reforms include incentives to encourage industry decarbonization, drive innovation and facilitation of capital allocation. On the other, they significantly reduce transparency, corporate accountability and ESG data, valuable to investors and consumers alike. Reliable, digital and transparent sustainability reporting is an increasingly vital source of information for evaluating business performance and influencing consumer choices, in an era of information overload. The EU's green objectives necessitate innovation, economic growth and capital investment; however, the transition must be both sustainable and transparent.
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