How European Businesses will be Affected by ESG Regulations in 2025
Overview
In 2025, European ESG regulations are undergoing a major transformation aimed at simplifying compliance while preserving sustainability goals. The new Omnibus Simplification Package brings relief to SMEs and shifts focus toward impactful environmental and social initiatives.
The Regulatory Shakeup
The European Commission’s Omnibus Simplification Package is the centerpiece of the 2025 ESG overhaul. Designed to reduce regulatory complexity, it targets three major frameworks:
Corporate Sustainability Reporting Directive (CSRD)
Corporate Sustainability Due Diligence Directive (CSDDD)
EU Taxonomy Regulation
The goal? To streamline sustainability reporting and reduce the compliance burden, especially for small and medium-sized enterprises (SMEs). However, critics argue that simplification may come at the cost of transparency and accountability.
Who’s Affected?
Approximately 50,000 European companies are impacted by these changes. The revised CSRD thresholds now apply primarily to:
Companies with over 1,000 employees
Annual turnover above €50 million
Balance sheet totals above €25 million
Non-EU parent companies must now have €450 million in EU turnover to fall under CSRD requirements. A “stop-the-clock” mechanism also delays reporting deadlines for many companies until 2028, giving them breathing room to adapt.
Industry Voices
Saskia van Gendt, Chief Sustainability Officer at Blue Yonder, sees the changes as a “necessary recalibration” rather than a rollback. She argues that sustainability teams are stretched thin, spending more time on compliance than on driving real impact. The new framework allows SMEs to innovate without being bogged down by one-size-fits-all mandates.
Meanwhile, large corporations—those responsible for the bulk of emissions—remain within scope, ensuring that accountability isn’t lost.
Simplification vs. Deregulation
Not everyone is convinced. Critics, including academics and sustainability leaders, warn that the Omnibus Package may reflect political opportunism rather than genuine reform. Andreas Rasche of Copenhagen Business School cautions that changes to CSRD and CSDDD timelines could undermine the EU’s sustainability ambitions.
An open letter signed by companies like Unilever, Nestlé, and Mars urges the EU to provide clear guidance rather than dilute standards. The tension between competitiveness and climate responsibility is palpable.
As Europe recalibrates its ESG strategy, the focus shifts from blanket compliance to targeted impact. The new regulations aim to empower businesses—especially SMEs—to prioritize meaningful sustainability initiatives. But the challenge remains: how to balance simplification with the rigor needed to drive real environmental and social change.
