EU to Finalize Sustainability Reporting Rule Revisions by October 2025

The European Union will publish more detailed sustainability reporting rules by October 2025 as part of its broader effort to simplify complicated compliance regulations for companies. The European Financial Reporting Advisory Group (EFRAG), the European Commission's advisory group, will submit new recommendations on the European Sustainability Reporting Standards (ESRS) to the European Commission. These requirements form a crucial part of the Corporate Sustainability Reporting Directive (CSRD) aimed at allowing businesses to report on their environmental and social impact. The current regime has not been seen to be simple enough and burdensome enough, however, to trigger a rewording of the rule under the EU's Omnibus program.

EFRAG will be responsible for updating the process, which will begin through a series of interviews with firms already using the ESRS. Besides these consultations, continuous feedback will be received to guide revision. Draft revisions by July 2025 are then followed by continuous public consultation which takes up to 45 days. September is also a month during which public consultation will occur so broader engagement will be done. This will then be delivered by October in the form of a final report of recommendations by the European Commission after the end of a very important phase in simplifying EU sustainability reporting obligations.

This is all part of a broader legislative overhaul with the Corporate Sustainability Due Diligence Directive (CS3D). CSRD and CS3D come under the scrutiny of lawmakers, who aim to make reporting more straightforward without compromising high standards. The European Parliament led the scrutiny of the legal documents, with its legal affairs committee set to report by June 2025. A conclusive vote in form will be taken in October, as a matching deadline for the final recommendations of EFRAG. The European Union Council is moving more quickly, however, and is intended to complete its position by June.

As one measure to soften mounting business issues regarding readiness for compliance, the EU has also decided to extend deadlines. Large firms with over 250 employees, €50 million turnover, or €25 million total assets are to be ready to adopt CSRD by 2028. SMEs small and medium-sized enterprises listed are provided until 2029. CS3D's large firms with over 5,000 employees must adopt by 2028. These are provided to give firms time to adapt to changing standards while regulatory systems are being implemented.

Despite the progress made by the Council, negotiations within the European Parliament continue to trail and remain patchy. The timing of legislation has particularly concerned stakeholders as business firms eagerly await clearer guidance to rebase in-house reporting framework. Postponing finalized updates also has an effect on firms' investment planning, ESG strategy alignment, and audit preparedness. EFRAG's holding preliminary revision proposals based on limited feedback warrants additional room for wider consultations and greater industry participation in arriving at realistic, enforcible norms.

EU policy is an example of exquisite harmony between regulatory vision and business practicability. EFRAG attempts to arrive at an improved reporting system that will ensure greater compliance by taking inputs from large companies as well as from SMEs. The CS3D and CSRD have been conceptualized as the foundations on which the EU's Green Deal is to operate with the dream of making firms accountable for their environmental and human rights track. But regulatory weight, especially on micro, small, and medium-sized firms, has been an area of apprehension about cost, administrative burden, and the timing of roll-out.

The drive to simplify under the Omnibus initiative is meant to ease these problems. It seeks to de-mystify definitions, remove duplication, and harmonize the disclosure regime. With improved harmonized standards, the EU seeks to increase the comparability and quality of sectoral ESG data and, ultimately, support investor choice and sustainability benchmarks. The September round of public consultation will play a crucial role in finalizing these updates since it offers the final opportunity for the stakeholders to influence the final recommendations before they are submitted to the Commission.

Though regulatory lagging is not an uncommon phenomenon when policies are reformulated across the board, they do present genuine challenges to those firms that would like to prepare ahead of changing ESG norms. ESG reporting solutions and advisory services already are in use by a range of firms, looking forward to complete compliance. While it gives extra lead time, the extended time line also creates skepticism, particularly among those with operations in more than one EU member country that have a variety of interpretive comprehension among the regulations.

By October 2025, the EU should have its more clarity-oriented and workable version of its sustainability reporting regulations. This will enable companies to better understand their roles, structure ESG activity more efficiently, and help foster a more transparent and accountable business culture in Europe. The concurrent efforts of EFRAG, the European Commission, and the Council reflect a concerted effort to embed sustainability deeply into the corporate governance system of Europe.

While this is being done, interaction among the industries has a significant role to play in ensuring that the rules are not only effective but also feasible. The harmonization of ESRS under the CSRD regime and due diligence duties under CS3D will certainly set the ESG paradigm in the EU for the foreseeable future. These reforms will probably find their impact most predominantly in international practice, particularly among the international companies doing business in, or having supply chains in, Europe.

Source and Credits:
Source: IPE
Credits: Jithin Joshey Kulatharayil, KnowESG