Sustainability Reporting: Major Regulatory Updates – Summer 2025

published on 30 September 2025 | reading time approx. 5 minutes

The regulatory momentum in sustainability reporting continues. In recent weeks, several regulations relevant to sustainability reporting have been published, including the delegated act on the EU Taxonomy, the draft bill for the implementation of the CSRD in Germany, extended transitional provisions for the ESRS, a recommendation on the application of the VSME standard, and the revised ESRS drafts. Below, we summarize the key developments for you.

EU Taxonomy: New Delegated Regulation simplifies application

On 4 July 2025, the European Commission adopted, as part of the Omnibus Initiative, a Delegated Act amending the EU Taxonomy Regulation. The changes include in particular the introduction of materiality thresholds: activities representing less than 10% of turnover, CapEx or OpEx will no longer have to be assessed for taxonomy-eligibility or alignment, but must still be disclosed as immaterial. For OpEx, it is also foreseen that data collection may be omitted entirely if OpEx is not material to the overall business model. In addition, the “Do No Significant Harm” (DNSH) criteria have been clarified by deleting certain requirements and by referencing existing EU chemicals legislation (e.g. the REACH candidate list). The reporting templates have also been significantly streamlined: the number of mandatory datapoints is reduced from 78 to 28, disclosures on DNSH and minimum safeguards are removed, and sector-specific tables are integrated. The new provisions apply from financial year 2025, with the option of a transitional year under the previous framework.

CSRD transposition: new draft bill in Germany

On 10 July 2025, the Federal Ministry of Justice and Consumer Protection (BMJV) published a new draft bill for the transposition of the CSRD. The draft builds on the 2024 government draft, but also reflects changes introduced by the Omnibus Initiative, such as the “Stop-the-Clock” Directive. A new provision has been added for certain Wave 1 companies: capital-market-oriented undertakings with 500 to 1,000 employees are to be exempted from the reporting obligation for financial years 2025 and 2026, as they will no longer fall within scope following the planned increase of the threshold to 1,000 employees at EU level. According to BMJV estimates, this exemption affects around 50 companies in Germany. Based on the draft, a government bill will now be prepared, to be adopted by the Federal Cabinet and subsequently introduced into the Federal Council. The objective is to transpose the CSRD requirements into national law in due time and thus provide legal certainty for companies.

European Commission adopts Delegated Act on ESRS transitional reliefs

On 11 July 2025, the European Commission adopted a Delegated Act amending the first set of ESRS (Regulation (EU) 2023/2772). The aim of this so-called “Quick Fix” is to extend and broaden certain transitional provisions (“phase-in”) in order to relieve in particular Wave 1 companies, which must already report under the CSRD from financial year 2024 (subject to national transposition). Specifically, companies with more than 750 employees may, in financial years 2025 and 2026, omit reporting on selected standards – including ESRS E4 and the social standards ESRS S2 to S4. In addition, reliefs originally available only in the first reporting year for complex disclosures – in particular regarding expected financial effects of sustainability-related risks – are likewise extended to financial years 2025 and 2026. The Delegated Act applies retroactively and directly to financial years beginning on or after 1 January 2025, unless the European Parliament or the Council raise an objection within four months. The objective is to ease the initial reporting phase without altering the fundamental requirements of the standards.

EU recommends VSME Standard for SMEs

On 30 July 2025, the European Commission officially adopted as a Recommendation the “Voluntary Sustainability Reporting Standard for non-listed SMEs” (VSME Standard) developed by EFRAG. It encourages non-listed SMEs and micro-enterprises that wish to provide sustainability information on a voluntary basis to apply the VSME Standard. Business associations emphasize that the standard provides SMEs with urgently needed harmonization and simplification in ESG reporting – particularly in view of heterogeneous value chain requirements.

ESRS revision: publication of Exposure Drafts

On 31 July 2025, EFRAG published the Exposure Drafts for the revision of the ESRS and launched a public consultation running until 29 September 2025. The purpose of the amendments is to significantly streamline the requirements and facilitate application, while at the same time preserving the objectives of the CSRD and interoperability with international standards such as the ISSB. A clear distinction is to be made between mandatory requirements and application guidance; non-mandatory content has been deleted, simpli-fied or moved to a new “Non-Mandatory Illustrative Guidance” (NMIG). Further adjustments concern the double materiality assessment, which may in future be conducted either top-down or bottom-up. The structure of reports will also become more flexible, e.g. through the option of executive summaries or the use of annexes. According to the drafts, 57% of mandatory datapoints are eliminated and the overall length of the standards is reduced by 55%. Additional changes include clarifications on the definition of greenhouse gas emissions, treatment of value chains and acquisitions, and handling of sensitive information. A new “Fair Presentation” principle has also been introduced to safeguard the overall quality of reporting.

Outlook

Further decisions in the field of sustainability reporting can be expected in the coming months. While the EU consultation on the ESRS drafts is ongoing and the final adoption by the European Commission is being prepared, the legislative process for CSRD transposition in Germany is progressing. Companies should make use of the existing transitional provisions, but at the same time start adapting their reporting processes to the forthcoming changes at an early stage. We will continue to keep you informed about further developments.

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