Sustainability Reporting: Major Regulatory Updates – Summer 2025

updated on 20 October 2025 | reading time approx. 5 minutes

The regulatory momentum in sustainability reporting continues. In recent weeks and months, 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.

CSRD transposition: new draft bill in Germany

On September 3, 2025, the German Federal Cabinet approved the government draft for the implementation of the CSRD. In terms of content, this draft closely follows the draft bill from July 2025 and incorporates the adjustments already provided for in the Omnibus Initiative, including the “stop-the-clock” directive.

The special regulation for certain wave 1 companies also remains unchanged: capital market-oriented companies with 500 to 1,000 employees are exempt from the reporting obligation for the 2025 and 2026 financial years, as they would no longer belong to the group of users in the future following the increase in the threshold value discussed at EU level. According to estimates by the BMJV, this exemption affects around 50 companies in Germany. On October 17, 2025, the Bundesrat adopted its opinion on the government draft. This will now be submitted to the Bundestag together with the federal government's counterstatement, followed by the second and third readings. It is not yet clear when the legislative process will be completed. With the government draft, the federal government is fundamentally pursuing the goal of transposing the CSRD requirements into German law in a timely manner, with legal certainty and without additional national requirements.

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 rules are to apply from the 2025 financial year, with the possibility of a transition year under the previous law. The delegated act is currently still in the scrutiny period, which has been extended until January 5, 2026, at the request of the EU Parliament. Final clarity will only prevail once the scrutiny period has passed without objections and the delegated act has been published in the Official Journal of the EU. Even in this case, however, the changes are likely to apply to reporting for fiscal years beginning on or after January 1, 2025.

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 from January 1, 2025. Neither the EU Parliament nor the Council raised any objections during the review period, and the delegated act is scheduled to be published in the Official Journal of the EU in mid-November. The aim is to ease the burden on companies in the start-up phase without changing 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.

Agreement reached in the European Parliament's JURI Committee on a position on the Omnibus Initiative

On October 13, 2025, the European Parliament's Legal Affairs Committee (JURI) adopted its position on the planned changes to the CSRD and CSDDD reporting requirements as part of the Omnibus Initiative. Like the Council of the EU, which had already published its position in June 2025, the JURI Committee also advocates raising the thresholds for CSRD reporting to 1,000 employees and €450 million in net sales. If the EU Parliament confirms the opinion at its next plenary session, trilogue negotiations on the final text of the directive will begin. It is not yet clear when the negotiations will be concluded and what the text will look like in detail, i.e., which specific reporting requirements will apply to which group of users in the future.

Outlook

Further decisions on sustainability reporting are expected in the coming months. While at the European level, the results of the consultation on the ESRS drafts are being evaluated and finalized for final submission to the EU Commission by November 30, 2025, the legislative process for CSRD implementation is progressing in Germany. At the same time, there is still uncertainty regarding the changes associated with the Omnibus Initiative. Companies should take advantage of the existing transitional provisions, but at the same time align their reporting processes with the upcoming changes at an early stage. We will keep you informed of further developments as usual.

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