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The European Commission has proposed a significant simplification of regulations in the domain of sustainable development.​​​​​​​​​​​​​​​​

The European Commission has proposed a significant simplification of regulations in the domain of sustainable development.​​​​​​​​​​​​​​​​

​​​​​​​​​​​​​​On February 26, 2025, the European Commission adopted a new package of proposals aimed at simplifying EU regulations, strengthening competitiveness, and attracting additional investments.

The Commission has set an ambitious goal to simplify regulations by 25% overall and by 35% for small and medium-sized enterprises (SMEs). The first packages of proposals (called "Omnibus" in the EU) provide for significant simplification of requirements in the following areas:

  • Sustainability reporting (CSRD and EU taxonomy for sustainable activities)
  • Corporate Sustainability Due Diligence Directive (CSDDD)
  • Carbon Border Adjustment Mechanism (CBAM)
  • EU investment programs

If these proposals are adopted and implemented according to the current plan, according to preliminary estimates by the EC, they will reduce annual administrative costs by approximately €6.3 billion and mobilize an additional €50 billion in public and private investments.

Main Changes in Sustainability Reporting (CSRD and EU Taxonomy):

  • CSRD coverage reduction: approximately 80% of companies will be excluded from CSRD. The main focus will remain on the largest companies that have a significant impact on people and the environment.
  • Reduced burden on small businesses: large companies subject to CSRD should not impose excessive sustainability requirements on smaller companies in their supply chains.
  • CSRD requirements postponement: companies currently subject to CSRD and required to report from 2026 or 2027 will be given two additional years, i.e., until 2028.
  • Reduction in EU taxonomy reporting requirements: these obligations will apply only to the largest companies (in accordance with CSDDD), while other large companies falling under the future CSRD will be able to submit reports voluntarily. This will significantly reduce costs for small businesses while maintaining access to sustainable financing.
  • Introduction of partial reporting according to EU taxonomy: this will facilitate a gradual ecological transition and support the development of transformation process financing.
  • Financial materiality threshold for EU taxonomy: a materiality threshold value in taxonomy reporting is introduced, as well as a 70% reduction in reporting templates.
  • Simplification of "Do No Significant Harm" (DNSH) criteria: priority will be given to simplifying requirements for pollution prevention and control over the use and presence of chemicals in all economic sectors, with further revision and simplification of all DNSH criteria planned.
  • Adjustment of key taxonomy indicators for banks: the main taxonomy indicator for banks, Green Asset Ratio (GAR), will be changed. Banks will be able to exclude from GAR calculation companies that will not fall under CSRD (i.e., companies with fewer than 1000 employees and turnover less than €50 million).
  • It is effectively confirmed that certain non-EU companies doing business in the EU and exceeding established criteria must report in 2029 for the 2028 financial year. Reporting deadlines for non-EU companies have not changed.

Main Changes Regarding Voluntary and Mandatory Sustainability Reporting (ESRS):

Introduction of a Voluntary Standard for Companies Not Subject to Mandatory Reporting

  • The European Commission proposes a voluntary standard for companies not obliged to report under CSRD.
  • This standard will be based on VSME (Voluntary SME Standard) developed by EFRAG.
  • The Commission plans to adopt this voluntary standard as a delegated act.

ESRS Updates

  • The Commission intends to review the first set of ESRS standards to simplify and optimize reporting requirements.
  • The delegated act for updating ESRS will be adopted no later than six months after this proposal enters into force.
  • Main changes include:
    • Reducing the number of mandatory indicators by removing those least important for general sustainability reporting.
    • Prioritizing quantitative indicators over descriptive texts.
    • Clearer distinction between mandatory and voluntary indicators, maintaining compatibility with global reporting standards.

Further ESRS Improvements

  • Clearer formulation of standard provisions to eliminate uncertainties.
  • Increasing ESRS coherence with other EU legislation.
  • Providing clearer instructions on applying the materiality principle so companies report only material information.
  • Minimizing the risk that auditors will require unnecessary information or that companies will spend excessive resources on materiality assessment.
  • Simplifying the structure and presentation of standards.
  • Strengthening compatibility with global sustainability standards.
  • Additional changes based on the first application of ESRS to improve the standards.

Main Changes in Corporate Sustainability Due Diligence (CSDDD):

  • Simplification of due diligence requirements to reduce unnecessary complexity and costs. The main focus will be on direct business partners, and periodic assessments and monitoring of partners will be conducted once every 5 years instead of annually, with the possibility of additional checks if necessary.
  • Reducing the burden on SMEs and mid-sized enterprises by limiting the scope of information that large companies can request when examining supply chains.
  • More preparation time: postponing due diligence requirements until July 26, 2028, for the largest companies, while accelerating the adoption of relevant recommendations by July 2026.

Main Changes in CBAM:

  • Exemption of small importers from CBAM obligations, covering about 182,000 importers (90% of all importers, predominantly SMEs), by establishing an annual threshold of 50 tons of imports. CBAM will continue to cover 99% of emissions in the regulatory sphere.
  • Simplification of rules for companies remaining under CBAM: reducing the administrative burden on CBAM declarants, simplifying the calculation of embedded emissions and reporting requirements.
  • Future expansion of CBAM: coverage of additional ETS sectors, value-added products, and a new legislative initiative on further CBAM expansion in 2026.

Proposals for Investment Programs (InvestEU, EFSI, and Other Financial Instruments):

  • Increasing the EU's investment potential - expected to attract €50 billion in additional public and private investments.
  • Strengthening InvestEU to support strategic directions such as the Competitive Compass and the Green Industrial Deal.
  • Simplifying administrative requirements for partners, financial intermediaries, and end beneficiaries, primarily SMEs. Cost savings of €350 million are expected thanks to simplification measures.
  • Facilitating member states' participation in the program, allowing for the mobilization of more private investments.

Next Steps in Implementing Changes

  • Legislative proposals will be submitted to the European Parliament and Council for consideration and approval.
  • Changes to CSRD, CSDDD, and CBAM will come into force after agreement by the parties and publication in the EU Official Journal.
  • Priority review of the package of changes, especially regarding the postponement of CSRD requirements and the CSDDD implementation deadline.
  • The update of the delegated act on EU taxonomy will be adopted after public consultations and will enter into force after the review period by the European Parliament and Council.

What This Will Mean for Ukraine and Ukrainian Business Obligations in Sustainability Reporting

In Ukraine, the main driver of sustainability regulations has been the Strategy adopted by the government on October 10, 2024 (Strategy for Implementing Sustainability Reporting for Ukrainian Enterprises). This is one of the most practical government documents in the ESG domain and represents a significant step toward sustainable business and Ukraine's integration with the EU. The Strategy is not just a formal document but an ambitious plan that assigns businesses tasks in transparent management and responsibility. It defines a foundation based on European ESRS standards, with additional audit and control procedures that will foster trust in reporting.

As part of the strategy implementation, changes to Ukrainian legislation are being developed that will implement mandatory sustainability reporting for certain categories of enterprises. The Ministry of Finance has developed relevant proposals to Ukrainian laws. Due to the expected adoption of large-scale changes in EU legislation, Ukraine must also adjust the criteria and deadlines for respective sustainability reporting obligations.

We remind you that you can learn more about the EU Corporate Sustainability Reporting Directive (CSRD) by reviewing the analytical document from the Green Transition Office.




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