The Uncertain State of EU ESG Legislation (CSRD & CSDDD) in 2025

After years of building momentum on ESG (Environmental, Social, Governance) obligations, the European Union is suddenly pressing pause on two flagship initiatives. In early April 2025, the European Parliament voted overwhelmingly to delay the timelines and water down key requirements of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). These directives – meant to drive transparency and accountability on climate, environmental, and human rights issues – are now in a state of flux.

What happened? And what does this plot twist mean for those managing supply chains and corporate sustainability?

Let’s dive into the origins of these regulations, the recent EU Omnibus Proposal intended to simplify them, and why some are cheering the relief while others worry this is a step back at the worst possible time.

From Ambition to Uncertainty: A Brief History of CSRD & CSDDD

Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive was born out of the EU’s desire to upgrade its Non-Financial Reporting Directive (NFRD) of 2014. Under NFRD, only large public-interest companies (like listed firms and banks) had to report limited ESG information. The EU Green Deal and growing investor demand for climate and social data prompted a more ambitious overhaul.

Enter CSRD: adopted in 2022, it dramatically expanded the scope and detail of sustainability reporting. Originally, “large undertakings” – companies meeting two of: 250+ employees, €40 million+ turnover, €20 million+ assets – would have to report annually on a wide range of ESG topics. This included climate change (e.g. carbon emissions, transition plans), environmental impacts (water, pollution), social and human rights matters (diversity, labor standards), and governance.

The CSRD introduced double materiality, meaning companies must disclose not just how ESG issues affect them, but also how the company’s activities impact people and planet. It also mandated the development of detailed European Sustainability Reporting Standards (ESRS) to ensure consistent, comparable data, with an eventual move toward independent assurance of the reports. In short, CSRD’s intent was to put sustainability reporting on par with financial reporting in rigor and credibility – no more greenwashing through vague PR; hard numbers and audited data would rule. It was giving supply chain transparency some teeth.

Corporate Sustainability Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive took aim at the actions behind those reports, focusing on human rights and environmental harm in global supply chains. Inspired by existing laws like France’s Duty of Vigilance and Germany’s Supply Chain Act, the European Commission proposed CSDDD in early 2022 to make “companies hunt down human rights abuse and environmental harm in their supply chains” (The Guardian) – driving true accountability throughout supply chains.

The original proposal would require large companies to identify, prevent, and mitigate adverse impacts in their own operations and throughout their value chain – from child labor at raw material sources to deforestation by suppliers. Crucially, it included enforcement measures: administrative fines for non-compliance, and provisions to hold companies liable for harms they failed to prevent.

The initial scope targeted EU firms with over 500 employees and €150 million turnover (or >250 employees/€40m in high-impact sectors like mining or textiles), plus similarly large non-EU companies doing significant business in the EU (The Guardian). Companies would need to integrate due diligence into policies, monitor suppliers, publish findings, and even could be required to adopt climate transition plans in line with Paris Agreement goals.

The intent was clear – no more “look the other way” when a distant subcontractor pollutes or exploits workers. The EU wanted to “stop businesses from looking away from very real human misery and destruction”, as one MEP, Lara Wolters, put it (The Guardian). Instead, companies would have a legal duty to care for the planet and people along their supply chains, not just their bottom line.

Both CSRD and CSDDD were pillars of the EU’s sustainability agenda, intended to work in tandem: CSRD shines a light (transparency in reporting), while CSDDD wields a stick (due diligence obligations and liability for harm). Together, they signaled a new era of corporate ESG accountability.

For Procurement and Supply Chain professionals, these directives weren’t abstract ideals – they translated into immediate responsibilities: collecting data from suppliers, enforcing supplier codes of conduct, assessing ESG risks in sourcing, and steering their organizations toward cleaner, more ethical supply chains. By design, CSRD would force companies to ask their suppliers hard questions, and CSDDD would force them to act on the answers.

Why Procurement & Supply Chain Teams Mattered All Along

If you work in Procurement, Sourcing, Sustainability, or supply chain management, you might have felt a mix of excitement and anxiety about these new rules. Under the CSRD, suddenly CFOs and sustainability officers would be knocking on Procurement’s door for data:

• How much CO2 did our suppliers emit?
• Do our raw materials come from deforestation-free sources?
• What are the labor conditions at our third-tier supplier’s factory?

The CSRD’s broad scope (covering the entire value chain for relevant impacts) meant that a lot of the information needed for reporting resides with suppliers – which Procurement manages. Even though CSRD is “just reporting,” the old adage “what gets measured gets managed” holds true. Once companies have to publicly disclose, say, their Scope 3 carbon emissions or any human rights risks in their supply chain, there’s pressure to actually improve those metrics.

In other words, transparency drives action: Procurement teams would need to work with suppliers on carbon reduction plans, switch to greener vendors, or tighten codes of conduct to address any ugly truths revealed by the new reporting.

Meanwhile, the CSDDD put procurement directly on the front lines of compliance. Due diligence isn’t a one-time report – it’s an ongoing process of vetting, monitoring, and remediating issues with business partners. This means supply chain mapping, risk assessments, supplier audits, contract clauses requiring ESG standards, training for buyers, and tough decisions like dropping a supplier that won’t fix a serious human rights abuse. The directive even contemplated that if a supplier caused “severe” harm and failed to remedy it, the company would be required to eventually terminate the business relationship as a last resort – a dramatic shift from voluntary ethical sourcing efforts to a hard legal mandate. As one sustainability manager quipped, “CSDDD basically makes my supplier risk checklist into EU law – and gives it teeth.”

Thus, by early 2024, many large companies’ Procurement and Sustainability teams were already gearing up: performing gap analyses, investing in supply chain traceability tools, hiring ESG consultants, and training staff, all to meet what they thought were imminent deadlines (some as early as 2025–2026) for these directives. There was a sense of inevitability – Europe was charging ahead, and global companies would have to level up or get left behind. As the World Green Building Council warned, “transparent reporting is essential for sustainable investment, innovation and economic resilience”, urging the EU to keep robust rules that put sustainability at the heart of Europe’s economic future (WorldGBC calls for policymakers to reject delays to corporate sustainability reporting in EU Omnibus vote - World Green Building Council) (World Green Building Council).

The message to business was clear: get your ESG data and supply chain house in order, or face regulatory reckoning.

The Plot Twist – An Omnibus “Simplification” & the Big Delay

Cue the plot twist.

In February 2025, the European Commission abruptly proposed an “Omnibus sustainability rules simplification package” (World Green Building Council). The idea was to consolidate and dial back parts of the CSRD and CSDDD (and some related laws like the EU Taxonomy regulation), ostensibly to address concerns from companies and certain Member States that the new ESG rules were too onerous, too fast. Internal Market Commissioner Thierry Breton spearheaded this move, describing it as a necessary step to “avoid excessive burdens that could damage Europe’s competitiveness” (The Sustainable Times).

The Omnibus package sought to “combine the competitiveness and climate goals” of the EU by making the sustainability regime “more proportionate and easier to implement” (Regulatory & Compliance).

In plainer terms, the Commission hit the brakes.

This Omnibus package was fast-tracked with almost warp-speed (by Brussels standards). On 3 April 2025, the European Parliament voted – 531 in favor, 69 against – to “stop the clock” on key requirements of CSRD and CSDDD  (ESG Dive). MEPs had agreed two days earlier to treat the proposals as urgent, bypassing the usual lengthy debates (Regulatory & Compliance). One Dutch MEP grumbled that the urgent procedure is meant for true crises, not for giving companies a breather – calling this “a hasty approach” that relied on support from the far-right and was “detrimental to trust” in the EU’s lawmaking (Responsible Investor). Nevertheless, the Parliament – with a coalition of center-right and right-wing groups in support – gave the green light. The Council of the EU (representing member state governments) had already signaled its approval of the delay a week prior (Regulatory & Compliance), so the decision became a fait accompli.

What exactly changed? In short, a lot. The vote approved a “Stop-the-Clock” Directive that delays the implementation timelines of both CSRD and CSDDD, and endorsed the Commission’s plan to significantly narrow their scope and obligations. Some of the key developments:

Delayed Deadlines

Hitting Snooze on Compliance: Most companies just got two extra years to start reporting under CSRD, and an extra one year for CSDDD due diligence obligations. Originally, the next wave of CSRD was set to kick in for fiscal year 2025 (reports published in 2026) – that’s now pushed to FY 2027 (reports in 2028) (Regulatory & Compliance).

Listed SMEs, who would have started reporting a year later, are pushed to FY 2028 (reports in 2029) (Regulatory & Compliance). In practice, this means the “second wave” of companies under CSRD have until 2028, and the “third wave” until 2029, to comply (Skadden).

The “first wave” – the largest public-interest entities already reporting in 2025 for FY 2024 – remain on schedule so a subset of big companies still must forge ahead now.)

For the CSDDD, Member States now have until July 2027 to transpose it into national law (a one-year extension), and the largest companies in scope won’t have to begin applying due diligence until mid-2028 (Regulatory & Compliance). This is essentially a one-year pause for the due diligence rollout (Skadden).

“Shrinking the Net”

Vastly Fewer Companies in Scope: Perhaps the most dramatic change is who will be subject to these rules. The Omnibus plan redefines “large” companies for CSRD from 250 employees to 1,000 employees (financial thresholds of €50M turnover or €25M balance sheet remain) (Regulatory & Compliance).

This seemingly small edit has a huge effect: raising the threshold to 1000 employees slashes the number of companies covered by an estimated 80% (ESG Dive). Tens of thousands of medium-sized firms that were bracing to report sustainability data will now be off the hook entirely. Listed SMEs – previously included – are no longer in scope at all unless they qualify as large by the new definition (Regulatory & Compliance).

Non-EU companies, which would have been caught if they had €150M in EU turnover, now face a higher bar of €450M (Regulatory & Compliance). This brings CSRD’s scope closer to the (also raised) CSDDD thresholds. Indeed, EU governments in Council had already pushed CSDDD’s threshold up to 1000 employees / €450M turnover in late 2023 (The Guardian), a move critics said “killed two-thirds of the law” by excluding 70% of companies that would have originally been covered (The Guardian).

“We’re left with bare bones, with an already weak framework that now covers only a fraction of all large companies,” lamented one WWF policy officer at the time (The Guardian). By aligning CSRD with this higher bar, the Omnibus changes effectively consolidate both directives around a much smaller universe of corporate giants – letting most “mid-cap” firms sidestep these new ESG obligations entirely.

Lighter Reporting Load

“Simplifying” or Diluting the CSRD? For those companies still in scope of CSRD, the Commission promises a gentler regime. The European Sustainability Reporting Standards will be pruned: substantially fewer data points, clearer guidance, more alignment with global standards (Regulatory & Compliance).

“Less is more,” apparently – the aim is to focus on the most important info and cut out what some executives complained was a checklist overload. Sector-specific standards (which would have added extra metrics for, say, oil & gas or agriculture companies) are scrapped entirely (Dentons). And that plan to move from limited assurance on sustainability info to reasonable assurance (akin to a full audit) over time? Dropped – reports will stick to limited assurance only (Dentons ). The core concept of double materiality survives (companies still must report both how ESG issues affect them and their impacts on society/environment) (Dentons), but overall the reporting exercise will be closer to “ESG Lite.”

The Commission even floated a “value-chain shield” for smaller businesses: a new voluntary reporting standard for SMEs, which in-scope companies can ask of their small suppliers – and a rule that big companies can’t force SMEs to provide more information than that standard requires (Regulatory & Compliance). In other words, your Procurement team may no longer bombard every mom-and-pop vendor with exhaustive ESG questionnaires just to satisfy the auditors. (Cue small supplier sighs of relief.)

Softening the Due Diligence Directive – From Stick to Carrot?

Changes to the CSDDD are equally significant, fundamentally changing how companies approach supply chain responsibility. Under the revised approach, companies only need to scrutinize their direct business partners by default (ESG Dive). The original idea of conducting “in-depth” checks through all layers of the supply chain has been removed. Now, firms are only expected to chase issues down to sub-suppliers if they have plausible information of an actual problem deeper in the chain (ESG Dive).

This is a move from proactive to reactive due diligence – “don’t ask, unless you suspect.” Moreover, the requirement that companies terminate relationships as a last resort when severe abuses aren’t fixed is removed (Dentons). In practice, that gives companies more leeway to continue sourcing from a high-risk supplier as long as they say they’re trying to mitigate the harm, rather than mandating a hard break that could disrupt business.

The frequency of conducting due diligence updates is also relaxed – instead of reviewing risks and updating the plan every 12 months, the Omnibus suggests a five-year interval for periodic assessments. Five years is an eternity in ESG terms; a lot of deforestation or worker exploitation can happen while a company is “waiting” to refresh its review. And for the lawyers in the room: the new text defers more to national civil liability regimes on the question of if and how companies can be sued for harms in their supply chain (Dentons).

This could make it harder for victims of, say, a mining spill in Africa to bring a case in European courts – a key provision NGOs wanted – depending on each country’s legal setup. Finally, there is an effort to align CSDDD’s climate obligations with CSRD, meaning any requirement for companies to adopt climate transition plans will be tied into the CSRD reporting framework. (Earlier drafts had a standalone requirement for large firms to limit global warming to 1.5°C and even empowered boards to cut executive bonuses if climate targets weren’t met – it’s unclear if those parts will survive the simplification.)

In essence, the EU is paring back its once-bold ESG regime. The omnibus changes, as one law firm put it, “dramatically reduce the scope and reporting required” under these sustainability laws (Regulatory & Compliance).

The move has been packaged as a win-win: lighten the load on business while still keeping the overall framework in place, just on a delayed timeline. An EU Council press release framed it as enhancing competitiveness and providing legal certainty to companies in turbulent times. And indeed, many in industry welcomed the reprieve. “A pragmatic recalibration that balances sustainability ambitions with business realities,” is how one corporate sustainability leader described the delay (ESG Dive). “This extension acknowledges the implementation challenges of complex frameworks like CSRD and CSDDD,” said Maura Hodge of KPMG US, adding that companies should “use this extended window strategically to strengthen their sustainability data infrastructure... ensuring they're well-positioned when requirements take full effect in 2028” (ESG Dive). The sentiment among relieved compliance officers was essentially: we’re not rejecting the mission, we just need more time and simplicity to do it right.

Backlash: “Watering Down” Green Goals or Sensible Breather?

Not everyone is applauding, to put it mildly.

The reaction from environmental groups, socially conscious investors, and some EU lawmakers has been mildly critical to outright scathing.

EU Lawmakers' Response

“Disgraceful,” “misguided,” “empty shell” – these are a few of the choice words flying around. Global Witness, an NGO known for exposing corporate harms, blasted the Parliament’s vote: “MEPs have backed a delay to this vital climate protection law – but the climate emergency won’t wait... Delays and any watering down of this law not only fail people and planet, but create uncertainty and instability.” They and others argue that in an uncertain world, the EU should stand firm and not squander its climate leadership (Global Witness).

After all, the EU has legally binding targets to cut emissions 55% by 2030 and reach net-zero by 2050 – goals that require more aggressive action this decade, not less. Pushing off climate-related reporting to 2028 could mean companies delay aligning their strategies with those targets. “The climate emergency won’t wait,” Global Witness warned, adding that the EU needs to reintroduce key parts of the original law – like obliging big companies to actually act on their climate impact and giving affected communities the right to take companies to court for abuses (Global Witness).

In other words, don’t let the law lose its teeth.

Green MEPs and social advocates in the European Parliament were similarly alarmed. Lara Wolters (the Dutch MEP who helped author the due diligence law) said the Commission’s proposal “would leave ground-breaking rules for human rights and the environment an empty shell, and make companies engage in pointless box-ticking” (Lara Wolters, LinkedIn). She urged fellow lawmakers to “call this out for what it is. It’s an extreme proposal, it’s blatantly misguided, and it’s backed by the fossil fuel industry and the far right” (Lara Wolters, LinkedIn).

Strong words – essentially accusing opponents of hijacking the simplification under the guise of helping business.

Another MEP, Pascal Canfin – who is actually a centrist and chair of the Parliament’s environment committee – echoed concern that the delay risked undermining Europe’s credibility on its climate commitments (The Sustainable Times). He warned it could even affect the EU’s ability to attract the capital needed for the green transition (The Sustainable Times). The logic is that the EU has been a global leader in sustainable finance and ESG rules; if it suddenly gets cold feet, investors might question how serious Europe is about its green promises, potentially “undermining Europe’s ability to attract vital transition capital” (The Sustainable Times) for clean energy and innovation.

Environmental Activists' Response

Activists are also quick to note the broader implications: Europe’s stance often sets the benchmark for other countries. “A softening of Europe’s position might encourage others to slow down or backtrack” on corporate sustainability efforts, one analysis warned (The Sustainable Times). For example, will countries like Canada or Japan, considering similar due diligence laws, now hesitate? And what about companies? Some fear that those who were gearing up to comply might lose internal momentum or face pressure to divert resources elsewhere now that the legal pressure is eased.

An analyst at the Institute for Energy Economics & Financial Analysis criticized the move, saying it creates uncertainty that could discourage sustainable investments – the exact opposite of the intended effect (The Sustainable Times). After all, if rules keep changing, how can businesses plan long-term ESG strategies?

Supporters of the ESG Delays

On the other hand, there is a camp arguing that this reset could ultimately benefit sustainability goals, by preventing a rushed, sloppy implementation. They suggest that with more time and streamlined requirements, companies will deliver higher-quality, more credible reports and genuinely integrate ESG, rather than hastily ticking boxes to meet an arbitrary deadline (The Sustainable Times).

There’s also the point that small and mid-sized businesses were feeling overwhelmed – and that climate action won’t succeed if it’s seen as a bureaucratic burden that crushes the very companies whose innovation we need.

The trick is finding the balance: simplifying without gutting the substance. As one observer wryly noted, whether this pause is “careful pragmatism or environmental recklessness” will depend on what the EU does next (The Sustainable Times).

The Future of Europe's Green Deal

If the final adjusted rules (to be hammered out over the next year) maintain strong accountability for the biggest players and give others a viable path to participate, the EU could still salvage its Green Deal credibility. But if lobbying further erodes the standards, the risk is a decade of lost progress.

For now, the net-zero and sustainability community is on alert. The World Wide Fund for Nature (WWF) didn’t mince words: “EU governments have killed two-thirds of the law... We’re left with bare bones.” (The Guardian) And the World Green Building Council cautioned that weakening transparency and accountability “can undermine the EU’s green transition – as well as market certainty for businesses and investors” (World Green Building Council). They urged policymakers to “reject delays and rollbacks” and instead work on refining the rules *“without weakening accountability” (World Green Building Council).

It’s a sentiment many share: keep the ambition, fix the practicalities. And underlying all the rhetoric is a simple reality that no vote can repeal – the planet’s warming, biodiversity loss, and human rights abuses aren’t taking a break. As critics quip, we can hit pause on laws, but we can’t hit pause on climate change.

What Now? Practical Implications for Procurement & Supply Chain Professionals

So, what does this regulatory rollercoaster mean for those in the trenches of procurement, sourcing, and sustainability?

In one sense, a bit of relief: the frantic race to meet 2025/2026 compliance deadlines just got a pit stop. If you were scrambling to gather supplier ESG data or implement due diligence processes by next year, you’ve been granted a reprieve. Use it wisely. As KPMG’s Maura Hodge suggested, this is an opportunity for companies to “strengthen their sustainability data infrastructure and reporting capabilities” so they’re fully ready when the requirements do kick in (ESG Dive).

In practical terms, that means continue building those ESG reporting systems, but now with less panic. You can pilot test that new supplier questionnaire, refine your data collection templates, get your software in place, and improve internal training. By 2028, when many of these obligations land, you want your processes running like a well-oiled (or rather, well-decarbonized) machine.

Here are a few to-do’s and considerations for professionals navigating this uncertainty:

Continue ESG Initiatives (Voluntarily)

Just because the law says “not yet” or “not you” (for those now out-of-scope) doesn’t mean ESG efforts should stall. Many companies will continue reporting sustainability information voluntarily or to meet investor expectations. If your firm has publicly committed to net-zero or issued an ESG report, stopping now could damage credibility. The best companies will use the delay to go beyond mere compliance. For instance, some Procurement teams are proceeding to map supply chain emissions and set science-based targets even if CSRD reports aren’t legally due for a couple more years. This maintains goodwill with stakeholders and avoids a last-minute scramble later.

Prep for Supply Chain Due Diligence "Lite"

For CSDDD, since the most onerous parts have been trimmed (no mandatory cutting ties, less frequent checks), Procurement can adapt its approach. You may have more flexibility to work with suppliers on gradual improvement rather than dropping them to avoid liability. This could foster more collaboration – use the time to engage suppliers in capacity-building (e.g. help a smaller supplier improve safety practices) rather than simply auditing them. However, be mindful that national laws (like France’s or Germany’s) might still impose stricter duties in the interim. And reputational risk hasn’t been delayed: if a scandal emerges from your supply chain tomorrow, “but the EU law isn’t in force yet!” won’t save your brand in the court of public opinion. Smart companies will continue rolling out due diligence programs as if the law were in effect, just with a bit more breathing room to get it right.

Watch the Regulatory Fine Print & Future Moves

The situation is still in flux. The Omnibus changes will go through final approvals and then need to be transposed by each EU country by 2025 (Skadden). There’s also a political wildcard: the next review of these directives (or a future Parliament after 2025) could swing the pendulum back toward tougher rules if they feel the EU is falling behind its sustainability goals. In short, don’t assume “watered down” today means “watered down forever.”

Keep an eye on guidance that comes out – for example, the promised simplified ESRS standards will be crucial for reporting teams to understand what data to collect from Procurement. Also, some Member States might go beyond the minimum when transposing the directives (so-called “gold-plating”). One country’s law might still cover smaller companies or demand certain disclosures. Stay tuned into both EU-wide and local regulations to ensure you’re not caught off guard.

Strengthen  Your Supplier Relationships

With the hard edge of enforcement dulled (no more automatic requirement to terminate errant suppliers), Procurement can leverage a more partnership-based approach. This is a bit of a double-edged sword: it eases pressure, but it could also tempt less responsible companies to do nothing until a problem is undeniable. Resist that complacency.

Instead, use the extra time to build strong supplier engagement programs. Develop clear Supplier Codes of Conduct, continue conducting risk-based supplier assessments, and set improvement plans. The difference is you may not have to fire a supplier per law – but you should still be ready to, if they consistently flout serious environmental or human rights standards. The directive’s spirit is to prevent harm; just because you can wait for a “plausible hint” of an issue beyond tier-1 doesn’t mean you should. Leaders in sustainable supply chain management will go further, mapping deeper tiers and addressing risks proactively, law or no law.

Seize the Opportunity to Influence

Industry and professional input will likely be sought as the standards are revised. Procurement and Sustainability practitioners should voice their experiences – e.g. if certain data requirements truly were unworkable, suggest alternatives; if the delay could allow for harmonizing with global standards (like the new ISSB sustainability standards or U.S. SEC climate disclosure rules), advocate for that. The EU is explicitly aiming for “high interoperability with global reporting standards” (Regulatory & Compliance). This could reduce duplicate work if your company reports in multiple jurisdictions. Now’s the time to engage via industry coalitions or public consultations to ensure the final shape of CSRD and CSDDD is practical yet effective.

Conclusion

Lastly, a bit of mental recalibration: It’s easy for sustainability pros to feel disheartened – like the rug was pulled out from under years of work.

But remember, much of what these laws drive is not just externally imposed; it’s fueled by genuine market and societal forces. Consumers still demand fair supply chains. Investors are still analyzing ESG risks. Climate scientists still warn (loudly) that we’re on a tight timeline to avoid disaster. Those pressures aren’t legislated – they’re real.

In that sense, the job for Procurement professionals hasn’t fundamentally changed. It was never just about ticking a legal box by 2025; it’s about building resilient, responsible businesses for the long run. The EU may have extended the deadline on paper, but the urgency remains. Or as one commentator aptly put it, whether this pause is prudent or perilous depends on what we do with it (The Sustainable Times).

So take a brief sigh of relief – maybe enjoy a (sustainably farmed) coffee now that you won’t be spending all night on that supplier ESG survey – but then keep at the work of integrating ESG into your procurement decisions.

The clock is still ticking in the real world, even if Brussels stopped theirs for now. And if you do your job well, when 2028 rolls around, compliance will be just a formality because you’ll already be living and breathing sustainable practices.

In the end, authentic commitment beats compliance deadlines – and that’s something no delay should change.