No summer slump here: there has been a lot going on behind the scenes of ESG regulation in recent weeks. We summarise briefly what will be important for you in the future. The EU taxonomy is being streamlined. The Corporate Sustainability Reporting Directive (CSRD) is finally gaining momentum in Germany. The European Sustainability Reporting Standards (ESRS) are to be made more practical and significantly simplified. At the same time, the EU Commission is officially recommending the application of the VSME standard for SMEs. In addition, more and more countries are basing the introduction of national sustainability standards on the guidelines of the International Sustainability Standards Board (ISSB).
01 Streamlining of the EU taxonomy regulation ⚖️
The EU is working on streamlining the EU taxonomy: on 4 July 2025, the Commission presented a draft of a new delegated regulation. It is now in a four-month scrutiny period, during which the EU Parliament and Council will review it. No changes to the content are possible during this process; the legal act must be accepted in its entirety. If the draft is adopted, the streamlined EU taxonomy will apply to reports from 1 January 2026. For financial years beginning between 1 January 2025 and 31 December 2025, companies may apply the old version (optional).
What are the main simplifications for non-financial companies? The most notable changes are the introduction of materiality thresholds, revised KPI reporting templates and simplified requirements in annex C of the climate and environmental delegated acts.
What this means for companies:
The new legal framework is intended to provide for materiality thresholds: in future, companies will not have to take immaterial economic activities into account in the EU taxonomy assessment. In practice, some companies have already been working with materiality thresholds – including some of our clients. In consultation with the respective auditors, we have defined thresholds in order to implement the requirements pragmatically.
Activities are not material if they cumulatively account for less than 10% of total turnover, total investment expenditure (CapEx) or total operating expenditure (OpEx) (i.e. this must be checked for each KPI).
In our opinion, this simplification is sensible and purposeful. In addition, the EU taxonomy reporting templates are being significantly revised. For non-financial companies, there will be a new overview reporting template (summary of the individual KPI reporting templates) as well as the three revised KPI reporting templates.
A new data point will be needed for the overview template: the proportion of non-material activities that have not been assessed. There will also be a new data point in the individual KPI reporting templates: the proportion of taxonomy-aligned activities in taxonomy-eligible activities. If you are interested in details, you can find a sample reporting template from the EU Commission here.
It should be noted that the new reporting templates are easier to read thanks to simple restructuring, the transfer of data points to the overview reporting template, the focus on meaningful data points and the omission of non-essential details. Nevertheless, companies should not underestimate the structure and work behind the EU taxonomy. The media is talking about a 64% reduction in the number of data points to be reported. In our opinion, this raises false expectations. Although there are fewer data points to report, the work involved in the verification process remains similar. This is because the core data is identical; only the structure of the reporting template is simpler.
Another point is that adjustments to Annex C of the Climate and Environmental Regulation (Delegated Regulations (EU) 2021/2139 and 2023/2486) will simplify the taxonomy alignment verification process. This is the EU's response to a common criticism: the requirements for an activity to be designated as taxonomy-aligned sometimes go beyond applicable European law. The use of certain substances that are permitted under European law will no longer be an obstacle to thr taxonomy alignment assessment.
02 The CSRD is coming to Germany! 🇩🇪
On 10 July 2025, the Federal Ministry of Justice and Consumer Protection (BMJV) published a new draft law on the national implementation of the CSRD. Germany was originally required to transpose the CSRD into national law by 6 June 2024. As a result, infringement proceedings have now been initiated against Germany.
The public consultation on the draft ran until 21 July 2025. On 3 September 2025, the BMJV published the government draft for the national implementation of the CSRD. The aim is to have the law come into force before the end of this year.
What this means for companies:
The BMJV has implemented the EU requirements largely one-to-one and is already adapting to planned EU simplifications from the omnibus procedure. For example, there is a specific rule for wave 1 companies with 500 to 1,000 employees: they are exempt from the reporting obligation in order to avoid a short-term obligation and time pressure. However, wave 1 companies with more than 1,000 employees may still have to report in 2025, while wave 2 and 3 companies will not have to report until 2027 and 2028, respectively, in accordance with the "stop the clock" directive.
The short deadlines could pose a challenge for companies that have not yet prepared sufficiently. If the law comes into force this year, wave 1 companies would have to set up processes and obtain the relevant data within a few weeks. Although the "quick fix" regulation provides for certain transitional relief (see "04 Simplifications in CSRD reporting for wave 1 companies"), uncertainty remains at European level, particularly with regard to future adjustments to the ESRS. EFRAG recently published a draft version, but it remains unclear when this will be adopted by the European Union and come into force.
It is advisable for all affected companies to prepare in good time. Despite the legal uncertainty, it is best to establish structures and processes for reporting at an early stage.
03/06 Draft proposal to simplify the ESRS 🇪🇺
Practical, readable and less complex reporting – this is what the six levers described in the graphic are intended to achieve. A public consultation on this is currently underway and will run until the end of September 2025.
What this means for companies:
There are plans to thoroughly revise the materiality assessment within the framework of the ESRS. This will bring massive relief for companies subject to reporting requirements.
Instead of having to work through a multitude of (sub)topics in a complex bottom-up process, the company's business model will serve as the starting point in the future, as part of a top-down approach. This saves time and brings the truly relevant topics to the fore. The result: a significantly leaner report – and more relevant content.
A concrete example: for one of our medium-sized clients in the automotive sector, we expect the sustainability report to be reduced by around 50%. But that's not all. In our view, shorter and more concise reports increase the quality of the content. They become more readable and are more readily accepted by stakeholders.
Another positive aspect is that topics that are not considered material but are requested by rating agencies, for example, can still be addressed in the report. This eliminates the need to produce separate supplementary reports – a double win in terms of efficiency and consistency of ESG communication.
Several structural changes have also been made to the ESRS. From now on, there is the option of including a short summary at the beginning of the sustainability statement and moving detailed key figures and information on the EU taxonomy to the appendix. It is also emphasised that duplication, especially with regard to policies, actions and targets (PATs), should be avoided. In our opinion, this will result in a more concise sustainability statement that focuses on qualitative characteristics.
The changed relationship between the Minimum Disclosure Requirements (now General Disclosure Requirements, GDR) and the topical requirements, as well as the reduced number of mandatory GDR data points relating to PATs, will also help to avoid duplication and keep the sustainability statement concise.
In order to make the ESRS requirements more understandable and accessible from the outset, the structure of the standards has been changed. For example, all voluntary disclosures have been removed, and the application requirements have been moved from the appendices to the standards themselves for the respective data points to which they relate. This will provide greater clarity on the requirements in the future.
Further simplifications designed to reduce the workload include, for example, the adoption of the concept of "disproportionate effort" from the ISSB, which is to be applied to the materiality assessment, the inclusion of the value chain and various key performance indicators. In general, the language of the ESRS has been aligned with the ISSB and interoperability with other standards has been improved through various levers.
Overall, we welcome the simplifications and reductions in the ESRS, of around 57% of the mandatory data points, as we believe they will lead to more concise and succinct sustainability reporting, and make it easier to understand for non-specialists.
04 Simplifications in CSRD reporting for wave 1 companies 🌊
On 11 July 2025, the European Commission published the so-called "quick fix" regulation. This introduces changes to the current ESRS. As a result, certain reporting requirements for wave 1 companies subject to CSRD reporting will be postponed. The legal act is currently in the "scrutiny period": the EU Parliament and Council can raise objections within four months. If this does not happen, the regulation is expected to come into force in November 2025. Implementation into national law is not necessary.
What this means for companies:
Disclosures on financial impacts can be postponed for the 2025 and 2026 reporting years, regardless of company size. Further postponements of reporting requirements relate in particular to the reporting elements of ESRS E4 (Biodiversity & Ecosystems), ESRS S1 (Own Workforce), ESRS S2 (Workers in the Value Chain), ESRS S3 (Affected Communities) and ESRS S4 (Consumers & End users). Their design depends on the size of the company and double materiality.
Wave 1 companies thus have more time and planning security when setting up processes, IT systems and data collection for sustainability reporting. However, it is important not to view the time gained as a postponement, but to use it for the early development of robust processes – to be well prepared from 2027 onwards and at the same time secure competitive advantages through reliable ESG data.
05 Official recommendation of the VSME for SMEs 🏢
With the Voluntary Sustainability Reporting Standard for SMEs (VSME), the European Commission is pursuing a clear goal: a uniform and practical ESG reporting standard for companies that do not fall under the CSRD. Companies are to report on a voluntary basis – and market participants such as customers or banks are to limit their ESG data requests to the approximately 75 VSME data points. This would significantly simplify and standardise data exchange between compilers and users.
However, although a revised version of the standard was announced for mid-2025, it has yet to materialise. Companies should nevertheless start laying the groundwork for solid ESG data management, as the revised version of the VSME will build on the existing standard.
What this means for companies:
The new voluntary standard based on VSME is likely to establish itself in the medium term as a practical basis for ESG reporting by small and medium-sized enterprises. This will be the case even if the announced revision turns out to be somewhat more extensive than the current version. However, it remains questionable whether market participants – such as banks or business partners – will actually limit their ESG requirements to the VSME data points. This is because freedom of contract applies here in legal terms. Anyone who requires additional information can continue to obtain it, regardless of the reporting standard chosen.
In addition, the VSME does not cover all the topics for which stakeholders such as rating agencies request data – for example, in the area of human rights due diligence along the supply chain. Companies should nevertheless take these into account in order to secure competitive advantages. Fundamentally, the standard offers a real opportunity – especially for SMEs. It helps companies to focus on essential ESG data and avoid unnecessary bureaucracy. This frees up resources for what really matters: the sustainable transformation and future-proofing of their own business model.
Moreover: ESG regulations worldwide 🌍
The International Financial Reporting Standards (IFRS) S1 and S2 of the International Sustainability Standards Board (ISSB) are gaining importance worldwide. With Mexico and Japan, two more countries have joined in 2025 that have adopted IFRS S1 and S2 in order to comply with their sustainability reporting obligations. From a global perspective, this is a step forward: countries that are working towards adopting these standards or have already implemented them account for more than 60% of global GDP. The international approach follows the "Climate First" principle, but is by no means limited to climate matters.
What this means for companies:
In future, internationally active companies will also have to comply with new sustainability reporting requirements outside the EU. The aim of the simplified ESRS is to ensure interoperability between the ESRS and the ISSB in order to avoid double reporting. Discussions on this are still ongoing. It remains to be seen to what extent companies can expect relief in this regard.
