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In recent months, the European Union has entered a new, more pragmatic phase of its ESG (Environmental, Social, and Governance) journey. While the initial wave of regulation was expansive, the period from mid-July to mid-August 2025 has been defined by a significant recalibration. The message from Brussels is nuanced: while the legislative burden is being simplified, the push for enforcement and accountability is stronger than ever.
This is a critical moment for every company, regardless of size or sector. The changes aren't just for financial institutions or major corporations; they are a clear signal that the wider concept of sustainability is becoming a fundamental part of the business landscape.
This article is written by Mario van den Broek ([email protected]) and Kirill van der Velde ([email protected]). Mario and Kirill are part of RSM Netherlands Business Consulting Services, with a specific focus on Sustainability and Strategy.
The Simplification Agenda: Less Burden, More Focus
The dominant theme is "simplification," which directly addresses industry concerns about the complexity of the initial regulations. The key changes are designed to make compliance more manageable, but this is not a retreat from the EU’s core ambitions. The rules for the Corporate Sustainability Reporting Directive (CSRD), for example, are being streamlined, with a proposed massive reduction of around 57% in mandatory data points. The goal is to make reporting more efficient, and a "quick fix" has also been implemented to provide companies already reporting with a two-year delay on certain complex disclosures. The political debate surrounding the Corporate Sustainability Due Diligence Directive (CSDDD) is intense, with proposals aimed at narrowing its scope; however, the core principle of supply chain due diligence remains intact. This highlights the concept of "percolation", the effects of EU regulations inevitably flow down the supply chain, reaching companies they weren't originally intended for. This push for practicality extends to the EU Taxonomy, which is also simplifying its complex disclosures with a new 10% materiality threshold. This new approach enables companies to exclude activities from their assessment if they are not financially significant, thereby shifting the focus from a one-size-fits-all approach to what truly matters to a business.
The Scrutiny Agenda: The Stakes are Rising
While the EU is simplifying reporting, financial regulators are simultaneously ramping up supervision and enforcement. The message is clear: if a company makes a claim, it must substantiate it. The European Supervisory Authorities (ESAs) have issued new guidance on the Sustainable Finance Disclosure Regulation (SFDR), encouraging national regulators to exercise their enforcement powers. This is a signal that we are moving from a period of policy guidance to one of real accountability, with misleading claims or vague disclosures coming under intense scrutiny. Furthermore, financial regulators are embedding ESG risks into core supervisory frameworks. The European Banking Authority (EBA), for example, is actively developing guidelines for ESG stress testing, treating sustainability risks in the same manner as any other financial risk. While some reporting has been temporarily delayed, the underlying requirement for companies to manage and prepare for these risks remains in place.
What does this mean for the industry?
The time for a passive "wait and see" approach is over. Even if a company is not directly subject to the largest EU directives, these changes will inevitably affect it. For many industries, the impact of these regulations is becoming more direct and tangible.
For the Technology, Media, and Telecommunications (TMT) sector, the focus is shifting to data governance, digital inclusion, and the environmental footprint of their operations. Data centers and network infrastructure are significant consumers of electricity, making them a prime target for emissions reporting under the CSRD and scrutiny under the EU Taxonomy. The "S" in ESG is also critical, with regulators looking at social responsibility related to content moderation, digital literacy, and the ethical use of artificial intelligence.
The Automotive industry is navigating a fundamental transformation. Beyond the push for electric vehicles, which directly ties into the EU's climate objectives, the focus is now shifting to the circular economy. The new Batteries Regulation means that automotive companies are directly responsible for the entire lifecycle of their products, from raw material sourcing and due diligence to collection and recycling. This creates new reporting burdens and new opportunities for supply chain innovation.
In the Logistics sector, the most significant impact comes from the need to manage and report on emissions. With CSDDD putting an emphasis on Scope 3 emissions, those produced throughout a company's value chain, logistics providers are a crucial component of their clients' environmental footprint. This means companies in this sector will face increasing pressure to provide detailed, verified data on their fuel consumption, routing efficiency, and overall carbon intensity to their business partners.
Finally, the Energy sector is facing the most direct scrutiny. The recalibration of regulations means that while reporting might be simplified, the focus on the transition from fossil fuels to renewable energy sources remains absolute. Companies are being encouraged to demonstrate how their capital expenditures and business activities align with the EU Taxonomy's objectives for climate mitigation and adaptation. Their ability to attract green investment and manage risk is increasingly tied to their demonstrable progress in this transition.
Forward thinking
With these industry-specific changes in mind, companies of all sizes should recognize that the recalibration is a call to action. The following key takeaways are essential for a successful ESG journey, moving from a reactive to a proactive and strategic stance.
Focus on Substance, Not Just Reporting: The simplification agenda enables companies to move beyond a mere compliance exercise. Instead, they can focus on building a genuine, resilient ESG strategy that creates real value for their business.
Prepare for the Ripple Effect: Large companies are now in scope, and they will need data from their suppliers to comply. This is a golden opportunity to get ahead. By proactively assessing its own ESG performance, a company can become a more attractive and reliable partner for its clients.
Validate Claims: Greenwashing is a major focus for regulators. Companies should be prepared to back up any environmental or social claims they make. Transparency and accuracy are key to building trust with customers, investors, and business partners.
The EU's Great Recalibration is not about pulling back. It's about maturing a framework to make it more effective. The focus shifts from a vast, complex set of requirements to a more focused and enforceable set of principles. A company's journey with ESG has never been more crucial, and a pragmatic, well-informed approach is now the most vital asset for a business to possess.
RSM is a thought leader in the field of Sustainability consulting. We provide frequent insights through training and the sharing of thought leadership, based on our detailed knowledge of industry developments and practical applications gained from working with our customers. For more information, please contact one of our consultants.