Stuck In Quicksand: Decoding The Latest EU Sustainability Rule Changes

The beginning of 2025 saw significant uncertainty surrounding sustainability regulations. Twelve months later, that uncertainty hasn’t disappeared – in fact, the year has highlighted just how volatile these regulations can be. Recent updates to EU frameworks have dominated discussions on the future of ESG and sustainability, shaping strategies across organizations depending on size, maturity and industry exposure. As we move towards 2026, firms should be monitoring two critical regulatory updates:

• Delay to European Deforestation Regulation (EUDR).
  On October 21, the European Commission proposed adjustments to the EUDR to ease implementation concerns, highlighting IT readiness and the administrative burden as key challenges. Austria, Germany, Hungary, Sweden and the Baltic States are all demanding deeper simplification, while Belgium, France and Spain stand firm on maintaining current requirements. These measures respond to concerns raised by a coalition of firms about the risk of undermining the credibility of EU sustainability regulations, and the associated administrative and investment cost. The proposal introduced a six-month postponement for SMEs, moving their deadline from June 2026 to December 2026. In October, the Commission retained plans to have the EUDR enter into force at the end of 2025, with enforcement action delayed by at least six months. However, on November 26, the European Parliament and Council agreed to delay the EUDR for another year. Additionally, both entities call on the Commission to carry out a new simplification review by the end of April 2026.
  
• Cuts to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).
  On November 13, the European Parliament voted to significantly scale back reporting and due diligence requirements under the CSRD and CSDDD. Under the new rules, the CSRD faces a 90% to 92% reduction in the number of organizations in scope, applying now only to firms with over 1,750 employees and €450 million in revenue. CSDDD obligations apply now to only 1,300 large enterprises with over 5,000 employees and €1.5 billion in revenue. Under the new cuts, SMEs are exempt from both directives, climate transition plans have been removed and the liability for non-compliance shifts to national authorities. Moreover, organizations outside the scope are protected from additional requests beyond voluntary reporting. For firms covered by the CSDDD, due diligence will rely on available information, rather than requiring suppliers to provide new data. With negotiations still ongoing, the EU is expected to settle the CSRD and CSDDD updates by the end of 2025.

These regulatory delays and rollbacks in the EU follow mounting pressure from international stakeholders such as the US and Qatar – countries that released an open letter expressing ‘deep concern’ over such regulations, warning the EU of risks to energy security, trade relationships and future investments.

In the meantime, the EU has released the Commission work programme 2026, which outlines ambitious strategies to accelerate progress on clean materials, sustainable products and the circular economy, introducing key initiatives such as the European Product Act and the Circular Economy Act. The Commission work programme reaffirms that sustainability remains high on the EU policy agenda. However, the key challenge will be balancing these ambitions with rising trade tensions and mounting concerns about the EU’s global competitiveness.

For firms, the uncertainty surrounding the EU’s regulatory landscape for sustainability will elevate the relevance of voluntary reporting. Indeed, voluntary standards – such as the CDP and the Global Reporting Initiative (GRI) are still very significant for nearly half of respondents to the 2025 Verdantix ESG and sustainability global survey. Organizations will rely on voluntary reporting to demonstrate their sustainability performance to stakeholders and prepare their business for potential regulatory shifts.

For deeper insights into how regulatory changes are shaping corporate attitudes, explore the Verdantix Global Corporate Survey 2025: ESG & Sustainability Budgets, Priorities And Tech Preferences and stay tuned for our upcoming market insight on ESG and sustainability predictions for 2026. To learn more about how to navigate the intersections between sustainability, regulations and resilience, register to attend  the Verdantix Transform event in Amsterdam in March 2026.