Climate Governance Initiative

Part II: Navigating Legal Duties & Sustainability in an Era of Divergence and Disruption

3 June 2025

Insights

How Boards can Navigate the EU's Proposed  Sustainability Reforms 

By Charlene Cranny, Senior Manager for the CGI Financial Sector Programme and Nathalie Dogniez, Chair of Eurosif

This is part two in a three-part series capturing insights from a board director workshop delivered by our Financial Sector team at Chapter Zero France's NED event, held alongside ChangeNOW in Paris. The session explored policy disruption and the increasingly polarised public discourse around ESG, climate, and sustainability.  

In this part, we distil the key proposed changes to EU Sustainability Rules under the ‘Omnibus’ as presented by Nathalie Dogniez, Chair of Eurosif - the European Sustainable Investment Forum promoting Sustainable Finance at the European level. We also offer strategic considerations for board directors who want to stay ahead of reforms.  


Much more than a simplification of reporting rules 

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On 26 February 2025, the European Commission published its first “Omnibus” sustainability simplification package—a sweeping set of proposed reforms that could reshape the trajectory of EU sustainability reporting and due diligence regulation. For boards, these proposals signal both a reprieve and a reckoning: regulatory timelines might be relaxed, but expectations on corporate sustainability governance remain high, and your company’s positioning could matter more than ever.

Proposals to take note of are:

1. Major Delays, Shrinking Scope 

CSRD and CSDDD delays: Reporting deadlines could be delayed by two years, and scope may shrink by over 80%. Only companies with more than 1,000 employees and either €50m turnover or €25m balance sheet would remain in scope if agreed.

CSRD is the Corporate Sustainability Reporting Directive and the CSDDD is the Corporate Sustainability Due Diligence Directive (sometimes called CS3D), a separate EU law that may require large companies to identify and address negative impacts on human rights and the environment.

SMEs spared: Listed SMEs and many non-listed companies might be excluded, with only around 7,000 companies expected to remain under CSRD scope—fewer than under pre-CSRD rules.

Board Action:

  • Reassess your company’s scope status under the proposed thresholds.
  • If out of scope, weigh the reputational and investor implications of voluntary reporting, especially if your clients or shareholders continue to expect disclosures.
  • If still in scope, consider using the potential delay to upgrade internal reporting systems, especially where data gaps have previously hindered assurance or audit-readiness. 

2. Simplified Standards—but Also Fewer Signals for Decision-Making

ESRS Set 1 adjustments (due October 2025): These may include fewer data points, a streamlined structure, and clarified terms. ESRS stands for European Sustainability Reporting Standards. Set 1 is the first group of these standards. It covers general reporting requirements and cross-cutting sustainability topics. 

Sector-specific standards scrapped: The EC would no longer mandate development of sector-specific standards, removing a key source of benchmarking and comparability.

VSME standards (voluntary): Not aligned with the main ESRS structure, no double materiality, limited audit requirements. VSME stands for Voluntary Sustainability Reporting Standards for Micro and Small Enterprises.

Board Action:

  • Boards should recognise that less regulatory disclosure doesn’t mean less investor scrutiny. You may need to develop internal dashboards or bespoke disclosures to maintain trust with capital providers.
  • Financial institutions and downstream value chain actors may still demand granular, sector-relevant data. Encourage dialogue with key business partners to understand their expectations. 

3. Due Diligence Significantly Narrowed

CSDDD changes: Due diligence would be limited to Tier 1 suppliers only and only required every five years. Downstream (especially financial) value chain due diligence would be excluded.

Stakeholder definition narrowed to those “directly impacted.”

Civil liability provisions removed at EU level—left to national implementation.

Board Action:

  • Redesign your due diligence processes with Tier 1 focus, but don’t abandon deeper chain oversight if critical risks (e.g. reputational, environmental, human rights) remain.
  • Assess your group-level and cross-border exposure—national rules may diverge significantly as civil liability and enforcement become decentralised. 

4. Climate Ambition Softened—but Not Forgotten

Transition plan requirements weakened: Companies would no longer be required to “put into effect” plans—only to report “implementing actions.”

Deletion of climate transition requirements under CSDDD means fewer regulatory tools to drive portfolio-level decarbonisation.

Taxonomy reporting reduced: Scope would mirror CSRD (i.e. also shrunk by 80%) and become subject to a 10% materiality threshold for revenues, CapEx, or OpEx.

Board Action:

  • Take a voluntary leadership stance: signal commitment to climate transition even in the absence of strict mandates.
  • Review your net zero strategy and disclosures—especially if you have previously set public targets or signed up to initiatives like the Science-Based Targets or GFANZ.
  • Ensure alignment with the SFDR (Sustainable Finance Disclosure Regulation) and its forthcoming review (postponed to Q4 2025), especially for financial institutions. 

5. Assurance and Transparency Landscape is Changing

No more reasonable assurance of data: Only limited assurance would be required.

Green Asset Ratio: Denominator would exclude companies not covered by CSRD.

Board Action:

  • For those staying in scope: now is the time to future-proof your sustainability assurance practices and clarify internal lines of accountability.
  • For those voluntarily reporting: ensure audit committee oversight and governance processes match investor expectations. 

6. What’s Next?

The Omnibus package must still be negotiated by the European Parliament and EU member states. A second legislative proposal on CSRD/CSDDD content is also under discussion. Meanwhile, EFRAG is expected to present ESRS simplification proposals by October 2025.

Board Action:

  • Request regular updates from legal, sustainability, and policy teams on legislative timelines and national implementation paths.
  • Engage with industry associations and standard-setters to shape guidance and avoid being caught off-guard. 

This Omnibus package is not a signal that sustainability is less important. It reflects political and implementation fatigue, but expectations from investors, customers, and civil society remain high. Board directors must now determine whether their organisations’ do the minimum—or use this time window to define a credible, durable business strategy that goes beyond compliance to fully consider material sustainability risks up and down the value chain.


Chapter Zero France and ChangeNOW partnered to co-host a series of events tailored specifically for Non-Executive Board Directors at the KPMG offices in Paris, alongside the ChangeNOW 2025 conference at the Grand Palais.

In part three, we will cover what the directors who attended the workshop say is working, and not working, when it comes to climate governance.


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