The European Commission has unveiled a major overhaul of the EU’s sustainability rules, delivering on its pledge to reduce bureaucratic red tape. The new package is set to save businesses €6.3 billion annually in administrative costs, while maintaining the EU’s ambitious environmental goals.
The reforms, presented on 26 February 2025, aim to boost competitiveness within the EU market while preserving the bloc’s commitment to climate and sustainability objectives. This marks a significant step in the Commission’s simplification agenda, with a goal of reducing administrative burdens by at least 25% across the board, and by 35% for small and medium-sized enterprises (SMEs) by the end of its mandate.
Key Areas of Reform
The new package targets key areas of environmental regulation, including sustainability reporting, due diligence obligations, the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM).
“Simplification promised, simplification delivered!” said European Commission President Ursula von der Leyen, adding: “We are presenting our first proposal for far-reaching simplification. EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence and taxonomy. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals.”
Significant Changes to Sustainability Reporting
One of the most notable changes affects the Corporate Sustainability Reporting Directive (CSRD). Under the new proposals, approximately 80% of companies will be exempt from its reporting obligations. Only larger companies with over 1,000 employees or a turnover above €50 million – those with the most significant environmental impacts – will remain subject to the requirements.
For those companies still within scope, the reporting obligations will be postponed for two years, until 2028, while EU Taxonomy reporting will be reduced by 70%, impacting only the largest firms.
Maria Luís Albuquerque, Commissioner for Financial Services, highlighted that the simplification would not undermine environmental ambitions: “We are defining a path towards more growth-friendly, more usable and proportionate EU sustainable finance rules. It’s about striking the right balance between reducing excessive administrative burden and focusing on our longer-term goals.”
Streamlined Due Diligence and Supply Chain Monitoring
The overhaul also simplifies requirements under the Corporate Sustainability Due Diligence Directive (CSDDD). Companies will now focus due diligence on their direct business partners, and assessments will shift from annual to every five years, with ad hoc evaluations as needed.
The proposal also removes EU civil liability conditions, though compensation rights for victims will still be maintained under individual Member States’ laws. The implementation deadlines for large companies have been extended by one year, now set for July 2028.
Michael McGrath, Commissioner for the Economy, emphasised the balance between simplification and safeguarding human rights: “We are simplifying compliance for large companies while upholding the core objective to prevent companies from indirectly contributing to exploitative business practices harming human rights, the climate, or the environment through their value chains.”
CBAM Reform for Small Importers
The most dramatic simplification comes in the form of changes to the Carbon Border Adjustment Mechanism (CBAM). A new cumulative annual threshold of 50 tonnes per importer will exempt approximately 182,000 small importers from CBAM obligations, saving over 90% of the total importers from compliance while still covering more than 99% of emissions in scope. This is expected to deliver savings of €1.12 billion for businesses and €87.5 million in reduced processing costs for Member States.
Boosting Investment Capacity
Beyond regulatory simplification, the package optimises several EU investment programmes, such as InvestEU and EFSI. These changes are anticipated to mobilise an additional €50 billion in public and private investments and generate €350 million in cost savings.
Industry Reaction and Next Steps
The business community has generally welcomed the reforms, expressing relief at the reduction in overlapping requirements and compliance costs. However, environmental groups have raised concerns about the potential weakening of standards.
The proposed changes will now be sent to the European Parliament and Council for approval. The Commission is pushing for a fast-track adoption process, particularly for the measures postponing reporting requirements and extending due diligence deadlines.
Stéphane Séjourné, Executive Vice President for Prosperity and Industrial Strategy, stated: “We can show that Europe is not only an incredible market to invest, produce, sell and consume but also a simple market. This proposal delivers real simplifications – less administrative burden, easier access to funding, and clearer, more predictable rules. We keep our objectives but change the way to achieve them better.”
Further simplification packages targeting small mid-caps, farmers, and digital reporting are also in development, as the Commission continues its efforts to streamline regulations while ensuring the EU’s green transition remains on track.