ESG Focus: UK/EU/International ESG Regulation Monthly Round-Up – March 2025

1.1 Omnibus Simplification Package – Timing Updates

Following the European’s Commission’s proposals on 26 February 2025 (read more here), the European Council and Parliament have both progressed the proposals through their legislative processes.

On 20 March 2025, the European Council published its Conclusions from the latest European Council Meeting, agreeing to give priority to the proposed omnibus simplification packages on sustainability reporting and due diligence. In terms of timing, the Council calls on the co-legislators to finalise the omnibus simplification packages as soon as possible in 2025 and calls for the proposal on the stop-the-clock mechanism on sustainability reporting and due diligence to be adopted and at the latest by June 2025.

On 26 March 2025, the Council announced that Member State representatives have approved the stop-the-clock directive, which postpones the entry of application of CSRD requirements by two years for large companies which have not yet started reporting and listed SMEs, and the transposition deadline and the first phase of CS3D application for the largest companies by one year (the stop-the-clock proposal).

Separately, on 1 April 2025, the European Parliament  voted to fast track its work on the stop-the-clock proposal and to use the urgent procedure.  On 3 April 2025, the Parliament voted for the draft stop-the-clock proposal (531 votes in favour, 69 opposed and 17 abstaining).  The stop-the-clock proposal needs formal agreement on the final legal text across the legislative bodies before publication in the Official Journal and entry into force. Once in force, this means that reporting will be postponed for two years for waves 2 and 3 under CSRD and will postpone application of the CS3D for one year, both until 2028. Read here for more insights into the process.

1.2 Omnibus Simplification Package – European Commission instructs EFRAG to simplify ESRS

On 28 March 2025, EU financial services Commissioner Maria Luís Albuquerque sent a letter to EFRAG instructing it to begin the process for simplifying the European Sustainability Reporting Standards (ESRS). As the ESRS have been implemented through the Commission’s delegated acts, these do not require the express approval of the Council or Parliament (although the co-legislators do have power to revoke the delegation or to express objections).

The letter requests that EFRAG begin the process of simplifying the ESRS “as soon as possible” and asking EFRAG to inform the Commission by 15 April 2025 about its internal timeline and work plan to deliver its advice.

In its Explanatory Memorandum to the Omnibus package, the Commission stated its plans to adopt amendments to the ESRS within six months after entry into force of the proposed Directives. The Commission also stated that these amendments should substantially reduce the number of mandatory ESRS datapoints by “(i) removing those deemed least important for general purpose sustainability reporting, (ii) prioritising quantitative datapoints over narrative text and (iii) further distinguishing between mandatory and voluntary datapoints, without undermining interoperability with global reporting standards and without prejudice to the materiality assessment of each undertaking”. The Commission has also suggested that the amendments to the ESRS should provide clarity, including clearer instructions on how to apply the CSRD’s double materiality principle.

In the letter on 28 March 2025, the Commission asked EFRAG to issue their technical advice by 31 October 2025 in order to “allow the Commission to adopt the corresponding delegated act in time for companies to apply the revised standards for reporting covering financial year 2027”. In response, the Chair of the EFRAG Sustainability Reporting Board confirmed that it is “fully aligned” with the Commission’s simplification objective and that “[b]y building on the experience of first wave companies, [EFRAG] will simplify the standards to support companies in delivering meaningful and decision-useful sustainability information while maintaining the ambition of the CSRD."

1.3 European Commission published a Commission Notice on frequently asked questions (FAQs) for the EU Taxonomy

On 5 March 2025, the European Commission issued a Commission Notice containing the frequently asked questions (FAQs) on the application of the EU Taxonomy. The notice is the finalised version of the draft notice published in November 2024.

The FAQs contains clarifications responding to FAQs on the technical screening criteria set out in the Taxonomy Environmental Delegated Act, the Taxonomy Climate Delegated Act and the Taxonomy Disclosures Delegated Act. This notice complements previous notices which have been published on the EU Taxonomy and its Delegated Acts.

1.4 ESMA published its overview of planned consultation papers for 2025

On 13 March 2025, the European Securities and Markets Authority (ESMA) published its Overview of Planned Consultation Papers 2025. The overview sets out a timeline of upcoming public consultations that ESMA plans to release.

The following dates are of note for sustainable finance:

• Q2 2025: planned publication of a consultation paper on Regulatory Technical Standards (RTS) on the Green Bond Regulation; and
• Q2 2025: planned publication of a consultation paper on the ESG rating regulation: RTS on registration, separation of business and methodological disclosures for ESG Rating Providers.

1.5 EU Platform on Sustainable Finance Updates

The EU Platform on Sustainable Finance (the Platform) has been completing its mandate and finalising the outstanding elements of its work as its mandate expired at the end of March 2025.  It has published the following during March 2025:

1. Report – Advancing Sustainable Finance

   On 1 April 2025, the Platform published a report reviewing technical criteria for new activities under the EU Taxonomy and a first review of the Climate Delegated Act with a focus on transitional activities.  This review is in parallel with the development of technical screening criteria of a list of new economic activities.

   The report contains recommendations for activities/areas reflecting this mandate. 

2. Response – EU Taxonomy Delegated Acts 

   On 26 March 2025, the Platform published its response to the European Commission’s call for evidence on the draft delegated regulation amending the Taxonomy Delegated Acts. The Platform recommends aligning the scope of Taxonomy reporting with the CSRD, while preserving the CSRD’s original scope.

   The Platform recommends that for non-SME companies below the 1,000 employee threshold, reporting should be focused on the most essential standards, including Taxonomy alignment.

3. Report – Streamlining sustainable finance for SMEs

   On 21 March 2025, the Platform published an independent report on streamlining sustainable finance for Small and Medium-sized Enterprises (SMEs).  In the report, the Platform has identified a new voluntary “simple and easy-to-use framework” – the SME sustainable finance standard.  The idea is that banks and other financiers will use the standard to classify loans or other finance extended to SMEs as sustainable (green or transition) instead of the EU Taxonomy, allowing disclosure of key performance indicators and climate-related efforts. 

4. Handbook – Climate benchmarks and benchmarks’ ESG disclosures

   On 21 March 2025, the Platform published an updated version of its Handbook of Climate Transition and Paris-Aligned Benchmarks (v2). The updated handbook covers ESG disclosures, alongside other areas including anti-greenwashing measures, terminology, and reduction trajectory.

5. Report – Monitoring capital flows to sustainable investments

   On 11 March 2025, the Platform published a report taking stock of sustainable investments, and noting that sustainable investments are gaining momentum and transition-related capital flows are emerging. Debt financing dominates the sustainable investment flows, although progress towards a sustainable transition varies across sectors.

1.6 US Securities and Exchange Commission (SEC) confirmed the end of its legal defence of the SEC Climate Disclosure Rules

On 27 March 2025, the US Securities and Exchange Commission (SEC) announced that it has voted to end its defence of its Climate Disclosure Rules in court. The SEC has withdrawn its defence of the rules and that the Commission’s counsel are no longer authorised to defend the rules. Acting Chairman Mark T. Uyeda referred to the disclosure requirements as “costly and unnecessarily intrusive”.

The Climate Disclosure Rules were initially adopted on 6 March 2025 and scheduled to be effective from 2026, but the rules were challenged by corporations in the US Court of Appeals for the Eight Circuit.

1.7 Japan issues Corporate Sustainability Disclosure Standards

In March 2025, the Sustainability Standards Board of Japan (SSBJ) published the final versions of its three sustainability disclosure standards. The standards are based on the International Financial Reporting standards (IFRS) S1 and S2 standards, published by the International Sustainability Standards Board in 2023.

The SSJB Standards will eventually be applied by entities listed on the Prime Market of the Tokyo Stock Exchange.

1.8 Science Based Targets initiatives (SBTi) released draft proposals for its Corporate Net-Zero Standard

On 18 March 2025, the Science Based Targets initiatives (SBTi) released draft proposals for its Corporate Net-Zero Standard – Version 2. The Standard provides guidance and tools for companies to set science-based net-zero targets.

Following the release of the draft corporate net zero standard, the SBTi has opened an initial public consultation process for external stakeholders to provide feedback to its Corporate Net-Zero Standard Version 2.0 initial draft. The consultation is open until 1 June 2025.