The European Union (EU) is increasing efforts to simplify environmental policies after a year of delays to sustainability laws to help keep the EU bloc competitive for businesses – including shipping companies.

This “simplification” agenda saw the Omnibus Simplification Package introduced at the start of 2025, slowing down progress towards the European Green Deal, a set of policy initiatives that aim to make the EU climate neutral by 2050.

Consequently, regulations including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), which were both intended to fully take effect in 2025 and 2026 respectively, are seeing their implementation  delayed.

CSRD was adopted in 2023 to create requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions in accordance with the European Sustainability Reporting Standards (ESRS). It has been postponed till 2028, with the European Commission also scaling back the scope of CSRD so that only companies with more than 1,000 employees and EUR50 million in turnover will need to report on carbon emissions. CSDDD, which created additional reporting requirements, as well as legal liability, for companies in relation to their value chain, will now take effect from July 2028, a year later than planned.

Further, the European Council formally approved a ‘Stop the Clock’ Directive in April 2025, providing EU members and companies with additional time to demonstrate compliance with the laws. This has prompted some to question whether the initiatives might be overturned or watered down.

Cutting red tape for SMEs

Speaking to ICS Leadership Insights, Caroline May, EMEA Head of Environment, Health and Safety, Sustainability Partner, and Co-Head ESG EMEA at Norton Rose Fulbright LLP, explained that the Omnibus Simplification Package is not only about providing additional time for companies to achieve compliance.

“Even now CSRD has not been implemented in all Member States,” she said. The purpose of the Omnibus package announcement was not just to push back the reporting deadlines but also to “simplify some of the concepts and reduce the number of companies that need to report”.

She explained that it’s estimated that up to 90 per cent of the companies that were required to report originally may fall away, leaving only the “very largest” companies needing to comply. The delayed reporting timetable gives more time to clarify what is required of companies and to prepare, May noted.

“The overall aim is to reduce the impact on SMEs while focusing on those with the most emissions, with the idea that it will have a trickle-down effect, with the requirements being less so for those with less environmental impact from their operations,” added May.

However, the full ramifications of postponing the deadline remain to be seen. “The substantive changes proposed to the CSRD are still in draft form and subject to negotiations and so it is difficult to predict the full implications of the Omnibus,” explained May.

While deadline delays and proposed amends to legislation have caused concern among green groups, the EC has claimed it is focusing on simplification rather than deregulation.

Green Deal not dead

Despite the uncertainty, there are indications that the world will still continue to advance more stringent sustainability reporting requirements. In one recent example, the International Court of Justice found that states have an obligation to cut greenhouse gas emissions under both climate treaties and international law, with potential legal consequences for failing to act – pressuring countries to take meaningful action.

Speaking to ICS Leadership Insights, Peter Suasso de Lima de Prado, Founder of Bluespar, which helps businesses meet sustainability standards, agrees that sustainability reporting legislation will remain high on the agenda regardless of delays and potential setbacks.

This, he explained, is for two reasons. Firstly, it is because the directive serves as an extra dimension of financial reporting, which in turn helps investors and insurers better understand and manage risk and opportunity. “You need more information than just profit and loss and a balance sheet – you need to understand what makes your business tick, the threats and opportunities, and how the business is impacting the world outside as well as how the world outside is affecting the business.”

Secondly, these directives are occurring globally, with financial reporting regulations in many countries increasingly bringing in ESG disclosures. China, for example, is currently developing similar sustainability reporting regulations to the EU. This makes it harder to escape, as businesses that trade with companies based within those vicinities will be bound by the same rules. “I believe in 10 years’ time we will be looking at this as we do now to financial reporting,” added Suasso de Lima de Prado.

More uncertainty

Much of the confusion centres around requirements such as the double materiality assessment (DMA), which Suasso de Lima Prado explained incorporates two components: financial materiality and impact materiality – the latter of which is a new concept to many companies.

“Impact materiality is about gaining an understanding [of] where your business positively or negatively affects the environment and its value chain. Whatever outcome in terms of streamlining sustainability reporting directives in the EU, this will be a useful exercise that can positively impact your business.”

He added: “There are challenges, especially on the data side, simply because many of us do not have the systems for that yet – they may have operational information for example but normally not on sustainability. It is always better to take a slow approach and get it right than to try and find quick fixes.”

However, May said that more changes could be coming to the directive, adding to future uncertainty. But she added: “Companies that have started to prepare for the new legislation by collating data and reviewing their supply chains should continue to do so. Companies also stand to benefit from knowing what their environmental impacts are and how they can mitigate them leading to greater efficiencies and often cost savings.”

May stressed the need for “greater certainty” on the regulatory framework – something which would allow operators and investors to plan for the changes still looking to be implemented in the not too distant future.