By: Stefan Premer, Director of Consulting at Sphera

In recent years, climate action and sustainability surged to the top of the policy agenda across Europe. The EU led the charge with the Green Deal, the launch of the Corporate Sustainability Reporting Directive (CSRD), and landmark rules like the EU Taxonomy – all aimed at redirecting the economy toward net zero and more sustainable, transparent business practices. In today’s more complex economic and political climate, some suggest that sustainability has slipped down the list of priorities. Rising costs and global competition have triggered a broader debate about how the green transition should happen.

This shift has been compounded by recent EU decisions aimed at softening or simplifying green regulations. Recent amends to the European Sustainability Reporting Standards (ESRS) look to reduce reporting burdens and introduce scaled-back requirements for smaller businesses. While these moves don’t signal a pull back from climate ambition, they reflect a growing need to make regulation more proportionate and easier to implement.

In many cases, instead of laying the foundation for more effective impact, the proposed changes added uncertainty just as companies were preparing to act. This could derail businesses’ sustainability ambitions, especially as some important guidance that may have applied to a smaller number of businesses has been cut in the simplified ESRS draft, alongside entire subtopics, including waste discharge into the ocean.

Yet for some firms, the extra time created space to rethink their approach, paving the way for understanding sustainability not only as a compliance exercise, but embracing it to drive lasting value. That pause has helped shift the focus from short-term compliance to more structured, long-term preparation, laying the groundwork for stronger, more reliable reporting, and embedding sustainability in business operations.

A window of opportunity for more meaningful ESG reporting

In Sphera’s recent survey of nearly 400 EU business leaders, over half of respondents stated that they viewed the delays to reporting requirements as a chance to realign sustainability and supply chain goals. Rather than seeing the delay as a step back, many companies are using the time to strengthen data quality and better integrate environmental metrics into core operations.

This focus on long-term improvement is echoed by the 60% of surveyed leaders who said their top priority during the delay is to improve the quality of their sustainability data. Rather than treating reporting as a box-ticking exercise, this shift marks a move away from reactive compliance toward proactive sustainability management, setting the stage for more meaningful, integrated sustainability performance in the years ahead.

Deepening supply chain visibility

The delay in reporting requirements is also prompting companies to look beyond their own operations and deepen their understanding of supply chain sustainability. According to Sphera’s survey, 28% of businesses are using the extra time to invest in greater visibility beyond their tier 1 suppliers – a critical step given the rising expectations for value chain transparency under regulations like CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD). These companies recognise that meaningful sustainability reporting and risk management require insight into upstream activities, where many environmental and human rights impacts often occur.

More widely, 53% of respondents said they’ve already stepped-up efforts to manage supply chain risk through improved data. By strengthening the quality and reach of supply chain information, companies are not only preparing for more robust reporting but building resilience in the face of disruptions, from climate events to geopolitical shocks. This trend highlights that sustainability data has become crucial to operational and strategic risk management.

Delays have created space and now companies need certainty

Despite this progress, we’re hearing from many companies that the absence of concrete guidance from Brussels is becoming a barrier to progress. While the extension has provided breathing room, businesses are increasingly frustrated by the lack of clarity around what’s next or open discussion about the current thresholds for companies to comply. EFRAG, the advisory body to the EU Commission which has developed the ESRS standards that set a framework for CSRD reporting, reduced the number of required disclosures by two-thirds in its July update.

Descoping 80%-94% of companies from the CSRD creates long-term risks for the European economy. The European Central Bank criticised this in a mid-August statement, noting the importance that ESRS amendments ‘strike the right balance between retaining the benefits of sustainability reporting for the European economy and the financial system while ensuring that the requirements are proportionate’. The 500-employee threshold, in turn, would bring 6,800 firms back into scope, with substantial cost savings resulting from freeing mid-sized firms from limited assurance.

Nearly half of firms surveyed by Sphera said they’re still unclear on how to move forward, which topics they needed to report on, and whether they would need to report at all. Without stronger, more consistent guidance, there’s a real risk that momentum will stall just as companies should be accelerating efforts – a tension that threatens Europe’s broader sustainability goals, and the bloc’s long-term competitiveness through sustainable business models.

Looking ahead, it’s clear that sustainability reporting is increasingly shaping how businesses operate from the inside out, as well as being a tool for meeting external expectations. Regulatory requirements such as CSRD are increasingly requested and used by investors and customers to make informed decisions. Consumers and investors want to see businesses build long-term value and resiliency regardless of regulations. This means companies embracing proactive, thorough sustainability reporting gain a competitive advantage.

These regulatory delays have offered companies space to elevate sustainability data as a strategic asset. This reflects a wider movement where companies are investing in building solid climate accounting structures, climate transition plans, amping up their supply chain sustainability efforts and sustainability strategy development and implementation. As reporting becomes embedded in core business functions, the organisations that succeed will be those that use this moment to lay the foundations for more resilient, strategically aligned operations.

 

Sphera is a software company specialising in sustainability and operational risk.