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EU Sustainability Standards Slashed

EU Sustainability Standards Slashed

Tim Mohin
August 08, 2025

EU sustainability standards slashed by 57% for mandatory data points and 68% overall
Negotiators at the UN Global Plastics Treaty face threat of a U.S. pushback
COP30 preparations hit with soaring costs and U.S. boycott
New rules and lawsuits erupt on both sides of the ESG debate in the US
US SEC blocks a record number of climate and governance proxy votes

Late last week, the European Financial Reporting Advisory Group (EFRAG) released its newly simplified sustainability reporting standards - the European Sustainability Reporting Standards (ESRS) Set 2. These are the standards used to comply with the Corporate Sustainability Reporting Directive (CSRD).

I am reminded of the quote attributed to Mark Twain - “If I had more time, I would have written a shorter letter.” It is complicated to simplify things…and these simplified standards are a case in point.

The number of updates is staggering: There are 12 amended standards, each accompanied by amendments and markups to show what has changed with each standard. EFRAG also released a one-pager, an FAQ, a glossary, Non-Mandatory-Implementation-Guidance, and a Basis for Conclusions.

The Basis for Conclusions is a good place to cut through the noise. It provides a comprehensive summary of the changes and outlines the process used for simplification. The headlines are:

57% fewer mandatory data points
Removal of all voluntary data points
68% reduction in total data points
Page count for the standards is down 55%

The data points were not uniformly reduced across the 10 topical standards and two cross-cutting standards. For example, the biodiversity standard (E4) was reduced the most. The table below shows the reduction per standard - but you will need your decoder ring to sort out all the abbreviations.

The simplified standards have been well-received based on more than 800 survey responses and additional stakeholder engagements. Some, like Andreas Rasche at Copenhagen Business School, believe this technical approach to simplification is much better than the politicized ‘Omnibus’ process underway for CSRD.

One criticism of the simplified standards is that they are not fully interoperable with the standards from the International Sustainability Standard Board (ISSB) due to the removal of some data points that were shared between the two. There were also criticisms from Frank Bold, who found that some key data points were removed and that there was potential for abuse of the relief measures.

The public consultation period for the simplified standards (ESRS Set 2) will run until the 29th of September.

👉Want to learn more about these changes and the strategic implications? Join me and BCG colleagues for a webinar on the “Future of ESG Reporting Under ESRS Set 2.”

2. Global Plastics Treaty in Final Stages

This week, the final talks began on the UN’s Global Plastics Treaty in Geneva. The discussions dubbed the ‘Paris Agreement for Plastics’ aim to tackle plastic from production to the end of life.

Plastic production has increased 200-fold since the 1950s, causing substantial damage to the environment and human health. But after three years of discussions and five failed attempts to ratify a treaty, there remain deep divides on whether to include limits on production and certain chemical additives. Fossil fuel-producing nations, such as the US and Saudi Arabia, argue that the focus should be on increasing recycling rates, rather than limiting production.

Plastic pollution scientist Prof Richard Thompson, who coined the term microplastics, says we should be limiting production of all but essential products. Adding that “It is really clear to protect future generations, we need to take decisive action now on a treaty to address plastic pollution. So I really hope negotiators can look the next generation in the eye and say they acted decisively.”

The likelihood of an agreement that limits production became increasingly unlikely on the first day of the event. A letter sent by the US to a handful of countries asked them to block any treaty that includes any “limits on plastic production and plastic chemical additives.” The deadline for the talks is August 14th.

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3. COP30 Growing Pains

Brazilian President Lula

From one multilateral discussion to the next… COP30 - the global meeting on limiting climate change - is set to take place in Belem, Brazil, in just 3 months. This year’s hosts have come under fire as the cost of accommodation is pricing some smaller nations out of attending. Even wealthy European nations have talked about cutting the number of delegates in half.

The high costs of this year's venue may mean this COP will be defined more by who isn’t there than who is. The business community is also expected to show up in much smaller numbers this year. Plus, after the US fired its last climate negotiators last month and removed itself from the Paris Agreement, they are not expected to send a delegation at all.

The Brazilian government has come under scrutiny over a new law that would reverse many of Brazil’s deforestation protections. Brazilian President Lula claims he will propose changes to the policy before it goes into effect.

4. Sustainability Battles in the US Heat Up

In another attempt to limit solar energy, the US Environmental Protection Agency (EPA) is set to cancel $7 billion in domestic solar grants for low and middle-income households.

Simultaneously, a group of indigenous communities and non-profits has filed a first-of-its-kind class action lawsuit against the EPA and Administrator Lee Zeldin. The suit proposes reinstating a $3bn congressionally approved program aimed at helping hundreds of communities prepare for climate disasters.

On the state level, a new report from Pleiades revealed that 106 bills aimed at restricting the use of ESG and DEI criteria by financial institutions have been proposed this year, and 11 have become law in 10 Republican-led states. Frances Sawyer, founder of Pleiades Strategy, said, “This is trying to politicize and saber-rattle around good risk-management practices.”

Adding to the pressure on financial institutions, 21 Republican Attorneys General sent a letter to the CEOs of 25 leading asset management firms asking them to “abstain from embedding international political agendas, such as net zero climate mandates, natural capital frameworks, or the EU’s Corporate Sustainability Reporting Directive (CSRD), into default investment strategies and corporate engagement. These approaches often rely on predetermined political outcomes, not fiduciary judgment, and they risk overriding market signals in favor of ideological consensus.”

Some of these state-level policies are facing their own legal challenges. Glass Lewis & Co. and Institutional Shareholder Services filed a lawsuit against Texas Attorney General Ken Paxton last week over the state’s most recent anti-ESG law. The proxy advisory firms alleged that the law is unconstitutional and are seeking a preliminary injunction to stop it from going into effect.

5. Proxy Season Without ESG

The pushback on ESG is evident during this year's US proxy voting. The US Securities and Exchange Commission (SEC) issued a record 195 ‘no action’ rulings, blocking shareholders from the opportunity to vote on climate, diversity, and governance issues.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.