Why CSRD relief won’t save companies from ESG pressure

Brussels delayed sustainability reporting requirements, but business leaders shouldn't mistake regulatory relief for market reality.

European companies celebrated a victory in July when Brussels froze new Corporate Sustainability Reporting Directive (CSRD) requirements until 2027. After sustained lobbying from the private sector, industry managed to obtain what it wanted: a three-year reprieve from complex environmental and social reporting obligations.

The regulatory victory, however, may not translate into the market relief many companies expect. While Brussels has provided breathing room on compliance timelines, the underlying drivers of sustainability reporting demand — institutional investor requirements, supply chain mandates, and banking sector risk assessments — operate on different schedules and priorities than EU regulatory cycles.

The lobbying success was undeniably impressive.

The combined effect of various CSRD modifications reduced coverage from roughly 50,000 companies to about 10,000 — an 80% decrease in scope⁽¹⁾. With Commission President Ursula von der Leyen making "simplification" a priority⁽²⁾ and global competitive pressures intensifying, Brussels proved receptive to arguments about regulatory burden.

Yet this regulatory focus may have obscured a crucial reality: sustainability reporting demand increasingly comes from market forces, not government mandates. This raises critical strategic questions that business leaders should be asking: Will major institutional investors still expect detailed ESG data for risk assessments? Do large customers plan to maintain sustainability requirements for suppliers? Are banking relationships shifting toward climate risk evaluation regardless of regulatory mandates?

Given that Europe commands about 40% of the global ESG advisory market (~US $8 bn in 2024) ⁽³⁾, and investors (83%) base core valuations on credible sustainability data (4), it's unlikely market pressure will ease simply because Brussels has delayed compliance. Deloitte research shows that clear, trustworthy reporting remains a key determinant of investor trust and access to capital, suggesting market pressures operate independently of regulatory timelines ⁽⁵⁾.

The evidence extends beyond consultancy spending.

Deloitte/Fletcher finds 83% of investors now require sustainability data in fundamental analysis — and they increasingly demand audited disclosures to ensure credibility⁽⁶⁾. The EU's own sustainable finance regulations create investor requirements that operate independently of CSRD timelines. Large corporations across automotive, technology, and consumer goods sectors often mandate sustainability reporting from suppliers as competitive differentiation.

The strategic question isn't whether these pressures exist — it's whether they're strong enough to outweigh regulatory relief in specific business contexts.

This creates strategic considerations that require honest assessment.

Some companies have already answered this question. Several major European firms opposed the CSRD changes in January 2025, arguing that "investment and competitiveness are founded on policy certainty and legal predictability"⁽⁷⁾. These companies concluded that regulatory stability might be more valuable than short-term compliance relief.

But other companies may reasonably reach different conclusions based on their specific stakeholder relationships, competitive positioning, and resource constraints. Indeed, 82% of M&A dealmakers view ESG as a core decision driver and 71% report increased ESG due diligence⁽⁸⁾. Simultaneously, green bond issuance dropped 32% amid policy uncertainty in Q2 2025 — underscoring that capital markets prioritize regulatory clarity ⁽⁹⁾.

The central question for business leaders is how to use this three-year window strategically.

Should companies maintain sustainability reporting systems to meet market demands while regulatory requirements are paused? Scale back and risk potential competitive disadvantage? Or build more efficient systems while competitors potentially step back?

These decisions depend on honest assessment of specific market positions. Companies whose investors, customers, and financial partners maintain sustainability expectations regardless of regulatory timelines face different calculations than those with more flexible stakeholder relationships.

Building robust sustainability data collection and reporting systems requires significant organizational change. Companies that use the delay strategically — improving efficiency while maintaining capability — may find advantages when requirements return through either regulatory or market channels. Those that simply scale back risk being unprepared for either possibility.

Companies should also recognize that the CSRD delay affects competitors equally. Those who use the time to build superior sustainability performance and reporting capabilities may find strategic advantages when market or regulatory pressures intensify.

Asset managers like BlackRock have publicly stated that ESG scores should be "as important as credit ratings"⁽¹⁰⁾, meaning that voluntary retreat from disclosure risks damaging external ratings and investor interest. Meanwhile, rising ESG skepticism in Europe — partly due to inconsistent voluntary metrics — risks eroding the credibility of any sustainability backtracking⁽¹¹⁾.

The Commission acknowledges that comprehensive standards revision is underway for 2027⁽¹²⁾, meaning current relief is temporary.

Even with regulatory delays, companies still must provide summary information on material sustainability issues⁽¹³⁾. This suggests Brussels recognizes that some sustainability disclosure remains necessary even during simplified periods.

Rather than viewing this as regulatory victory, business leaders should treat it as strategic opportunity. The three-year window allows for thoughtful system development, stakeholder engagement, and competitive positioning around sustainability performance.

Companies that mistake regulatory relief for market reprieve may discover they've lobbied themselves into strategic disadvantage. Those that recognize the distinction between regulatory timelines and market demands will likely emerge stronger.

The CSRD delay offers time, not absolution. How companies use that time will determine whether they benefit from the lobbying victory they worked so hard to achieve.

References

1. Earth.org. (2025, May 14). Explainer: What is the EU Omnibus Simplification Package - CSRD scope reduction data. Retrieved from https://earth.org/explainer-is-the-eu-backtracking-on-its-climate-pledges
2. IRIS. (2025, June 3). European climate commitments: A change in direction - von der Leyen simplification priorities. Retrieved from https://www.iris-france.org/en/european-climate-commitments-a-change-in-direction/
3. Credence Research Inc. & Polaris Market Research. (2024). Europe ESG advisory market analysis - 40% global market share data. Retrieved from market research reports.
4. Deloitte & Fletcher. (2024). Investor sustainability data integration study - 83% fundamental analysis integration. Deloitte Italia. Retrieved from deloitte.wsj.com
5. Deloitte. (2024). Sustainability reporting as determinant of investor trust and capital access. deloitte.wsj.com
6. Deloitte & Fletcher. (2024). Investor audit requirements for sustainability disclosures study. ET.Group powered by ETicaNews. Retrieved from deloitte.wsj.com
7. Sustainability in Business Blog. (2025, February 28). What should companies do on CSRD while they wait for the EU to make up its mind - corporate opposition to changes. Retrieved from https://www.sustainabilityinbusiness.blog/2025/02/what-should-companies-do-on-csrd-while-they-wait-for-the-eu-to-make-up-its-mind/
8. KPMG. (2024). M&A ESG due diligence priorities - 82% dealmaker ESG factor study. Retrieved from LinkedIn and deloitte.wsj.com
9. Reuters. (2025, Q2). Green bond issuance data - 32% drop amid EU/US policy uncertainty. Reuters Financial Markets.
10. BlackRock. (2024). ESG scores importance relative to credit ratings - Public statements. Wikipedia ESG investing references.
11. Taylor Wessing. (2024). ESG skepticism and greenwashing concerns in Europe - Inconsistent disclosure standards report. taylorwessing.com
12. European Commission. (2025). European Sustainability Reporting Standards and Omnibus reforms. ec.europa.eu
13. European Commission. (2025, July). Delegated act on ESRS quick-fix amendments. finance.ec.europa.eu