There is no doubt that sentiment toward ESG initiatives has shifted – in the U.S. and elsewhere. For starters, the SEC recently voted to withdraw its court defense of its own climate change disclosure guidelines. The ESG pullback has also reached Europe, as, in February 2025, the European Commission proposed an omnibus package of measures to simplify and streamline the EU’s ESG reporting requirements, as discussed here. More recently, and as discussed below, the European Parliament earlier this month voted to delay key EU ESG reporting requirements for two years, to allow more time for EU politicians to negotiate further changes to the union’s sustainability reporting rules. An April 3, 2025, Reuters article discussing the European Parliament’s vote can be found here.

Background

The European Parliament’s vote relates to two landmark sustainability reporting laws, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). As discussed here, the EU adopted the CSRD in a series of moves beginning in 2022, with the first set of reporting standards released in July 2023. The CSRD eventually was to apply to most EU companies as well as non-EU companies with significant operations in the EU. The CSDDD was adopted in March 2024, and is intended to ensure that companies operating in the EU identify, prevent, and address adverse human rights and environmental impacts in their operations and supply chains.

More recently, concerns in the European business community about the ability of their companies to compete in a changing global business environment has led to a push for the EU’s sustainability reporting requirements to be eased. For example, and as I noted in a recent post (here), at the February 2025 AI Action Summit, held in Paris, a number of European leaders expressed the view that the EU’s active regulatory approach could be making European countries less competitive, and suggested that the EU should dial back its regulatory efforts.  These concerns have mounted as the U.S. has launched what amounts to a global trade war. As discussed here, these kinds of concerns motivated the European Commission to propose earlier this year an “omnibus package” of measures to simplify the EU sustainability reporting requirements.

The European Parliament Vote

On April 3, 2025, by an overwhelming 531 to 29 margin, the European Parliament voted what an April 9, 2025 memo from the Steptoe law firm called a “significant step back from the EU’s ambitious sustainability regime.” In general terms, the approved proposal delays the date by which many companies must comply with the reporting requirement, moving the reporting deadline for all but the largest companies until 2029; increases the employee threshold for CSRD reporting requirements (removing as many as 80% of companies from the law’s scope), and “substantially reduces the number of data points reporting firms would have to collect. The proposal also lengthens the time intervals at which reporting companies must assess their supply chains and direct partners.

As detailed in an April 8, 2025, memo from the Skadden law firm (here), the delay is “intended to provide companies with more time to prepare for the new requirements while the various bodies of the European Union agree on the degree to which the reporting and due diligence obligations under the CSRD and CSDDD will be simplified.” In approving the delay, the European Parliament “emphasized the importance of a realistic timeline to allow companies to adapt and comply effectively with new reporting standards.”

The Steptoe law firm’s memo emphasizes that the EU’s efforts to simplify their reporting structures “comes amid rising global tensions around the role of ESG in business and government,” adding that the EU’s reconsideration of stringent ESG guidelines coincides with the brewing trade war between the U.S. and its trading partners.” The EU’s push to simplify its ESG regime is “a bid to maintain competitiveness against historic economic headwinds.”

Discussion

There is no doubt that the outlook on ESG issues generally has changed. With the advent of the Trump administration, there has been a categorical shift in Washington on ESG issues; clearly, as global business considerations come to the fore, there has also been a shift in Brussels as well.

While many businesses may welcome these shifts, many businesses may also wonder where this leaves them when it come to ESG disclosure obligations. For example, the EU disclosure requirements may have been delayed and may even have been simplified, but there are still a number of companies (mostly larger companies) that still will have to be prepared to comply eventually with the EU requirements.

Not only that, but as the Steptoe memo points out, while the EU and the US may have shifted on ESG issues generally, that arguably is not the case in Asia. China, for example, in December 2024 took steps toward finalizing its Basic Guidelines for Corporate Sustainability Disclosure, with mandatory disclosure requirements for large listed companies commencing in 2026 (as discussed here).  In March 2025, Japan’s Sustainability Standards Board published draft disclosure standards with intended compliance scheduled for 2027. Since 2022, Singapore’s stock exchange has required all listed companies in most sectors to provide climate-related disclosures. In Australia, as of January 1, 2025, reporting companies have been required to begin reporting on climate risk.

In other words, multinational companies, at least, may face something of a patchwork of ESG-related disclosure requirements, with different standards applicable in different jurisdictions on different timetables. The differing requirements arguably create a certain level of regulatory risk. But my greater concern has to do with investor expectations, and what shareholders claim companies should have but did not disclose about climate-related risks.

There are entire industrial sectors – energy companies, insurance companies, transportation companies, for example – where climate change-related issues remain critically important. My real concern about the shifting emphasis on climate change disclosure is that with reduced disclosure requirements companies may lose their focus on the longer-term risks associated with climate change issues. I have long worried that what could later be characterized as a failure now to recognize and address the long-term risks associated with global climate change may be setting the stage for claims that may emerge down the road.

In other words, even if changing policy perspectives on ESG disclosure may reduce the burdens associated with climate change-related disclosures, that will not relieve current corporate management from potential later scrutiny about steps taken (or omitted) now with respect to long-term climate change-related risk.