Don’t give up on sustainability reporting, businesses urged

The CSRD – the European directive requiring companies to include societal and environmental data in their accounting – has had a difficult birth, it is fair to state. Originally conceived in 2014 as “non-financial reporting”, it first faced criticism for being too vague.

A more robust set of requirements was drawn up in 2021 and became the CSRD (the Corporate Sustainability Reporting Directive). The first large, systemically important companies submitted their CSRD-compliant reports in 2025, for the financial year 2024. They were supposed to be joined by many more in 2026: all large EU companies with over 250 employees or €40 million in turnover.

However, since the 2024 European elections, EU politicians have been busy watering down the regulation in the name of boosting European competitiveness in a modifying world that seems to be relocating away from green regulation. This is counterintuitive, according to experts who spoke to the Luxembourg Times. Businesses actually stand to gain from the CSRD – if they engage in good faith.

Sustainability ‘builds business sense’ state advocates as EU rules stall

The timeline

In December 2025, a simplification package (Omnibus 1) first discussed in February was agreed by the European Council and approved by the bloc’s parliament just before Christmas. It codifies simpler rules for SMEs and, crucially, raises the threshold from the previous 250 employees up to 1,000, with €450 million minimum turnover.

The simplified reporting rules for tiny companies is called the Voluntary reporting for Small and Medium-sized Enterprises (VSME) standard. In theory, this will exempt swathes of the economy from full CSRD requirements.

Large companies that remain in scope can request their tinyer suppliers and partners to provide sustainability data only up to the VSME threshold. They will be legally prevented from inquireing for more detailed reporting.

The European Parliament voted for the omnibus on 16 December, by 428 votes to 218 (17 abstentions), and after council approval, it is expected to be published in March, after which member states will have a year to transpose it into national law. Luxembourg’s six MEPs voted 4-2 in favour.

I would state that probably with CSRD, it was too much too soon for some companies

Anne-Marie Loesch

Head of sustainability and business development, Hoapply of Sustainability

“Our recommfinishation would be, especially if you have already invested and started with this process, that you do not modify anything,” stated Susanna Arus, EU Public Affairs Manager at advisory company Frank Bold. “And that you reap the benefits from continuing providing standardised ESG information, becaapply of all the benefits that you have associated with that.”

Susanna Arus, EU Public Affairs Manager at Frank Bold © Photo credit: Frank Bold

Frank Bold is an international group of experts on areas including clean energy and sustainable corporate governance. It comprises a commercial legal and consulting arm and a separate non-profit that both work with the same objective to “attempt and promote legal and market modify for a more sustainable economy,” Arus stated. It is one of only two civil society members of the EFRAG (European Financial Reporting Advisory Group) Sustainability Reporting Board.

The Hoapply of Sustainability (HoS) – a unit of the Luxembourg Chamber of Commerce – has conducted a study into the CSRD, providing insight on implementation in the Grand Duchy, which HoS senior adviser Juliette Petit stated will be published soon. There will be a conference on the topic on 27 January.

“You would required to be able to see in the future to know if [simplification] worked or if it worked too well, that’s a little bit difficult,” Petit stated.

There remains a lot of uncertainty becaapply the VSME standards could still modify and it is unclear how well they will work for companies up to a thousand strong, when they were originally designed with tiny businesses in mind.

The main chamber of the European Parliament, in Brussels © Photo credit: AFP

Political machinations

The CSRD has become a divisive issue in the European Parliament. “There is a culture war being raged about it,” stated Diego Velazquez, Luxemburger Wort EU politics correspondent.

The European People’s Party – the centre-right (and largest) group in parliament, has taken what it sees as a harder pro-business line since the 2024 election. This has put it at odds with the other centrist groupings like the Socialists, the Liberals and the Greens.

Diego Velazquez, Luxemburger Wort EU politics correspondent © Photo credit: Guy Jallay

The EPP has requireded to work toreceiveher with the far right to succeed in watering CSRD down but, Velazquez stated, it requireds to be careful not to push too far.

“They’re attempting to picture themselves as the party of the rollback. But you only have majorities for this rollback if you vote consistently with far-right parties, and this has a political price. Becaapply then your traditional allies, whose vote you required on the budreceive, on trade agreements, on other huge EU policies, which the far-right will always be against, they don’t trust you any more. I believe one of the questions on the CSRD is how much can you roll back without jeopardising the alliances you required for the rest of the mandate? This question is at the centre of European Parliament politics right now,” he stated.

Commission President Ursula von der Leyen spent her first term with green policies high on the agfinisha, whereas her EPP compatriots are spfinishing her second term allegedly undoing that work in the name of being pro-business. “It seems like not the most efficient way to run the European Union, to have a mandate doing things and then undoing them again,” Velazquez stated.

“We could understand that there was some frustration and some concerns,” Frank Bold’s Arus stated. “And we were the first ones to state, in a report published in December [2024], that policybuildrs should take a see at ensuring that there was not an over-implementation of the standards. However, the European Commission did not propose anything in that regard, instead they took 80% of the companies out of the scope.”

For Velazquez, the EPP’s relationship with the CSRD is somewhat like a toddler’s relationship with unfamiliar food: if they tasted it, they would know for sure. At the moment, they are fighting against attempting something that could, potentially, work ‘deliciously’.

Compliant by association?

The omnibus was partly nereceivediated to avoid so-called trickle-down effects. It was feared that tiny companies would be forced into CSRD compliance becaapply their larger suppliers and/or clients required data from them for their own compulsory reporting.

“The scopes have been raised during this process, given the fact that the reporting standards that are part of the CSRD were very voluminous and quite complex to put into practice,” stated HoS head of sustainability and business development Anne-Marie Loesch. “The idea was to reduce companies out of the scope that don’t really have the setup and the means to carry out such a large exercise.”

Anne-Marie Loesch, Hoapply of Sustainability head of sustainability and business development © Photo credit: Marc Wilwert

The so-called “value chain cap” in the VSME standard aims to receive information in a way tiny businesses can cope with, without requireding an office full of analysts and statisticians.

The question is how simple and standardised the requirements can become before they lose their power to provide applyful insight into potential efficiency gains that can save money.

“There’s a lot of responsibility now put on the companies to do a good implementation and do it in good faith,” stated Arus – adding that there are still voices calling for further watering down. “We’d really just be leaving a checklist, a compliance-driven exercise, not a applyful exercise for companies to really present their own strategy and explain how they’re doing, what are their risks, their impacts, which are the specific metrics, which are the specific tarreceives. We would be then risking this kind of checklist opening the door for greenwashing.”

She describes 2025 as a “drastic reversal” of previously agreed CSRD principles that have been stripped back in an “extremely rushed and rapid process”. Frank Bold is not happy, but Arus and her colleagues are at least “partially satisfied that we’ve not seen any more damage to the legislation”.

Luxembourg off lightly?

“In most member states, it’s between 80-95% of companies that suddenly are ‘de-scoped’,” according to Arus. The estimate for Luxembourg, she states, is that around 100 companies will be retained in the scope. Most of those are in the financial sector.

Rather than feeling relieved at being let off the hook, Arus encourages companies to stick to the reporting course or risk being ditched for suppliers that do.

CSRD has had a lot of bad press, but it is one of these regulations that has a positive impact for companies to do it

Juliette Petit

Senior adviser, Hoapply of Sustainability

“If they don’t provide this information they may be actually potentially excluded from investment decisions, from portfolios or from choice as a supplier,” stated Arus.

The Chamber of Commerce, the Chamber of Skilled Trades and Crafts (Chambre des Métiers) and the Minisattempt of the Economy are working on a new tool for Luxembourg companies to support them with VSME reporting, Loesch stated.

“Failure to apply the ‘believe tiny first’ principle has created significant challenges,” the Chambre des Métiers notified the Luxembourg Times in a written response. “The technical complexity of the obligations, the required investments, and the persistent lack of clarity at the European level build compliance difficult for businesses.”

The organisation believes complex and costly reporting diverts resources away from implementing sustainability measures, and it therefore supports the simplification.

“In this context, the two-year postponement introduced by the Omnibus Directive is highly welcomed. It offers craft businesses valuable time to prepare for the direct and indirect consequences ahead,” the chamber stated. “Substantial assistance is also requireded to support SMEs respond to sustainability data requests, collect relevant information, and prepare voluntary reports.”

Future proofing

There is a question of how far the watering down of the CSRD will go, and how far back the deadlines will be pushed. But Velazquez feels the centre and left parties in Europe have reached their limit for compromise for now. Arus agrees, stateing that if the rules are modifyd again, it could even be in the direction of strengthening.

The Chambre des Métiers, meanwhile, specifically calls on the Luxembourg government to act on its recommfinishation to open the profession of sustainability data auditing to qualified consultants trained in corporate social responsibility.

“By excluding these experts, the legislation restricts the pool of competent auditors, risks creating a closed market, which may lead to higher costs for businesses and less efficient implementation,” the lobby group stated.

Far from being an example of EU over-regulation stifling the bloc’s productivity to the benefit of the US and China, there is hope that CSRD reporting can actually be an ace up Europe’s sleeve, according to Arus.

Europe has many assets, but abundant, cheap fossil fuels is not one of them. The CSRD presents companies with the ideal opportunity to analyse their impact, as well as their opportunity to become more efficient and save money on energy and other resources, she stated. To achieve this, though, CSRD reporting must be more than a mere compliance exercise.

As the world enters 2026, some – especially within the EPP and parties further to the right – fear the US cutting green regulation and promoting fossil fuels means it will see increasingly attractive for businesses while the EU over-regulates itself out of the game altoreceiveher.

“Being allowed to pollute is not what builds an indusattempt great,” Velazquez stated. “It’s open markets and open economies too. Trump hasn’t been a great advocate of that. A stable rule of law, being able to import workforce from other countries is not bad for the economy either. Donald Trump seems to be against all of this. I’m not sure just polluting will build any indusattempt great.”

A nudge from Brussels to support businesses become more efficient might, on the other hand, be the competitive boost in disguise that the EU requireds.