Climate and Energy: EU Policy and Regulation Update for 6 August 2025

As policy and regulatory landscapes evolve, this publication will provide insights to navigating emerging risks and opportunities in the energy transition. Read previous issues here.

Sustainability Omnibus Package

• EFRAG publishes State of Play 2025 report on first wave of ESRS implementation
• Commission adopts recommendation on voluntary sustainability reporting standards for SMEs
• EFRAG launches consultation on simplified ESRS

European Union/International

• ICJ issues advisory opinion on the obligations of states in respect of climate change
• Commission launches call for evidence on the development of an integrated framework for climate resilience and risk management

Sustainability Omnibus Package

23 July 2025 [EU] – EFRAG publishes State of Play 2025 report on first wave of ESRS implementation

EFRAG released its “State of Play 2025” report analysing the first sustainability statements issued under the CSRD for fiscal year 2024 [available here]. The report reflects insights from the first cohort of companies required to report in alignment with the ESRS.

EFRAG analysed over 650 sustainability statements and found that, while their high-level structure was broadly consistent, there was significant variability in the depth and clarity of disclosures. These differences appeared in areas such as report length, formatting, the number and type of material topics covered and how companies addressed Impacts, Risks, and Opportunities. While most companies reported on key areas like climate change, their own workforce and business conduct, fewer included disclosures on issues such as biodiversity, microplastics or affected communities. The report also found that materiality assessments tended to rely on input from internal stakeholders and business partners, with less engagement from broader societal groups.

Although early reporting efforts show promise, EFRAG’s report underscores the need for further efforts to enhance consistency, comparability and transparency in CSRD reporting.

30 July 2025 [EU] – Commission adopts recommendation on voluntary sustainability reporting standards for SMEs

The European Commission adopted a recommendation on voluntary sustainability reporting for small and medium-sized companies (SMEs) under the Corporate Sustainability Reporting Directive (CSRD) [press release available here].

The Commission recommends the use of the voluntary sustainability reporting standard for non-listed SMEs developed by the European Financial Reporting Advisory Group (EFRAG) and delivered in December 2024. The standard comprises a basic module, which serves as the minimum reporting requirement, and a comprehensive module for companies wishing to provide more detailed disclosures. Micro-undertakings need only apply select elements of the basic module.

Additionally, financial institutions and companies subject to the CSRD are urged to limit their sustainability data requests to SMEs to the information covered by the new standard, to reduce reporting burdens across the value chain.

The voluntary standard, included as Annex I to the recommendation, is intended for SMEs with up to 1,000 employees. The Commission proposes to formally adopt the standard through a delegated act following the necessary consultation process.

31 July 2025 [EU] – EFRAG publishes revised ESRS Exposure Drafts and launches public consultation

EFRAG published revised exposure drafts of the European Sustainability Reporting Standards (ESRS), launching in parallel a public consultation to stakeholder feedback [press release available here]. The revisions follow a formal request from the European Commission in March 2025 [see previous edition on EFRAG’s mandate here] as part of the broader initiative to reduce reporting complexity under the CSRD.

EFRAG’s review focused on simplifying structure and language, reducing duplication across standards and streamlining the double materiality assessment. All voluntary disclosures have been removed, and new relief mechanisms have been introduced to allow omissions where reporting would result in disproportionate cost or effort.

EFRAG published several documents [all available here], including revised ESRS 1 and 2, the revised E1 to E5 environmental standards, the revised S1 to S4 social standards and the G1 governance standard on business conduct (the so-called “topical standards”). Accompanying documents include a non-mandatory implementation guidance along with the EFRAG’s “basis for conclusions”.

In total, the number of mandatory datapoints (to be reported only if material) has been reduced by 57%, and the combined total of mandatory and voluntary disclosures by 68%. The length of the standards has also been reduced by more than 55%.

EFRAG’s public consultation will run until 29 September 2025, with final technical advice expected to be submitted to the Commission by 30 November 2025. 

European Union/International

23 July 2025 [International] – ICJ issues advisory opinion on the obligations of states in respect of climate change

The International Court of Justice issued an advisory opinion on the obligations of states in respect of climate change [available here]. The opinion, requested by the UN General Assembly in 2023, unanimously concludes that states have legal obligations under international law to take concrete measures to address climate change.

In its comprehensive analysis, the Court reaffirmed that states have obligations under climate change treaties (including, among others, the UN Framework Convention on Climate Change, the Paris Agreement and the United Nations Convention on the Law of the Sea) and customary international law to reduce greenhouse gas emissions and protect the climate system.

The Court endorsed a heightened due diligence standard, requiring states to adopt all feasible regulatory and administrative measures to prevent activities within their jurisdiction from causing significant environmental harm.

The opinion also emphasised the duty of international cooperation, given the inherently transboundary nature of climate change, and underscored the interdependence between environmental protection and fundamental human rights. The Court highlighted that rising global temperatures threaten core rights, including the rights to life and health.

Importantly, the ICJ affirmed that states’ climate obligations possess an erga omnes character – meaning they are owed to the international community as a whole – thus allowing any state to invoke responsibility for their breach.

While the opinion is expected to have some influence on the development of international environmental law, it does not create new binding obligations.

24 July 2025 [EU] – Commission launches call for evidence on the development of an integrated framework for climate resilience and risk management

On 24 July 2025, the European Commission launched a call for evidence to collect input on the creation of an EU-wide integrated framework on climate resilience and risk management [press release available here].

Building on the 2021 EU Adaptation Strategy and the 2024 European Climate Risk Assessment, the initiative aims to enhance preparedness and adaptive capacity across the EU in light of rising climate-related risks such as heatwaves, droughts and floods. The Commission intends to address key behavioural, financial, institutional, regulatory, and informational barriers that hinder effective climate risk management through its initiative.

The Commission’s initiative will follow the Better Regulation guidelines and is expected to be adopted in Q4 2026. The call for evidence, open until 4 September 2025, is intended to raise stakeholder awareness and gather views to inform an eventual impact assessment.