2025 Forecast: Big Changes for the EU Green Deal - Part 1

Politics moves quickly in the European Union, and this has perhaps never been more true than in 2025. With the return of Donald Trump to the U.S. presidency, the election of a center-right parliament, and ongoing geopolitical turbulence, the EU is navigating a dynamic and disrupted world, and legislators are struggling to keep up with the pace of change.

Part 1 of this lookahead will focus on the ongoing omnibus developments and the possible simplification of the deforestation regulation, while Part 2 will focus on extended producer responsibility (EPR) and the impact of the clean industrial deal.

The Omnibus: Simplification or Deregulation?

In June 2024, the EU parliamentary elections upended the progress of the Green Deal. Many liberal environmentalists lost seats, while populist parties from the center-right made significant gains. As a result, the hard-fought progress for sustainability policies and regulations came under threat from pro-business parties that saw those policies as a threat to innovation and a burden on EU competitiveness.

“The EU led the way in green initiatives, then nobody followed,” said Jon McGowan, a Florida-based attorney working on global sustainability law. “Current leadership clearly believes the European Green Deal put them at a disadvantage in the global market.”

Since then, European MEPs have been steadily stripping away elements of the Green Deal. On February 26, 2025, the commission proposed an Omnibus simplification package that would slash reporting requirements for key sustainability regulations like the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). Among the proposed changes, the CSRD would cover 80% fewer companies for reporting, while the CSDDD would drastically reduce due diligence requirements that were limited to first-tier suppliers.

In April, the parliament voted in favor of a “stop-the-clock” proposal to delay reporting and due diligence requirements for the CSRD by two years and the CSDDD by one year. While this gave EU businesses certainty regarding when the CSRD and CSDDD would apply, some expressed concern that parliament was sending the signal that what was billed as “simplification” was rapidly moving towards deregulation.

On June 23, 2025, the EU Council officially published its position on the Omnibus.

For the CSRD, the council's position is to increase the employee threshold to 1,000 employees and to remove listed small and medium enterprises (SMEs) from scope. It also added a net turnover threshold of €450 million to alleviate the reporting burden.

There are significant proposed changes to the CSDDD, including increasing the threshold to 5,000 employees and €1.5 billion net turnover. This would eliminate many companies from CSDDD's scope and limit it to the largest companies that have the biggest influence on their supply chains.

The commission's original Omnibus proposal included limiting due diligence to a company’s own operations, the operations of its subsidiaries, and to its tier 1 partners. The council's proposal takes this approach even further by limiting due diligence to a risk-based approach focusing on areas where abuse is most likely to occur. Instead of a comprehensive mapping exercise for due diligence, companies would take a more general scoping approach based on reliable information, though this can be extended beyond tier 1 if there is objective and verifiable information of adverse impact beyond immediate business partners.

The council further proposed limits on the obligations for companies to adopt transition plans to mitigate climate change, as well as a delay of two years on the enforcement of those obligations. It also proposed delaying the transposition deadline for the CSDDD by one year to July 26, 2028.

With both the commission and the council having reached their negotiating positions, it remains for the parliament to do the same, which is expected to take place in October of this year.

“From a practical perspective, it will be interesting to see how the political groups in the parliament find a consensus,” said Andreas Rasche, professor and associate dean at the Copenhagen Business School. “The positions, especially on the scope of CSRD and CSDDD, are really far apart. Right now, it looks like we will have a trilogue in November and December, which means that a final legal text might evolve towards the very end of 2025 or early in 2026.”

The EU is currently awash with proposals and opinions on what the final versions of the CSDDD and CSRD should look like. Parliament's omnibus rapporteur Jörgen Warborn of the European People's Party (EPP) recently published the EPP's proposed amendments for its negotiations within the EU Parliament before its final proposals in October. Warborn's proposals include aligning the thresholds for the CSRD, CSDDD, and the Taxonomy at €450 million net turnover and 3,000 employees, deleting mandatory climate transition plans in the CSDDD and making them voluntary in the CSRD, retaining the tier 1 approach in the CSDDD, and fully exempting subsidiaries in the CSRD.

In a LinkedIn post announcing the publication of his proposals, Warborn said, “I'm entering this process with a clear ambition: to cut costs for businesses and go further than the commission on simplification. Less red tape and fewer burdens for businesses. That's how we strengthen Europe's economy.”

McGowan believes the big debate will continue to be the thresholds for requiring a company to report under the CSRD and CSDDD. “The current 250 employee threshold will increase to between 1,000 and 2,000,” said McGowan. “Annual net turnover requirements will most likely end up at 450 million EUR. Protections will be in place to prevent reporting companies from demanding excessive information from non-reporting companies in their value chain, especially SMEs.”

The end result, said McGowan, will likely be a reporting requirement that directly impacts fewer than 5,000 of the 32 million companies in the EU.

For those who have grown tired of the term “omnibus,” the future likely holds no relief.

“We will see more omnibus proposals to deregulate the Green Deal,” said McGowan. “However, I expect those will not move at as fast a pace as the Omnibus I. The reductions to the CSRD and CSDDD released the pressure. The sense of urgency will not be the same.”

Rasche believes that the politicized process will continue to play out for the remainder of the year.

“I do not think that the EU will formally withdraw any of the regulations,” he said. “However, they may delay some of them further, for instance the EUDR. There is a small chance that they do not find agreement on the Green Claims Directive because the commission wants to exempt small businesses from this. In such a case, the commission has indicated that they will formally withdraw the proposal for the directive.”

What Should Businesses Do in the Meantime? Experts Weigh In

The commission's stated goal for the omnibus is simplification, but the immediate impact has been confusion for businesses wondering if they should continue to prepare for reporting deadlines or if those who have already started will find their efforts wasted after the possible withdrawal of requirements.

According to Rasche, the best thing for businesses to do right now is stay the course and see what happens.

“Nothing is decided yet and the political winds change quickly,” said Rasche. “For instance, the thresholds for scoping CSRD and CSDDD are heavily contested, and they may still change. I would advise firms to keep on preparing, because even if they fall out of scope once a final legal text emerges, there is a good chance that they will need some of the collected information to satisfy demands by business partners and investors. Just stopping is not the answer because it reflects short-sighted management.”

McGowan agrees that waiting is, for now, the best course of action, but he adds that businesses should resist trying to anticipate the outcome.

“For now, avoid the temptation to cut sustainability experts,” said McGowan. “Sustainability reporting isn't going away, just changing. Similarly, ignore calls to push forward with sustainability reporting despite the cuts. Those with a financial or advocacy interest in sustainability reporting will vigorously argue that companies should voluntarily report. The legal liabilities of voluntary reporting are still unclear, but the risk is increasing.”

Deforestation Regulation's Uncertain Future

Despite not even being in force yet, the EU Deforestation Regulation (EUDR) has had a rough life so far. The regulation - which aims to prevent global deforestation by eliminating the import or export of commodities and products that are the result of deforestation or human rights abuses during production - has been criticized since its inception for the burden it could potentially place on small producers, especially in relation to the complexity of managing the data to trace and disclose compliance.

Industry pressure, with support from the EPP, produced a one-year delay on the implementation of the EUDR until December 2025. In May 2025, the EU Commission published the Country Classification List to determine the risk posed by countries producing commodities covered by the scope of the EUDR. Only Russia, Belarus, Myanmar, and North Korea are categorized as high risk, while all other countries, including EU member states, are considered low risk as a result of strong legal frameworks and sustainable land management practices.

EU member states have pushed for additional measures to weaken the EUDR, including introducing a new category of “insignificant or negligible risk” that would remove many countries from the scope of the EUDR and could exempt entire sections or regions.

Supporters of the EUDR warn that the zero-risk category could provide a loophole that would allow countries involved in deforestation to place their products on the EU market without facing the restrictions or due diligence the original EUDR would have included. They also say that changes to the law now, with the deadline only a few months away, could penalize proactive companies already preparing their due diligence processes and might undermine the perception of the EU as a reliable, predictable market in which to do business.

With the heavily politicized negotiations over sustainability regulations continuing to be front-and-center at the EU, and more omnibus proposals potentially on the way, EU businesses will have to wait and see what their obligations will eventually be. With pressure from the U.S. and ongoing global economic disruption, a lot can happen in the next few months.