EU: Scope reduction of EU's sustainability disclosure rules makes it harder to asses companies & weakens transparency, say investors
"EU sustainability cutbacks make low-carbon leaders harder to spot", 10 December 2025
After months of pressure from companies and governments, the European Union agreed on Tuesday to sharply scale back two flagship sustainability disclosure laws.
The changes affect the Corporate Sustainability Reporting Directive (CSRD) - the EU’s rulebook that requires large companies to publish detailed information on their environmental, social and governance performance, and the Corporate Sustainability Due Diligence Directive (CSDDD), which requires firms to check their supply chains for human rights abuses and environmental harm.The CSDDD had also required companies to have and implement a plan to cut emissions to net zero, but that obligation has now been dropped.
Watering down the rules means investors will have less reliable, comparable information on companies' sustainability efforts, making it harder to tell which businesses are serious about cutting emissions, managing climate risks and environmental, social and governance standards.
Eleanor Fraser-Smith, Head of Sustainability at investor Victory Hill Capital Partners, said the weakening of the rules would "leave investors with poorer information for decision-making".
"Yes, EU reporting has become overly complex, but the solution is clearer guidance and better structure, not dilution. Stepping back from requirements doesn't make the system easier, it just makes it less coherent."
Some investors highlighted the scrapping of climate transition plans in the EU's due diligence law as a major concern.
"Without credible transition plans, Europe could lose comparability, visibility on progress and a potentially useful tool to access transition finance. Investors rely on these plans to assess climate risks and opportunities," said Carlota Garcia-Manas, head of climate transition at British investor Royal London Asset Management, which manages around 180 billion pounds ($239.53 billion)...
Hans Stegeman, chief economist at sustainability-focused lender Triodos Bank, said the moves represented a "significant weakening of essential sustainability rules".
"Legislation meant to combat child labour, environmental pollution, and exploitation in supply chains is being hollowed out. The so-called 'anti-looking-away law' has had its scope drastically limited," he said...