Environmental, social and governance | UK Regulatory Outlook October 2025

EU  

European Parliament rejects simplified sustainability rules under Omnibus Package I

The European Parliament has rejected the Legal Affairs Committee's negotiating mandate on simplified sustainability and due diligence rules, with MEPs voting 309 in favour and 318 against on 20 October. Following the rejection, MEPs will vote on amendments at the upcoming plenary session in Brussels on 13 November. They will then be ready to start talks with EU governments, which already adopted their position on 23 June (see the June Regulatory Outlook). The aim is to finalise the legislation by the end of 2025. 

The proposal seeks to simplify sustainability reporting and due diligence obligations and ease the administrative burden on companies as part of the Omnibus I simplification package proposed by the European Commission on 26 February 2025, following delayed application of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). 

The reported compromise would keep CSRD coverage at companies with more than 1,000 employees and add a €450 million revenue threshold, while increasing CSDDD thresholds to companies with at least 5,000 employees and €1.5 billion turnover. The Parliament's proposal also shifts the due diligence requirements to a risk-based approach focused on direct partners. Transition plans remain a requirement under the Parliament's position for companies to adopt a climate transition plan in line with the Paris Agreement. 

European Commission proposes delay to EU Deforestation Regulation despite industry opposition 

On 21 October 2025, the European Commission adopted a proposal for a targeted amendment to the EU Deforestation Regulation (EUDR). The Commission's proposal has two objectives, to reduce the load that the IT system of the EUDR will need to handle, and to reduce administrative burden on supply chain actors.  

The proposal introduces a six-month postponement for micro and small enterprises to 30 December 2026 (from 30 June 2026), as well as for the newly-defined category of micro and small primary operators, while for large and medium (non-SME) operators and traders, the regulation will apply as originally planned from 30 December 2025 onwards. However, to ensure a gradual phase-in of the rules, these large and medium-sized actors will benefit from a grace period of six months for checks and enforcement. 

The proposal needs to be agreed by the European Parliament and Council before it can take effect.  

This development comes after a coalition of companies had written to EU institutions warning that any additional delay to the EUDR would undermine forest protection efforts and increase costs.  

While acknowledging implementation challenges, notably IT systems readiness, the coalition emphasised ongoing investments to meet the 2025 deadline and cautioned that postponement would create uncertainty and disengagement across supply chains. The signatories also framed the due diligence and traceability obligations as core to responsible sourcing and risk management, not merely compliance, and noted that a late-stage change would strand investments made to build geolocation and supply chain mapping capabilities.  

The letter called for the Commission to take other actions rather than pausing the regime, such as issuing a notice establishing a short grace period, with suspended fines, and to establish a technical committee to "oversee implementation and facilitate technical discussion between authorities and operators."  

Following the introduction of the Commission's new proposal, medium and large operators and traders should continue preparations for compliance from 30 December 2025, but note that enforcement action may be delayed.

Council agrees position on extending some mitigation and supporting measures to companies that have outgrown the SME definition 

As part of the "Omnibus IV" legislative package, Member States' representatives have approved the Council of the EU's positions on European Commission proposals to extend certain mitigating measures available for small and medium sized enterprises by defining a new category of small mid-cap companies (SMCs). 

The new SMC category will cover companies with fewer than 1000 employees and either an annual turnover of up to €200 million or up to €172 million in annual balance sheet total. The aim of the new definition is to help to: 

• avoid a cliff-edge and enable a smooth transition of SMEs to SMCs;
• allow SMCs to keep the same beneficial environment as when they were SMEs; and
• give better incentives to SMEs to scale up. 

The most relevant mitigating measures to be extended or modified to include SMCs include those under: 

• Regulation (EU) 2023/1542: on batteries – articles 47, 48(1), and 52; and
• Regulation (EU) 2024/573: on fluorinated greenhouse gases. 

See the full list. 

Simplification to the EU CBAM enters into force 

Following the European Parliament's formal adoption of the changes to the carbon border adjustment mechanism (CBAM), Regulation 2025/2083 (which "aims to simplify and strengthen the EU's CBAM") has been entered into the Official Journal and came into force on 20 October. 

The key changes include: 

• adopting a new de minimis mass threshold whereby imports of up to 50 tonnes per importer per year will not be subject to CBAM rules;
• outlining conditions for a transition state for importers, whereby imports of CBAM goods will still be allowed while importers are awaiting CBAM registration; and
• a general simplification of CBAM measures, including the authorisation procedure, the data collection processes, calculation of emissions, and financial liability calculations; and
• adjustments to penalty provisions and on the rules regarding indirect customs representatives. 

MEPs push for new legislative framework that supports the digital and green transition 

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Waste Framework Directive: amending directive introduces EPR scheme for textiles 

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