As sustainability continues to move from voluntary reporting to regulated accountability, Q2 2025 delivered a critical wave of ESG-related policy developments across jurisdictions. While some regulators doubled down on simplification and business competitiveness, others advanced new disclosure regimes or moved closer to global alignment.
From the EU’s Omnibus I and CSRD/CSDDD restructuring to Japan's formal adoption of ISSB standards and the SEC’s retreat from defending its landmark climate disclosure rule, the global ESG regulatory landscape is shifting — fast, and unevenly.
This quarterly update distills the most important ESG-related regulatory and voluntary framework developments between April and June 2025. It provides companies, investors, and ESG professionals with a regional breakdown of new policies, stakeholder reactions, and practical implications for disclosure strategy, risk governance, and long-term ESG alignment.
Takeaways for business & finance
- Multinational companies must navigate fragmented ESG regimes with jurisdiction-specific compliance strategies
- Investors face a growing need to assess policy exposure and ESG readiness across markets—especially as simplification efforts diverge
- Voluntary frameworks are rapidly converging, but now require more sophisticated data infrastructure and assurance alignment
- Emerging markets are becoming regulatory first movers in ESG — especially in Asia and the Middle East
Key regulatory and framework updates by region: Q2 2025
Europe
Omnibus updates
🗓️ April 2025
The Council formally backed the “Stop‑the‑Clock” directive, effectively postponing and aligning deadlines for several sustainability laws:
- CSRD reporting obligations are delayed by two years
- CSDDD transposition shifted by one year
- The directive entered into force the day after publication and must be transposed by Member States by 31 December 2025
🗓️ May 2025
Throughout May 2025, EU Member States met in Council preparatory bodies (e.g., Coreper and working parties) to discuss the Omnibus I proposal in detail. Notably, divisions emerged:
- France and Germany pushed for tighter due diligence obligations, particularly on supply chain transparency
- Nordic and Baltic countries supported the Commission’s simplifications, emphasizing competitiveness and administrative relief for SMEs
- Member States debated the scope thresholds for CSRD, the timing of climate plan requirements, and risk-based vs. value-chain-wide due diligence mapping
🗓️ June 2025
In June 2025, Council reached a negotiating mandate on 23 June 2025. The Council adopted its formal position on Omnibus I, confirming:
- CSRD threshold increases to 1,000 employees + €450 million turnover.
- CSDDD scope narrowed to companies with 5,000+ employees + €1.5 billion turnover.
- Introduction of a risk-based due diligence approach focusing mainly on tier-1 suppliers.
- Postponement of first CSRD reports by two years for newly in-scope entities.
- Climate transition plan requirements relaxed and delayed by two years.
The Council’s position will set the tone for trilogue negotiations in late 2025, which Denmark will chair during its EU Council Presidency (expected October 2025).
Green Claims Directive (GCD) updates
🗓️ April 2025
- 2nd trilogue held (24 April): The EU’s second trilogue session focused on the scope and technical details of ex‑ante verification by independent accredited bodies. Discussions included whether environmental claims would conflict with Packaging and Packaging Waste Regulation (PPWR) requirements
- Greater scrutiny on carbon neutrality/offset claims: Legal experts noted the GCD aims to introduce stricter substantiation rules - especially for “carbon neutral” claims and offsetting—to ensure scientific evidence supports these assertions.
🗓️ May 2025
- Trilogue momentum stalls: By May, trilogue progress slowed. Key unresolved issues included pre‑approval mechanisms and detailed scope definitions. Some stakeholders argued for alignment with PPWR to avoid duplicative verification efforts.
- Parliament and Council remain at odds: While Parliament pressed for broad coverage, including microclaims and varied environmental claims, Member States sought a more focused, tiered approach. No formal trilogue was scheduled in May, pending June discussions.
🗓️ June 2025
- Commission signals withdrawal (20 June):Facing political pushback and concerns over burdens on ~30 million micro-enterprises, the Commission announced it "intends to withdraw the proposal" unless the scope is narrowed.
- Council cancels trilogue (23 June): Scheduled to be the third trilogue, the June 23 meeting was cancelled. Member States and the Parliament left in limbo after Italy’s recent withdrawal of support and the Commission’s threat to pull the directive.
- Sector watchdogs raise alarm: NGOs and legal groups issued warnings, stating the pause undermines needed guidance on credible corporate climate claims.
SFDR simplification updates
🗓️ April 2025
The Commission confirmed the delay of SFDR revision to Q4 2025 as part of its broader "Simplification Omnibus" agenda. This marks a strategic pause - allowing integration with CSRD, EU Taxonomy, and SME mid-cap reforms before introducing SFDR 2.0. Stakeholders like ICMA and banking circles highlight the need to simplify SFDR, especially to reduce administrative burden and prevent greenwashing
🗓️ May 2025
The European Commission launched a formal ‘Call for Evidence’ to feed into the SFDR revision’s impact assessment. Feedback was sought on:
- Clarifying concepts (e.g. PAIs, sustainable investment)
- Streamlining overlapping disclosures
- Exploring product categorization models with retail investor clarity in mind
The consultation received over 1,500 responses from stakeholders across the financial sector, civil society, and EU member states. Key themes emerging from the feedback included calls for clearer definitions of Article 8 and Article 9 financial products, better alignment with existing ESG reporting frameworks, and requests to reduce duplicative disclosures, especially for smaller financial entities burdened by current SFDR requirements.
🗓️ June 2025
In late June, the European Commission announced that it will present its legislative proposal for SFDR simplification in Q4 2025, confirming the timeline sought by industry stakeholders.
North America
SEC Climate Disclosure Rule (USA)
🗓️ April 2025
SEC votes to end defense of 2024 climate disclosure rules: On March 27, 2025, the SEC voted to withdraw its defense of the final 2024 climate-related disclosure rules - meaning SEC lawyers will no longer argue in court to uphold them. This marks a major turning point, though the rules remain and could still be upheld or struck down by the Eighth Circuit - the litigation hub for Iowa v. SEC.
SEC officially paused the implementation of the rules on April 4, 2025, signaling that enforcement is on hold until litigation concludes.
A group of 18 states and the District of Columbia requested that the Eighth Circuit hold the case in abeyance, citing the SEC's withdrawal. Iowa and other plaintiffs opposed this on April 14. Courts have yet to schedule oral arguments, keeping the rules in legal limbo.
🗓️ May 2025
Even though federal enforcement is stalled, many large U.S. companies continue to comply with climate reporting due to California’s climate laws (e.g., SB-253, SB-261).
🗓️ June 2025
Foreign climate litigation rule withdrawn: On June 20, 2025, the SEC withdrew its 2008 guidance that had encouraged - or required - companies to disclose foreign government environmental litigation. The guidance was non-binding, but the move was seen as symbolic of a broader de-prioritization of climate-aligned disclosure obligations.
SEC Climate Disclosure Rule (Canada)
🗓️ April 2025
CSA pauses mandatory climate rule: The Canadian Securities Administrators (CSA) announced a temporary pause on developing its mandatory National Instrument 51‑107 climate disclosure rule, citing global regulatory uncertainty and economic pressures stemming from international shifts - especially the SEC’s unexpected retreat on its own climate regime.
Asia-Pacific
Japan - Sustainability Standards Board of Japan (SSBJ)
🗓️ April 2025
SSBJ–ISSB alignment confirmed: The Sustainability Standards Board of Japan (SSBJ) announced that its disclosure standards are fully aligned with the ISSB’s IFRS S1 (general sustainability) and IFRS S2 (climate) frameworks. This marks a major milestone toward global comparability in Japan’s ESG reporting regime.
🗓️ May 2025
Phased implementation framework discussed: In May, Japan’s Financial Services Agency (FSA) convened its Sustainability Disclosure Working Group to finalize a timeline for mandatory adoption of the SSBJ standards. Key proposals include:
- FY 2026 (April 2025 start): voluntary early adoption
- FY 2027: mandatory for Tokyo Prime Market firms with ≥ ¥3 trillion market cap
- FY 2028: extension to those with ≥ ¥1 trillion market cap; broader application anticipated in the 2030s
Assurance requirements under review: The FSA is designing an external assurance framework aligned with the International Auditing and Assurance Standards Board’s ISSA 5000. Rules are expected prior to mandatory disclosure starts.
🗓️ June 2025
SSBJ released its first domestic standards: Application, General, and Climate Disclosures – each mirroring IFRS S1/S2 with minimal Japan-specific adjustments.
June updates reaffirmed:
- April 2025 will begin a voluntary implementation phase;
- Fiscal year ending March 2027 will mark mandatory disclosure for Tokyo Prime-listed firms above defined thresholds
China
🗓️ April 2025
CSRC ESG disclosure pilot begins: The China Securities Regulatory Commission (CSRC) launched a pilot of the Basic Standards for Corporate ESG Disclosure, targeting A‑share-listed companies. Reporting covers Environment (mandatory Scope 1 & 2 GHGs, resource use), Social (anti‑corruption, rural revitalisation) and Governance.
The public pilot applies to financial reporting ending on or after March 5, 2025, with full compliance expected by 2026 and broader rollout by 2030.
Stock exchange guidelines finalized: Shanghai, Shenzhen, and Beijing Stock Exchanges issued mandatory sustainability reporting guidelines for top-listed firms, backed by the Basic Standards.
These firms must publish ESG reports by April 30, 2026, covering the 2025 financial year. Initial disclosures are qualitative; quantitative metrics (like Scope 3 emissions) remain voluntary.
🗓️ May 2025
Stakeholder consultation on climate disclosure: The Ministry of Finance initiated public consultation on draft Corporate Sustainability Disclosure Standards, focusing on climate-related metrics aligned with GHG Protocol and ISSB conventions.
Feedback was particularly sought on emission disclosures and financing‑related emissions.
🗓️ June 2025
The CSRC enabled pilot implementation of its “Basic Standards” for ESG disclosure covering environmental metrics (including mandatory Scope 1 & 2 emissions), social, and governance factors.
Companies listed on mainland exchanges (Shanghai, Shenzhen, Beijing) are expected to publish reports for the fiscal year ending 2025 by 30 April 2026.
India
🗓️ April 2025
SEBI launches review of ESG disclosures: SEBI announced a comprehensive review of ESG disclosure mandates for listed firms, citing industry concerns over current environmental, social, and labor reporting requirements - especially around supply chain transparency. The review aims to ease burdens on smaller firms and ensure meaningful, high-quality ESG data.
🗓️ May 2025
Drafts climate finance taxonomy: The IFRS Foundation launched a jurisdictional roadmap tool, and India began work on its own climate finance taxonomy - highlighted in the S&P Global “ESG Regulatory Tracker” May 2025.
🗓️ June 2025
SEBI issues ESG debt framework: SEBI has released an ESG debt securities framework to govern ESG-labelled debt instruments, establishing rules for social bonds, sustainability bonds, and sustainability-linked bonds (SLBs). The framework mandates:
- Eligibility criteria aligned with international standards, such as ICMA Principles and Climate Bonds Standards.
- Mandatory third-party review, both pre- and post-issuance, to ensure transparency and credibility.
- Ongoing reporting, especially KPI performance tracking for SLBs, underpinned by transparency and alignment with global best practices.
Other regions
UK
🗓️ April 2025
DEFRA announced the Plan for Change reforms to modernize environmental regulations aimed at unlocking growth and protecting nature across England.
The UK’s Financial Services Regulatory Initiatives Forum published its updated Regulatory Initiatives Grid, providing timelines for upcoming ESG initiatives including SDR, Stewardship Code, ESG ratings, and ISSB disclosures.
The FCA issued two technical notes on TCFD-aligned climate disclosures for listed companies (TN/802.2).
The FCA has indefinitely paused extending Sustainability Disclosure Requirements (SDR) to portfolio and wealth managers.
🗓️ May 2025
At the first post-Brexit UK–EU summit, leaders agreed to explore linking EU and UK Emissions Trading Schemes and mutual exemptions on CBAMs.
The Great British Energy Act 2025 received Royal Assent, establishing a public entity to speed up clean-energy development under the new Energy Security and Net Zero department .
🗓️ June 2025
As part of London Climate Action Week, the UK Government launched three key ESG consultations:
- Climate‑related transition plan requirements under DESNZ.
- Assurance regime for sustainability reporting.
- Draft UK Sustainability Reporting Standards aligned with ISSB S1/S2. These consultations close on 17 September 2025
During the same week, the FCA unveiled new labeling rules for sustainability‑branded investment funds: all UK funds using “sustainable” terms must adopt one of four official labels (Sustainability Focus, Improvers, Impact, or Mixed Goals). The rollout heavily favored active funds - passive funds largely unable to qualify.
Middle East
🗓️ May 2025
The United Arab Emirates has become the first Middle Eastern country to mandate disclosure of greenhouse gas (GHG) emissions, marking a regional turning point in climate regulation.
- Federal Decree-Law No. 11 of 2024 officially took effect on May 30, 2025.
- The law requires all government entities and private-sector companies with GHG emissions of 500,000 metric tonnes or more to:
- Measure and report Scope 1 and 2 emissions (and Scope 3 where applicable),
- Develop climate adaptation and transition plans.
In addition, the law includes robust enforcement provisions. Non-compliance can result in financial penalties ranging from AED 50,000 to AED 2,000,000, with repeat violations within two years subject to a double fine.
Voluntary frameworks updates
Global Reporting Initiative (GRI)
🗓️ April 2025
The public comment period closed for two major updates to GRI’s Labor‑related Topic Standards:
- Revised GRI 404: Training & Education
- A new Standard for Working Parents & Caregivers, built on GRI 401: Employment
🗓️ May 2025
GRI launches a public consultation (ending 13 July 2025) to align existing Sector Standards (Oil & Gas 11, Coal 12, Agri/Aqua/Fishing 13, Mining 14) with new Biodiversity (101), Climate (102), and Energy (103) topic standards.
GSSB approves the final text for GRI 102: Climate Change 2025, consolidating emissions and economic disclosures (from GRI 305 and 201), with an effective date beginning 1 January 2027.
🗓️ June 2025
GRI publishes the finalized GRI 102: Climate Change and GRI 103: Energy Standards, emphasizing:
- Science-based emissions metrics aligned with IFRS S2, GHG Protocol, ESRS, and SBTi.
- Inclusion of just‑transition indicators, adaptation plans, energy use, intensity, and renewable sourcing.
- GRI releases a digital Sustainability Taxonomy aligned with XBRL, ISSB, and ESRS to support machine‑readable reporting and facilitate structured disclosures.
International Sustainability Standards Board (ISSB)
🗓️ April 2025
ISSB released ED/2025/1 proposing targeted amendments to IFRS S2, focusing on:
- Flexibility for financial-sector entities to optionally exclude Scope 3 Category 15 (financed emissions) for derivatives or insurance.
- Allowing use of jurisdiction-specific GHG measurement methods and Global Warming Potential (IPCC) values per local requirements.
- Option to disaggregate financed emissions using Global Industry Classification Standard (GICS) codes for banks and insurers.
ISSB planned to finalise amendments by the end of 2025, with early adoption options.
🗓️ June 2025
The ISSB ratified exposure drafts for:
- Enhancements to SASB Standards – amendments to nine prioritized industries, plus 41 others.
- Consequential amendments to IFRS S2 industry guidance to maintain alignment with updated climate-related metrics.
- Both drafts feature a 150‑day comment period and early application permitted; effective 12–18 months post‑issuance.
The IFRS Foundation published guidance on disclosing climate-related transition plans under IFRS S2. The guidance clarifies how to report strategy, governance, risk management, and metrics tied to transition efforts.
Science Based Targets initiative (SBTi)
🗓️ April 2025
SBTi unveiled its draft Corporate Net-Zero Standard 2.0, aligning with the Carbon Data Open Protocol (CDOP). This version added separate Scope 1/Scope 2 targets, clarified carbon credit usage, and emphasized verification mechanisms.
🗓️ June 2025
SBTi launched a targeted draft standard for the automotive industry, open for public consultation from June 12 to August 11, 2025. This focuses on manufacturers producing >10,000 vehicles or parts companies with ≥ 20% revenue from this sector.
SBTi invited organizations globally to pilot test the Corporate Net-Zero Standard V2 draft. This step aims to refine the standard with practical insights.
CDP (Carbon Disclosure Project)
🗓️ April 2025
CDP released the 2025 questionnaire and guidance for corporate disclosures. The updates maintain structural stability compared to 2024, with minor refinements such as improved guidance, updated dropdowns and logic flows, and a new mandatory question on financial reporting currency (Q1.2)
CDP emphasized that the 2025 cycle introduces only incremental adjustments to scoring. Highlights included broader mandatory requirements (e.g., governance disclosures) even for companies scoring at a C-level, stronger verification expectations, and the first inclusion of Taskforce on Nature-related Financial Disclosures (TNFD) elements.
CDP published its scoring methodology. Key changes included enhanced guidance in climate, water, and forests modules; clarified criteria; and public disclosure of water and forest scores for financial services firms.
CDP launched its Disclosure API, enabling select software Accredited Solutions Providers (ASPs) to test automated data transfers into the CDP Portal. The API supports the corporate, SME, cities, and states/regions questionnaires—automating questionnaire responses, attachments, and basic data validation.
🗓️ June 2025
CDP officially opened the 2025 response window on 18 June 2025. Disclosers could start submitting data on climate, water, forests, plastics, and biodiversity themes.
Following the portal opening, CDP’s Disclosure API entered broader testing - enabling ASPs like Pulsora and others to pilot direct data transfers and test automated uploads, fostering streamlined disclosures.
Impact on companies & investors
The Q2 2025 ESG policy developments mark a pivotal shift in how companies and investors must approach sustainability reporting, risk management, and strategic planning. While many updates aim to simplify and streamline ESG obligations, the implications are nuanced and vary significantly by region and regulatory framework.
Growing divergence in global ESG compliance landscapes
While Europe continues refining and, in some cases, softening its sustainability mandates (e.g., Omnibus I and CSRD threshold increases), other regions such as Japan, China, and the UAE are moving steadily toward stricter ESG alignment—often referencing ISSB standards. This divergence places increased pressure on multinational companies to manage jurisdiction-specific compliance strategies, particularly for reporting, due diligence, and transition planning.
Implication: Companies operating globally must prepare for dual or even triple reporting tracks (e.g., CSRD in Europe, SSBJ in Japan, and ISSB-style disclosure in the UAE or China). Investors need to assess regional policy alignment as part of risk screening and stewardship.
Cost relief and scope shrinkage — but also, legal uncertainty in the EU
The EU’s Omnibus I proposal and Council mandate offer substantial compliance relief for mid-sized companies, particularly through:
- Higher CSRD and CSDDD thresholds
- Delays in first-year reporting and climate transition plan requirements
- A pivot to tier-1, risk-based due diligence
However, legal uncertainty looms over final outcomes, with trilogue negotiations expected to be contentious - especially due to opposition from France, Germany, and investor coalitions pushing back on dilution.
Implication: Mid-cap companies may benefit from short-term cost savings, but larger corporates and financial institutions should not scale back ESG readiness until the final directive texts are adopted. Investors must stay alert to policy volatility and material gaps in reported data.
Voluntary frameworks are converging — and getting technically complex
With GRI, ISSB, CDP, and SBTi all updating or launching new sector-specific or digital standards, the voluntary ecosystem is rapidly professionalizing. Cross-alignment (e.g., GRI Climate 102 aligned with IFRS S2 and SBTi) supports comparability but also increases technical and data management demands, particularly for structured, machine-readable formats (e.g., XBRL).
Implication: Companies must invest in ESG data infrastructure and digital tooling to keep pace with integrated, audit-ready disclosures. Investors will benefit from improved standardization but must understand the nuances of each framework’s scoring and classification criteria.
U.S. uncertainty drives market fragmentation
The SEC’s strategic retreat from defending its 2024 climate rule—and the pause in Canadian mandatory climate disclosures—have placed federal policy in legal and political limbo. However, California’s state laws and investor-driven disclosure practices are keeping pressure high on public companies.
Implication: For U.S.-listed companies, ESG disclosure is increasingly shaped by state law, shareholder expectations, and global investor demands rather than federal mandates. Investors must navigate a complex interplay of soft enforcement and jurisdictional divergence.
Emerging markets are mobilizing faster than expected
New mandates in the UAE, Saudi Arabia, India, and China indicate rapid ESG regulatory momentum in emerging markets. These frameworks are often modeled after global best practices (e.g., ISSB, ICMA, GHG Protocol), signaling a race toward alignment rather than fragmentation.
Implication: Global investors with exposure to Asia and the Middle East must build ESG research capabilities beyond the EU/US axis. Companies in these regions should proactively align with global norms to maintain access to capital and international supply chains.
Looking ahead to Q3 2025
The overarching trend is toward selective simplification, not rollback. While thresholds may rise and deadlines may shift, ESG disclosure and due diligence obligations are expanding in scope and sophistication - particularly in areas like climate risk, transition planning, and supply chain integrity.
Companies should:
- Strengthen ESG governance and materiality assessments
- Prepare for dual-framework disclosure (voluntary + regulatory)
- Invest in interoperable ESG data systems with digital tagging and assurance-readiness
Investors should:
- Scrutinize policy-risk exposure across jurisdictions
- Engage portfolio companies on readiness for new standards
- Integrate emerging-market ESG signals into decision-making
