Compliance in transition: ESG between regulation, reality, and reputation

Slowing down the ESG momentum

A few years ago, the term ESG – environmental, social, and governance – gained strong momentum across Europe, reflected in the European Union’s ambitious sustainability regulations, such as the Non-Financial Reporting Directive (NFRD), the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD), which together created a complex framework for companies to report on ESG issues.

However, the EU has recently hit the brakes. In February 2025, the European Commission introduced an “Omnibus” deregulation package, a set of reforms designed to simplify ESG reporting and delay implementation deadlines. The goal was to ease administrative and financial burdens, particularly for small and medium-sized enterprises (SMEs), for which compliance with ESG rules has proven especially onerous.

So is the EU scaling back its commitment to sustainability, or merely adjusting its pace to ensure realistic implementation?

Divided response to deregulation

The Omnibus package has stirred debate across the continent. Some business leaders welcomed the move as a long-overdue simplification, reducing bureaucracy and costs. Others fear that easing ESG requirements may weaken Europe’s credibility as a sustainability leader.

In October 2025, the European Parliament rejected the proposed compromise version of Omnibus, signalling hesitation to support reforms that might dilute the EU’s sustainability ambitions. The Parliament is expected to return to the debate in November, as the struggle to balance simplification and sustainability credibility continues.

Compliance-perception gap

While regulatory frameworks evolve, another challenge emerges: the gap between corporate ESG declarations and employee perception. Research by SD Worx reveals that 52% of Polish companies claim to integrate sustainability into their HR strategies, and 72% consider their ESG image credible. Yet employees see things differently; only 60% trust their employers’ ESG efforts.

This discrepancy is not unique to Poland. Across Europe, 74% of organisations promote themselves as “sustainable” in how they treat employees through equality, diversity, or wellbeing initiatives. However, just 62% of European workers believe their employers genuinely act in the spirit of sustainable development.

In this light, ESG should not be viewed merely as a regulatory obligation, but as a strategic opportunity. Even as EU institutions debate the scope and timing of reporting requirements, companies that continue investing in sustainability stand to gain a competitive edge through trust, engagement, and long-term reputation building.

The future of ESG 

The Omnibus debate highlights a defining challenge for Europe: finding balance between reducing administrative pressure and maintaining the integrity of its sustainability agenda. Compliance frameworks will continue to evolve, but organisations that approach ESG as more than a compliance issue, and as a genuine cultural and operational commitment, will lead the next chapter of responsible business.

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Emilia Łowczyk is an expert at navigating regulatory requirements with an emphasis on data protection and employment matters.