C-Level procurement executives must adapt to evolving ESG regulations impacting procurement and sourcing strategies by 2025. Simplification of regulations might not always simplify processes, especially when discussing sustainability rules affecting about 50,000 companies within Europe. The year 2025 has ushered in numerous changes impacting procurement and supply chain practices, with the European Commission’s Omnibus Simplification Package set out to alleviate the complexity of sustainability regulations. However, its introduction could potentially add layers of challenges. First published in February 2025, the draft came after extensive calls from businesses and political entities aiming to reduce regulatory burdens. This is particularly pressing for small and medium-sized enterprises (SMEs), for whom reporting is far from straightforward.\n\nSaskia van Gendt, Chief Sustainability Officer at Blue Yonder, says: \"Some view this as a step back from transparency, but I see it as a necessary recalibration. Sustainability teams are increasingly stretched, spending disproportionate time on compliance rather than impact. The omnibus gives companies, especially SMEs, breathing room to focus on initiatives that actually drive environmental and social progress.\"\n\nThe omnibus package affects the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), EU Taxonomy Regulation and the Carbon Border Adjustment Mechanism (CBAM). Saskia says: \"By shifting away from one-size-fits-all requirements, the Directive still maintains accountability where it matters most. Larger companies responsible for the bulk of emissions and equipped with greater resources remain within scope. In contrast, SMEs, which account for a smaller share of emissions, get space to innovate and adapt.\"\n\nCSRD: Planned changes to the Corporate Sustainability Reporting Directive (CSRD) would reduce reporting companies by about 80%. New rules would apply mainly to firms with over 1,000 employees and turnover above €50m ($58.4m) or a balance sheet over €25m ($29.2m). Non-EU parents would need €450m ($526m) EU turnover and significant presence to qualify. A \"stop-the-clock\" measure delays reporting for waves two and three by two years, until 2028, approved outside the omnibus package.\n\nCSDDD: The Corporate Sustainability Due Diligence Directive (CSDDD) timelines would shift, giving member states until July 2027 to adopt it, with large companies complying from July 2028. Scope would narrow to direct suppliers and contractors using a risk-based approach. Applicability rises to EU firms with over 1,000 staff and €450m ($526m) turnover. Reviews would be every five years, not annually, and no transition plans required. Civil liability, minimum penalties and third-party claims rights could be removed.\n\nEU Taxonomy: Omnibus changes to the EU Taxonomy would reduce mandatory reporting and let large out-of-scope companies report voluntarily. Firms could omit activities under a 10% de minimis threshold from technical screening. Data points would drop by roughly 70%, with simplified templates removing the need to report separately for different objectives. This aims to cut complexity while keeping the framework open to voluntary participation for companies not strictly required to comply.\n\nCBAM: The Carbon Border Adjustment Mechanism (CBAM) threshold would change to 50 tonnes annually per importer per CBAM-covered good, retaining 99% of emissions in scope but exempting 90% of importers. Advance quarterly CBAM certificate purchases would fall from 80% to 50% of embedded emissions. The repurchase limit would increase to 50% of annual liability. Importers could reduce CBAM costs based on carbon charges paid in any third country, not only the origin country.\n\nRegulation changes inevitably spark debate across industries. A group of prominent global enterprises, including DP World and Unilever, appealed to the European Commission, cautioning against the dilution of existing sustainability standards. In an open letter, more than 200 organisations reiterated this sentiment, emphasising maintaining robust frameworks for ESG reporting and due diligence within the procurement realm.\n\nSophie Graham, Chief Sustainability Officer at IFS, feels that businesses should \"leave the debating to the politicians.\" She continues: \"Amid the ongoing debate around the omnibus, a simple fact remains: good data is good for business. A better handle on data is what enables sustainability to be managed as a strategic corporate initiative, with a focus on delivering value, driving efficiencies, creating accountability and integrating into decision-making across functions. It’s worth noting that in the omnibus proposed changes, two factors that have held steady are the focus on the quality of the data and the relevance to business performance. Companies still need to perform a double materiality assessment to identify their most relevant sustainability topics to manage and disclose, as well as externally assure the data they report.\"\n\nWith these regulatory shifts, procurement leaders must prioritise investing in technology to optimise data management, enabling a seamless transition to more dynamic and accountable sustainability practices. This strategic alignment can pave the way for increased operational efficiency, ensuring compliance while enhancing overall corporate value.

How EU ESG Regulations are Redefining Procurement Dynamics

The European Union is introducing a series of regulatory changes in 2025 through its Omnibus Simplification Package to streamline ESG reporting and procurement practices. The package modifies key directives including the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), EU Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM). These changes aim to reduce compliance burdens, especially for small and medium-sized enterprises (SMEs), by narrowing reporting scopes, simplifying data requirements, and shifting timelines. While some regulations introduce delays and exemptions, the core emphasis remains on data quality and business relevance. Industry leaders such as DP World and Unilever have expressed concerns about potential dilution of sustainability standards, urging the European Commission to maintain robust ESG frameworks. Procurement executives are advised to invest in technology to improve data management and align sustainability with strategic business goals.