GKI Analysis: Has competitiveness taken precedence over sustainability in the EU?

By: Trademagazin Date: 2025. 04. 28. 11:19

The European Union’s sustainability (ESG) objectives have been a high priority in recent years. The aim of sustainability regulations is to ensure that companies take environmental and social impacts into account in their operations, as well as transparent corporate governance. However, in response to the current international competitiveness challenges, the EU has decided to postpone the deadline for compliance with sustainability criteria. Sustainability remains a high priority, but the preparation time has only been extended due to competitiveness considerations.

Two-year postponement

In April 2025, the European Council approved the “Stop-the-clock” directive, submitted as part of the so-called Omnibus package, which aims to simplify EU rules, postpone sustainability regulations and thereby increase the EU’s competitiveness. The decision postpones the application of the second and third wave of the Corporate Sustainability Reporting Directive (CSRD) by two years, while the first phase of application of the Corporate Sustainability Due Diligence Directive (CSDDD) will be postponed by one year. Large companies that were originally due to start reporting under the CSRD in 2026 will now have to report for the first time in 2028 for the financial year 2027, while listed small and medium-sized enterprises will have to start reporting in 2029. The application of the sustainability due diligence (CSDD) obligations for the largest companies will be postponed to 2028.

As part of the Omnibus package, the European Commission has also proposed substantive amendments to the CSRD and CSDDD, which aim to simplify the regulations and reduce the administrative burden on companies. However, these proposals are still under negotiation and are expected to take longer to finalize.

Impact on Hungarian companies

EU Member States will have to transpose the amended CSRD Directive into their national legal systems by 31 December 2025 at the latest, meaning that the domestic ESG law will change accordingly in the near future. The transposition of the CSDD Directive into Hungarian law must take place by 2027.

The postponements provide Hungarian companies with the opportunity to prepare more thoroughly for the sustainability reporting and due diligence obligations, which is very beneficial for companies, as many Hungarian companies are significantly behind in terms of what needs to be done. This period provides an opportunity to properly develop the necessary internal processes, data collection systems and reporting structures. However, it is important to note that the postponements do not mean the abolition of the obligations.

Companies are still advised to proactively prepare for the introduction, development and reporting of sustainability aspects. This is especially important for companies that participate in international supply chains, as their partners may already expect sustainability data to be made available. Large international companies are increasingly requiring sustainability data from their suppliers, so the relevant Hungarian companies should also start preparing ESG reports. In addition, ESG reporting is increasingly decisive in terms of access to capital and favorable financing conditions. Investors who take ESG aspects into account prefer companies that are transparent and compliant with the rules from a sustainability perspective. Furthermore, sustainably operating companies can also benefit from EU and state subsidies.