Regulatory Updates from the European Union in 2025
The European Union continues to develop the legislative framework for sustainable business intensively, with a particular emphasis on ESG reporting. During 2025, several key documents have been adopted that have a direct impact on obligations and guidelines for entrepreneurs in the EU, including Croatia.
The most important updates for 2025 include:
Directive (EU) 2025/794 – officially published on April 16, 2025, this directive postpones the beginning of sustainability reporting obligations for entrepreneurs in the second and third round of the CSRD application, giving businesses more time to adapt to new requirements.
Commission Recommendation (EU) 2025/1710 – published on August 5, 2025, introduces a voluntary reporting standard for small and medium-sized enterprises (VSME). The aim is to facilitate access to sustainable reporting and encourage transparency, even for those not covered by mandatory reporting.
CSRD Directive Amendments – “Omnibus Package” – as part of the so-called “content proposals,” amendments to the CSRD have been proposed to simplify requirements, reduce administrative burden, and redefine the scope of subject entities. These changes are currently being negotiated between EU institutions and are expected to be finally adopted by the end of the year.
These updates mark further development of the ESG framework, aimed at greater clarity, accessibility, and proportionality of requirements, especially for small and medium-sized enterprises.
Postponement of Reporting Requirement for Some Businesses
Directive (EU) 2025/794, adopted in April 2025, postpones the beginning of sustainability reporting obligations for the second and third group of businesses, which includes:
- large businesses not covered by the first group of CSRD subject entities,
- small and medium-sized enterprises with securities listed on a regulated EU market.
The postponement means that the first reporting period for them will begin no earlier than January 1, 2027, or January 1, 2028, depending on the group they belong to.
This provides all affected businesses with a two-year transition period for additional preparation, capacity development, and better adaptation to new regulatory requirements.
However, this directive does not affect the first group of businesses required to report for the 2024 business year; there has been no postponement for them. All large businesses and parent companies of large groups that are public interest entities based on being issuers whose securities are listed on a regulated market in any member state, credit institutions, insurance or reinsurance companies, and which at the balance sheet date exceed the criterion of an average of 500 employees during the previous business year, are required to report on sustainability for the business year starting January 1, 2024, or after that date. These entities, according to the new Accounting Act (Official Gazette 85/24, hereinafter: the Act), are the first to begin reporting on sustainability under the new legislative framework based on the CSRD Directive.
Please keep in mind the fact that legislation tends to change frequently. This article is therefore necessarily based on our understanding and correct interpretation of the law and practice at the time of issuing this article. This article will not be updated due to changes in legislation that occur after this article is issued.