ESG Is Changing, But It Is Not Disappearing

Over the last few years, ESG became one of the most discussed topics in business. For some companies, it became a serious part of strategy and reporting. For others, it felt like another compliance burden added to an already long list of obligations. Now, as sustainability reporting rules continue to change in Europe and internationally, many business owners are asking a practical question: does ESG still matter?

The answer is yes, but the way businesses approach it is changing.

CSRD, the Omnibus Package, and Regulatory Evolution

In Europe, the Corporate Sustainability Reporting Directive, known as CSRD, was introduced to improve the quality, consistency, and comparability of sustainability information reported by companies. The European Commission explains that the first companies subject to CSRD had to apply the new rules for the 2024 financial year, with reports published in 2025. The aim was to give investors, stakeholders, and the public better information about sustainability risks, impacts, and business practices.

However, the regulatory picture has not remained static. The EU has been reviewing and simplifying parts of its sustainability reporting framework through what has become known as the Omnibus package. The European Parliament’s legislative train describes proposals to postpone certain CSRD reporting requirements for some companies and delay parts of the Corporate Sustainability Due Diligence Directive. Reuters has also reported that sustainability reporting is evolving globally, with some regulatory rollbacks in the EU and the United States, while other countries continue moving towards mandatory sustainability disclosure aligned with international standards.

For businesses, this creates confusion. Some may assume that if rules are delayed, reduced, or simplified, then ESG is no longer important. That would be a mistake.

The real trend is not that ESG is disappearing. The trend is that sustainability reporting is becoming more practical, more focused, and more connected to business value. Companies are being pushed to move away from generic statements and towards clearer information that stakeholders can actually use.

The table below summarises how the conversation around ESG is shifting from the older perception to the emerging reality.

The old perception of ESG	The emerging reality
A compliance burden to satisfy regulators	Part of risk management and long-term business planning
Generic statements and broad slogans	Clear, useful information stakeholders can actually use
Only relevant to large listed companies	Increasingly requested across supply chains, including SMEs
A marketing exercise	Evidence, data, and consistency that stakeholders can verify
Less important if rules are delayed or simplified	Still expected by banks, investors, customers, and insurers

Why ESG Still Matters Beyond Formal Reporting

This matters because ESG is no longer only about regulation. Banks, investors, larger customers, public sector buyers, insurers, and international supply chains may still ask for sustainability-related information even where a business is not directly required to publish a formal sustainability report. A smaller company may not fall under the full CSRD scope, but it may still be asked to provide information by a larger client that does.

This is especially relevant for SMEs. Many small and medium-sized businesses are not directly subject to the same level of reporting as large listed companies, but they increasingly operate inside supply chains that are affected by sustainability rules. A large company preparing sustainability disclosures may need information from suppliers on energy use, emissions, labour practices, governance, or risk controls.

This is one reason why EFRAG developed a voluntary sustainability reporting standard for non-listed micro, small, and medium-sized enterprises, known as VSME. EFRAG describes the VSME as voluntary, intended for companies with fewer than 250 employees, aligned with the European Sustainability Reporting Standards, and tailored to the size, capacity, and needs of SMEs.

For many SMEs, this may become a useful middle ground. They may not need a complex sustainability report, but they may still benefit from having structured information ready when banks, customers, or business partners ask for it.

ESG as Risk Management and Business Planning

From a finance perspective, ESG should be understood as part of risk management and long-term business planning. It is not only about environmental policies or corporate statements. It can affect access to finance, insurance terms, tender eligibility, supplier relationships, brand reputation, and investor confidence.

For example, a bank assessing a business may increasingly consider climate-related risks, energy costs, regulatory exposure, governance quality, and the reliability of management information. A company with poor records, weak controls, or no visibility over environmental and operational risks may appear less prepared than a competitor with clearer data. Bringing structure to this kind of information often starts with the same discipline as a thorough financial health check of the underlying numbers.

The same applies to tenders and supply chains. Businesses that work with larger organisations may find that sustainability questionnaires become part of onboarding. These questionnaires may ask about energy usage, waste management, data protection, employee policies, anti-bribery procedures, or supplier controls. In practice, ESG often overlaps with general good governance.

This is why businesses should avoid treating ESG as a marketing exercise. Stakeholders are becoming more cautious about vague sustainability claims. They want evidence, data, and consistency. A company does not need to present itself as perfect, but it should be able to explain what it measures, what risks it faces, and what improvements it is making.

A Practical Approach for Smaller Businesses

For smaller businesses, the best approach is usually practical and proportionate. Start with the basics. Understand energy consumption, review major suppliers, document key policies, improve internal controls, and keep records that can support claims made to banks or clients. This does not need to become a complex corporate exercise from day one.

The important point is to build reliable information gradually. If a company waits until a bank, investor, or major customer asks for ESG information, it may struggle to respond quickly. If the information is already organised, the business can respond with more confidence.

There is also a strategic benefit. Reviewing sustainability-related data can help businesses identify cost savings and operational improvements. Energy efficiency, waste reduction, better procurement, employee retention, and stronger governance can all have a financial impact. ESG, when approached properly, is not separate from business performance. It can support it. The right accounting, tax and advisory support can help turn this scattered information into something structured and credible.

From Slogans to Credible Reporting

This is the shift businesses need to understand. The discussion is moving away from ESG as a slogan and towards sustainability information as part of credible business reporting. The companies that handle this well will not be the ones producing the longest reports. They will be the ones producing the most useful, accurate, and relevant information.

For directors and business owners, the message is clear. Even if regulatory requirements are changing, stakeholder expectations are still moving towards greater transparency. Companies that prepare early, keep better records, and understand their risks will be in a stronger position when dealing with banks, investors, customers, and regulators. If you are unsure where to begin, it is worth speaking to an advisor before your next bank review or tender deadline.

ESG may be changing, but it is not disappearing. It is becoming part of how businesses are assessed, financed, and trusted.

Sources & References

European Commission. “Corporate sustainability reporting.” Available at: https://finance.ec.europa.eu/

European Parliament. “Omnibus I sustainability reporting stop-the-clock proposal.” Available at: https://www.europarl.europa.eu/

Reuters. “Two steps back, but three forward for sustainability reporting.” Available at: https://www.reuters.com/

EFRAG. “SMEs and Sustainability Reporting.” Available at: https://www.efrag.org/