Great Britain may no longer be part of the EU, but the bloc’s environmental reporting legislation has a profound effect on UK trade. Recent changes made by Brussels look to simplify reporting requirements, but the truth remains much more complex.
The European Parliament’s decision last year to scale back elements of its sustainability reporting framework has been widely seen as a relief for companies supposedly ‘burdened’ by regulation. While this move may reduce short-term compliance pressure, it risks sending the wrong message at a time when businesses are still struggling to get a firm grip on their sustainability data.
Although the UK is no longer subject to EU legislation, British firms trading with Europe still operate within supply chains that rely on aligned standards. Any shift in the EU’s direction, therefore, has an immediate effect on expectations placed upon UK exporters, importers and suppliers.
The biggest concern, however, is that scaling back reporting requirements doesn’t address the true underlying problem. Our report, The State of ESG Data Management in Europe, shows that trust in sustainability data remains low across the continent. Only one in five European business leaders fully trusts their ESG data, compared to the 68% who trust their financial data. This gap highlights a fundamental issue in how ESG information is collected, managed and used, rather than a problem caused by regulation alone.
The real question is whether reducing regulatory requirements will allow these problems to persist, rather than addressing them.
Sustainability data remains scattered and unreliable
The research reveals that ESG data collection is still an unnecessarily fractured process. Many organisations pull information from at least five departments, which increases delays and reduces oversight. A substantial proportion of teams still rely on four or more software tools to gather and interpret sustainability metrics. This approach creates a patchwork of spreadsheets, disconnected systems, and duplicated efforts, which often result in unreliable data.
Half of the businesses (50%) in our study say that poor data quality and missing technology are their biggest challenges in the ESG space. These concerns extend directly to UK companies whose European customers expect data that is traceable, comparable, and reliable. While rules may soften, the need for trustworthy information has not diminished. Now, it is important to maintain both commercial relationships and regulatory expectations.
Why weaker rules will not fix the underlying issue
Some may assume that reduced ESG requirements will give organisations breathing room. But in practice, it risks covering up fundamental flaws in how sustainability data is gathered and validated.
Businesses are making decisions with data that they do not fully trust, and investors continue to ask for detailed, auditable disclosures regardless of ongoing changes to policies and regulations. The EU has a strong history of setting legislative benchmarks that other regions eventually follow to streamline trade, the most classic example being the GDPR (General Data Protection Regulation), which was set in 2018. Even when rules are adjusted, market expectations often remain aligned with the original higher standard.
We are also noticing more and more cases of how sustainability data is becoming a central aspect of a firm’s commercial strategy. There are a few reasons for this: ESG data influences procurement decisions, investment confidence, and long-term planning. If businesses treat ESG data as a secondary concern, it will only lead to missed opportunities and poor decision-making.
The solution here is to develop an integrated system of record that will enable organisations to consolidate datasets, establish clear ownership, and improve auditability. This mirrors the transformation that financial reporting underwent several decades ago. Embracing this shift now will equip firms to navigate both regulatory change and market scrutiny.
A moment for action, not retreat
The scaling back of EU rules should not be treated as a signal to deprioritise sustainability reporting, but a reminder for businesses to strengthen their internal processes. Reliable, centralised and transparent ESG data management is the only way forward for UK and European companies to operate confidently in the next phase of ESG reporting, where expectations will only continue to evolve.
Juanjo Mestre is Co-Founder and CEO, Dcycle, an agentic data platform that unifies every ESG framework with expert guidance.
Image: Luke Chesser / Unsplash
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