Key highlights from May 2025 in the sustainability space.
1- European Commission escalates enforcement of the Digital Services Act
On May 7, the European Commission referred Czechia, Spain, Cyprus, Poland, and Portugal to the Court of Justice of the European Union for failing to properly implement the Digital Services Act (DSA). While all Member States were required to appoint and empower a national Digital Services Coordinator (DSC) by February 17, 2024, Poland has yet to appoint one, and the other four countries designated DSCs without granting them the necessary authority. None of the five have established penalty regimes for DSA violations, prompting the Commission’s legal action to ensure consistent enforcement across the EU.
The Commission also issued a reasoned opinion to Bulgaria for similar shortcomings—failing to empower a DSC and set penalties. Bulgaria now has two months to comply or risk being referred to the Court as well.
2- European Central Bank cautions on diluting sustainability rules
In a formal opinion published on May 8, the European Central Bank (ECB) commented on the European Commission’s proposed amendments to the CSRD and CSDDD under the Omnibus proposals. While backing the overall goal of boosting Europe’s long-term competitiveness, the ECB stressed that “it is important to strike the right balance to ensure that the benefits of sustainability reporting for the European economy and for the financial system are retained.”
The ECB cautioned against narrowing the scope of the CSRD, particularly in relation to mid-sized and third-country companies, and emphasised the importance of retaining robust climate (ESRS E1) and biodiversity (E4) disclosures. It also called for clear value chain reporting and enforceable transition planning under the CSDDD, voicing concern that the proposed amendments to the CSDDD may introduce legal uncertainty.
At a time when EU institutions appear to be retreating from parts of their sustainability agenda, the ECB’s opinion serves as a timely reminder of the role these disclosure rules play in safeguarding financial stability.
3- European Commission unveils Single Market Strategy
On May 21, the European Commission released a comprehensive policy package, the Single Market Strategy, aimed at modernising regulations to strengthen the EU market’s attractiveness for companies, workers and consumers. Key proposals include a harmonised definition for small mid-cap companies (SMCs), streamlined GDPR rules for companies with under 750 employees, and digitalisation of product compliance procedures.
The strategy also aims to dismantle barriers to the free movement of goods and services. Among the most harmful obstacles identified by businesses are fragmented rules on packaging, inconsistent product standards, limited recognition of professional qualifications, and unjustified territorial supply constraints that inflate consumer prices.
While the package aims to simplify the regulatory environment, it may introduce short-term uncertainty, especially when paired with other reforms like the EU’s Omnibus proposals in sustainability regulation.
4- Trump administration backs antitrust case targeting ESG-driven investor actions
On May 22, the US Department of Justice and Federal Trade Commission filed a legal brief supporting a Texas-led lawsuit (launched in November 2024) alleging institutional investors like BlackRock, State Street, and Vanguard conspired to manipulate energy markets by pushing to slash coal production as part of their “green energy” policies.
This is the first time a federal court has weighed in on antitrust risks tied to common ownership, where investors hold significant stakes in competing companies and allegedly influence their conduct. Citing President Trump’s executive orders declaring a national energy emergency and calling for increased coal production, the agencies argue that the alleged conduct undermines energy security and market competition. The statement clarifies that while passive investment and typical shareholder activity are generally protected, using commonly held shares to influence competing firms' output violates antitrust laws and cannot be justified under environmental or ESG-related goals.
The investors deny wrongdoing and argue their actions reflect long-term investor interests. Still, the case underscores intensifying scrutiny of ESG investing in the U.S., particularly under the current administration.
- Content prepared with the help of Defne Fresko Tasci.