This issue brings you a concise overview of recent legislative and policy changes driving the sustainability agenda in Estonia, Latvia, Lithuania and at the EU level.
In the Baltics, we cover the adoption of the “Stop-the-Clock” Directive in Estonia and Lithuania, Latvia’s steps to implement the European Media Freedom Act, as well as new measures on equal opportunities, crisis management, and climate roadmaps.
At the EU level, we look at significant developments — from streamlined EU Taxonomy reporting and a “quick fix” for early reporters under the European Sustainability Reporting Standards, to proposed tax incentives for clean industrial transition, the first-ever European Ocean Pact, a new 2040 climate target, and efforts to simplify sustainability reporting and due diligence rules.
Whether you are tracking regulatory deadlines, seeking to understand upcoming compliance requirements, or exploring opportunities in the evolving ESG landscape, we hope these insights will keep you informed and prepared.
News from Lithuania
On 26 June 2025, the Parliament adopted amendments to the Law on Accountability of Companies and Groups of Companies, which came into force on 1 July 2025. These amendments transpose the provisions of the “Stop-the-Clock” Directive and postpone the reporting requirements for so-called “Wave Two” and “Wave Three” companies. Under the revised timeline, large companies and groups are required to begin reporting from 1 January 2027, while listed small and medium-sized enterprises will start on 1 January 2028. The law has also been supplemented with provisions allowing subsidiary companies to opt out of preparing consolidated financial statements and consolidated management reports, provided that these are prepared by the parent company of the group.
Additionally, on 26 June 2025, the Parliament adopted amendments to the Law on Equal Opportunities. The amendments aim to strengthen the legal framework supporting the full participation in society of people with disabilities, and the exercise of their rights across various areas of life. The revised law encourages service providers to take more proactive measures to ensure accessibility.
Updates from Latvia
Latvia will implement the European Media Freedom Act. On 22 July 2025, the Latvian government approved the Ministry of Culture’s initiative to incorporate the requirements of the European Media Freedom Act into national legislation. These changes are intended to enhance media transparency, independence and pluralism, including reforms to media registration, oversight of state advertising, and the establishment of responsible regulatory bodies.
On 1 July 2025, Latvia has launched a reformed crisis management system with the establishment of the new Crisis Management Centre (KVC – Krīzes Vadības Centrs). Operating under the oversight of the prime minister, the KVC now coordinates national preparedness and response efforts, streamlining decision-making and enhancing institutional cooperation to address a wide range of threats.
News from Estonia
A law transposing the “Stop-the-Clock” Directive in Estonia was adopted and has been in force since 20 July 2025. This means that the reporting deadline for large companies is 1 January 2027, and 1 January 2028 for SMEs.
According to stakeholder feedback and a prior agreement, sector-specific roadmaps will be developed this autumn alongside the draft Climate-Resilient Economy Act. These roadmaps will outline the options for achieving climate targets and ensuring competitiveness, providing clear guidance while retaining the flexibility to choose the best means of reaching those goals.
EU-level news
EU simplifies Taxonomy reporting
The European Commission has adopted a Delegated Act to streamline the EU Taxonomy framework, significantly easing the compliance burden for both financial and non-financial companies. One of the key changes introduced is the exemption of non-material activities from detailed reporting requirements, meaning that companies will no longer be required to assess EU Taxonomy eligibility or alignment for economic activities that are not financially material to their operations. For non-financial companies activities are considered non-material if they make up less than 10% of revenue, capital expenditure (CapEx), or operational expenditure (OpEx). For financial companies, the same materiality threshold applies to financial assets that finance specific economic activities, provided the use of the proceeds is known.
In addition to these materiality thresholds, the Commission has simplified reporting templates, reducing the number of required data points by 64% for non-financial companies, and by 89% for financial institutions. The new rules will apply from January 2026, with the option to delay until 2027, and are intended to balance a reduced administrative workload with continued prioritisation of the environment.
The Delegated Act will now be sent to the European Parliament and the Council for their scrutiny. The changes will apply once the scrutiny period of four months, which may be prolonged by an additional two months, is over. The simplification measures will apply as of 1 January 2026 and will cover the financial year 2025 . However, companies are given the option to apply the measures starting with the financial year 2026 if they find this more convenient.
Commission adopts “quick fix” for companies already conducting Corporate Sustainability Reporting
The Commission has adopted targeted “quick fix” amendments to the first set of European Sustainability Reporting Standards (ESRS). This will reduce burdens and increase certainty for companies that were previously required to start reporting for the financial year 2024 (commonly referred to as “Wave One” companies). These changes allow such companies to omit certain disclosures, such as the financial effects of sustainability-related risks for 2025 and 2026, meaning that Wave One companies will not have to report categories of information additional to what they had to report for the financial year 2024. Moreover, for the financial years 2025 and 2026, Wave One companies with more than 750 employees will benefit from most of the same phase-in provisions that currently apply to companies with up to 750 employees. This quick fix was essential because Wave One companies are not covered by the “Stop-the-Clock” Directive, which postponed by two years the sustainability reporting requirements for companies reporting for the financial years 2025 and 2026 (so-called “Wave Two” and “Wave Three” companies).
EU Commission proposes Tax Incentives to accelerate clean industrial transition
The European Commission has released a new Recommendation on Tax Incentives to support the Clean Industrial Deal (CID), a key pillar of the EU’s climate-neutral strategy. The measures include accelerated depreciation, which allows companies to more quickly deduct the full cost of eligible clean technology investments (e.g., renewable energy systems, energy-efficient machinery), sometimes even in the year of purchase or lease, as well as targeted tax credits, designed to reduce upfront costs and improve cash flow for companies investing in clean technologies and decarbonisation. These tools reduce initial costs for companies adopting clean technologies (e.g., renewable energy, energy-efficient machinery) and align with EU climate goals to strengthen competitiveness and meet the 2050 net-zero target.
Member states are now expected to adopt relevant measures and report on their progress. The Commission will facilitate best-practice sharing, monitor outcomes, and publish regular assessments to measure how these tax policies are accelerating clean investment.
First ever EU European Ocean Pact
The President of the Commission, Ursula von der Leyen, announced the first-ever European Ocean Pact and an investment of EUR 1 billion to support ocean conservation, science and sustainable fishing. The Pact focuses on six priority areas: restoring ocean health, boosting the competitiveness of the sustainable blue economy, supporting coastal and island communities, enhancing maritime security and defence, advancing ocean research and innovation, and strengthening international ocean governance. One-third of the funding will go to support scientific and conservation projects, while the rest will be to benefit people who rely on the sea for their livelihood.
Proposed amendments to EU Climate Law
The European Climate Law, which entered into force in July 2021, enshrines in legislation the EU’s commitment to reach climate neutrality by 2050 and the intermediate target of a reduction of at least 55% in net greenhouse gas emissions by 2030, compared to 1990 levels. To build on this framework, the European Commission has proposed an amendment to the EU Climate Law, setting an EU climate target for 2040 of a 90% reduction in net greenhouse gas emissions compared to 1990 levels. This target builds on the existing 2030 goal and outlines a flexible, cost-effective path toward climate neutrality by 2050, supporting innovation, industrial competitiveness, and energy security.
The Commission’s proposal setting a 2040 climate target will be submitted to the European Parliament and the Council for discussion and adoption under the ordinary legislative procedure.
Council finalises its position on the second Omnibus initiative concerning sustainability reporting and due diligence
The European Council adopted its position on simplifying sustainability reporting and due diligence requirements. This proposal aims at simplifying the directives on corporate sustainability reporting (CSRD) and due diligence (CS3D) by reducing the reporting burden and limiting the trickle-down effect of obligations on smaller companies.The proposed changes include increasing the CSRD threshold from 250 to 1,000 employees and introducing a 450 million EUR turnover threshold, as well as excluding listed SMEs from its scope. For CS3D, the threshold is raised to 5,000 employees and 1.5 billion EUR in turnover, and the due diligence obligations are simplified by applying a risk-based approach focused on areas where adverse impacts are most likely, rather than requiring exhaustive mapping.
The European Parliament is expected to adopt its final position regarding the Second Omnibus in October 2025, after which trilogue negotiations will begin.
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Contact the authors:
Co-head of Sorainen ESG team, Counsel, Lithuania
vitalija.impoleviciene@sorainen.com
Counsel, Latvia
Senior Associate, Estonia
