[updated version of an article initially published on 4 April 2025]
The European Union has adopted the “Stop-the-Clock” Directive to immediately postpone application of the CSRD and CSDDD. The first Draft Position of the Council on the second “substantive” Omnibus proposal is now available.
In response to widespread concerns about the administrative burden imposed on companies, the European Commission presented its Omnibus Simplification Package on 26 February 2025. This package aims to strengthen the EU’s competitiveness by significantly simplifying sustainability reporting and reducing due diligence burdens arising under the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the Taxonomy Regulation.
The Omnibus Package includes three important legislative proposals:
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a proposal to immediately postpone application of the CSRD and CSDDD (“Stop the Clock”);
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a proposal to amend the scope of, and the obligations under, the CSRD and CSDDD; and
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a proposal to amend certain delegated acts under the Taxonomy Regulation.
Status update
On 17 April 2025, the “Stop-the-Clock” Directive entered into force (see here). Member States must transpose this Directive into national law by 31 December 2025.
However, the “Stop-the-Clock” Directive merely postpones application of the CSRD and CSDDD. The proposed substantive amendments to the CSRD, CSDDD and the delegated acts under the Taxonomy Directive are still under review by the European Parliament and the Council. On 16 April 2025, the first Draft Position of the Council on the second “substantive” Omnibus proposal became available.
“Stop-the-Clock” Directive approved, published and in force
The “Stop-the-Clock” Directive immediately postpones the upcoming reporting requirements of the CSRD for two years for:
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the second wave of companies and groups, being large EU companies (i.e. companies satisfying at least two of the following criteria: more than 250 employees, annual net turnover above EUR 50 million, and a balance sheet total above EUR 25 million) and groups other than large public interest entities with more than 500 employees; these companies and groups are now required to report in 2028 (instead of 2026) for financial year 2027 (instead of 2025); and
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the third wave of companies (being SMEs with securities listed on an EU regulated market); these are now required to report in 2029 (instead of 2027) for financial year 2028 (instead of 2026).
The first wave of large public interest entities with more than 500 employees remains under an obligation to report under the CSRD for the first time this year (2025) for financial year 2024. Their reporting requirements are not postponed.
The “Stop-the-Clock” Directive also postpones the transposition deadline and the first phase of the entry into force of the CSDDD by one year. The deadline for Member States to transpose the CSDDD into national law is now 26 July 2027 (instead of 26 July 2026). The first wave of companies (i.e. EU companies with net turnover of more than EUR 1.5 billion and more than 5,000 employees, as well as non-EU companies with net turnover in the EU of more than EUR 1.5 billion) have to comply as from 26 July 2028 (instead of 26 July 2027).
Main proposed substantive changes to the CSRD
Significantly reduced scope
The scope of reporting companies will be reduced, as a result of which approximately 80% of the companies initially subject to the CSRD’s sustainability reporting requirements will now fall outside its scope.
The reporting requirements should only apply to (i) large EU companies (i.e. companies having either annual net turnover above EUR 50 million, or a balance sheet total above EUR 25 million), and (ii) groups with more than 1,000 employees (rather than 250 employees). Even if their securities are listed on an EU regulated market, SMEs are thereby removed from the scope of the measure.
Non-EU ultimate parent undertakings will only be in scope if they have net turnover in the EU exceeding EUR 450 million (instead of EUR 150 million) and either:
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an EU branch generating net turnover exceeding EUR 50 million (instead of EUR 40 million); or
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a large EU subsidiary (even if it does not have more than 1,000 employees).
“Value chain cap” for SMEs
To avoid SMEs from being included in the value chain of larger companies that fall within the scope of the CSRD, it is proposed preventing them from being subject to excessive reporting demands. The European Commission wants to adopt a voluntary standard for all companies out of scope, such as SMEs (the “VSME standard”). Companies within the scope of the CSRD will not be able to request any information beyond that set out in the VSME standard from any company in their value chain that falls outside the scope of the CSRD.
European Sustainability Reporting Standards (ESRS)
The Commission intends to revise the first set of ESRS in order to reduce substantially the number of data points, to clarify provisions deemed unclear, and to improve consistency with other legislation. These changes are to be adopted as soon as possible, and no later than six months after the entry into force of the Omnibus Simplification Package. Moreover, it is proposed that the power of the European Commission to adopt sector-specific standards be abolished, thereby avoiding an increase in the number of prescribed data points that companies require to report on.
Limited assurance only
It is furthermore proposed removing the possibility of moving from a so-called “limited assurance” to a “reasonable assurance” so as to avoid any future increases in costs of assurance.
Despite much speculation in the lead-up to publication of the first Omnibus Package, the double materiality principle (impact materiality and financial materiality) has not been amended.
Main proposed substantive changes to the Taxonomy Regulation
Reduced scope
The scope of reporting companies under article 8 of the Taxonomy Regulation will be reduced in line with the scope of the CSRD (see above: “Significantly reduced scope”). Consequently, the proposal is that listed SMEs or other companies/groups with fewer than 1,000 employees not be required to report under the Taxonomy Regulation.
Under the proposal, large companies with more than 1,000 employees but with net turnover not exceeding EUR 450 million will not need to report under the Taxonomy Regulation unless they claim that their activities are aligned, or partially aligned, with the EU Taxonomy (“opt-in approach”). In that case, they need to disclose their turnover and CapEx KPIs (mandatory), but are free not to disclose their OpEx KPI (voluntary).
Partial alignment
The undertakings that opt in will be allowed to report on activities that meet some technical Taxonomy screening criteria without meeting all of them. This reporting on partial alignment could foster a gradual environmental transition of activities over time, in line with the aim of scaling up transition finance.
Main proposed substantive changes to the CSDDD
Transition plan aligned with the CSRD
The provision on climate transition plans will be better aligned to the language of the CSRD, while continuing to complement the CSRD by imposing a clear obligation to adopt such a plan.
No harmonised liability regime
The Union-wide liability regime will be removed. Civil liability will accordingly need to be defined by the national law of each Member State. The “optional” minimum cap for fines, of 5% of turnover, will also be repealed, and the European Commission will be tasked with developing guidelines on fines.
Impact on SMEs and small midcap companies
To further limit the trickle-down effect on companies with fewer than 500 employees, the information that might be requested as a part of value-chain mapping will be restricted to that specified in the VSME sustainability reporting standard, unless additional information should prove necessary.
Simplified due diligence
The due diligence requirements will be simplified. The notion of “stakeholders” will be narrowed to those that have a link to the specific stage of the due diligence process being carried out, and the stages of the due diligence process that require stakeholder engagement will be reduced. In-depth assessments of indirect business partners will only be required where there is plausible information indicative of adverse impacts. The intervals in which companies need regularly to assess the adequacy and effectiveness of due diligence measures will be extended from one year to five years. Moreover, the obligation to terminate business relationships as a last resort will be removed.
Next steps
The Member States must transpose the “Stop-the-Clock” Directive into national law by 31 December 2025.
The proposal on the substantive changes to the CSRD and CSDDD will probably not be fast-tracked and will therefore have to go through the ordinary legislative procedure.
