European Parliament approved the “Stop-the-Clock” proposal of the European Commission to immediately postpone the application of the CSRD and CSDDD.
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:
-
A proposal to immediately postpone the application of the CSRD and CSDDD (“Stop-the-Clock”).
-
A proposal to amend the scope of, and obligations under, the CSRD and CSDDD.
-
A proposal to amend certain Taxonomy delegated acts.
Status update
On 3 April 2025, the European Parliament voted in favour of the proposal, after the urgent procedure to fast-track the proposal was approved on 1 April 2025.
The next step to bring the Directive into force is the Council’s formal approval, probably during the next Council meeting on 7 April 2025. This is expected to be a formality, since the Council already agreed its negotiating position on 26 March 2025.
Once published in the Official Journal, Member States must transpose the “Stop-the-Clock” Directive into national law by 31 December 2025 at the latest.
The proposed substantive amendments to the CSRD and CSDDD and the Taxonomy delegated acts are still under review by the European Parliament and the Council. Considering their nature, their legislative process is expected to take much longer.
Main changes proposed to the CSRD
-
Delayed timeline. The upcoming reporting requirements would immediately be postponed by two years for: (i) the second wave of companies and groups required to report in 2026 for financial year 2025 (being large EU companies and groups other than large public interest entities with more than 500 employees), as well as (ii) the third wave of companies required to report in 2027 for financial year 2026 (being SMEs with securities listed on an EU regulated market). The first wave of large public interest entities with more than 500 employees are required to report under the CSRD for the first time this year for the financial year 2024; their reporting requirements will not be delayed.
-
Significantly reduced scope. The scope of reporting companies shall be reduced, excluding approximately 80% of the companies initially subject to the CSRD’s sustainability reporting requirements.
-
The reporting requirements would only apply to large EU companies and groups with more than 1,000 employees (instead of 250 employees). SMEs, even if their securities are listed on an EU regulated market, are thus removed from the scope.
-
Non-EU ultimate parent undertakings would only be in scope if they have:
-
a net turnover in the EU exceeding EUR 450 million (instead of EUR 150 million); and either
-
an EU branch generating a net turnover exceeding EUR 50 million (instead of EUR 40 million); or
-
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 withing the scope of the CSRD, the proposal prevents these SMEs from being subject to excessive reporting requests. The European Commission would adopt a voluntary standard for all companies out of scope, such as SMEs (the “VSME standard”). Companies in the scope of the CSRD will not be able to request from companies in their value chain that are out of scope of the CSRD any information that goes beyond the information set out in the VSME standard.
-
ESRS. The Commission intends to revise the first set of European Sustainability Reporting Standards (ESRS) to reduce the number of data points substantially, to clarify provisions deemed unclear, and to improve consistency with other pieces of legislation. These changes are to be adopted as soon as possible, and at the latest six months after the entry into force of the Omnibus Simplification Package. Moreover, the power of the European Commission to adopt sector-specific standards would be abolished, thereby avoiding an increase in the number of prescribed data points that companies must report on.
-
Limited assurance only. The possibility of moving from a so-called “limited assurance” to a “reasonable assurance” would also be removed 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 changes proposed to the Taxonomy regulation
-
Delayed timeline. The reporting obligations under the Taxonomy Regulation are postponed in accordance with the postponement of the reporting obligations under the CSRD.
-
Reduced scope.
-
The scope of reporting companies under Article 8 of the Taxonomy Regulation shall be reduced in line with the scope of application of the CSRD (see above). Consequently, listed SMEs or other companies/groups with less than 1,000 employees would not be required to report under the Taxonomy Regulation.
-
Large companies with more than 1,000 employees but with a net turnover not exceeding EUR 450 million must not 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 must disclose their turnover and CapEx KPIs (mandatory), but are free to not disclose their OpEx KPI (voluntary).
-
-
Partial alignment. The undertakings that opt-in would be allowed to report on activities that meet certain Taxonomy technical screening criteria without meeting all of them. Such reporting on partial alignment can foster a gradual environmental transition of activities overtime, in line with the aim to scale up transition finance.
Main changes proposed to the CSDDD
-
Delayed timeline. The transposition deadline as well as the first phase of the entry into application would be postponed with one year. The deadline for Member States to transpose the CSDDD into national law would be 26 July 2027 (instead of 26 July 2026). The first wave of companies (i.e., EU companies with a net turnover of more than EUR 1.5 billion and more than 5,000 employees, as well as to non-EU companies with net turnover in the EU of more than EUR 1.5 billion) would therefore have to comply as from 26 July 2028 (instead of 26 July 2027).
-
Transition plan aligned with CSRD. The provision on climate transition plans will be better aligned to the language of the CSRD, while continuing to complement the CSRD with a clear obligation to adopt such a plan.
-
No harmonised liability regime. The Union-wide liability regime would be removed. The civil liability thus needs to be defined by the national law of each Member State. The ‘optional’ minimum cap for fines of 5% of the turnover would also be deleted, and the European Commission would be tasked with developing fining guidelines.
-
Impact for SMEs and small midcap companies. To further limit the trickle-down effect on these companies with fewer than 500 employees, the information that may be requested as part of the value chain mapping would be limited to the information specified in the VSME sustainability reporting standard, unless additional information is necessary.
-
Simplified due diligence. The due diligence requirements would be simplified. The notion of ‘stakeholders’ would be narrowed to those stakeholders 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 would be restricted. In-depth assessments of indirect business partners would only be required where there is plausible information suggesting adverse impacts. The intervals in which companies need to regularly assess the adequacy and effectiveness of due diligence measures would be extended from 1 year to five years. Moreover, the obligation to terminate business relationships as a last resort would be removed.
No immediate impact. It is important to stress that the current legislative framework, including its scope and timeline, remains in place. Companies must thus not yet rely on the Omnibus package. The Council agreed its negotiating position on the “Stop-the-Clock” proposal on 26 March 2025. On 3 April 2025, the European Parliament voted in favour of the proposal, after the urgent procedure to fast-track the proposal was approved on 1 April 2025.
The final steps to bring the Directive into force are the Council’s formal approval (probably during the next Council meeting on 7 April 2025) and the publication of the Directive in the Official Journal. According to the current text of the proposal, Member States must transpose the “Stop-the-Clock” Directive into national law by 31 December 2025 at the latest.
