EU Agrees Sustainability Omnibus ‘Stop-the-Clock’ Directive and Consultation Launched on the European Sustainability Reporting Standards

On 14 April 2025, the European Council formally adopted the “stop-the-clock” Directive.[1] This follows on from the European Parliament voting overwhelmingly to approve the proposal on 3 April 2025, with 531 votes for, 69 against and 17 abstentions. The Directive was published in the Official Journal of the European Union on 16 April 2025 and entered into force on 17 April 2025. Member States will have to bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by 31 December 2025. However, we expect most Member States to transpose the changes sooner than this. 

The “stop-the-clock” Directive is one of two directives proposed as part of the European Commission’s first sustainability ‘omnibus’ package, published on 26 February 2025. The “stop-the-clock” Directive postpones reporting requirements for companies currently within scope of the Corporate Sustainability Reporting Directive (CSRD) who are required to report for financial years beginning on or after 1 January 2025 and on or after 1 January 2026 by two years (until financial years beginning on or after 1 January 2027 and 1 January 2028 respectively). It also delays the application of the Corporate Sustainability Due Diligence Directive (CS3D) by one year for the first wave of in scope companies, to 26 July 2028. The adoption and subsequent entry into force of the Directive will provide welcome certainty to companies caught by the relevant requirements. 

The second part of the sustainability ‘omnibus’ package, a Directive addressing the content, sets out more substantive amendments to the obligations in the CSRD and CS3D. This Directive has yet to be approved, although both the Parliament and the Council have set themselves ambitious timelines for doing so. Recent intelligence suggests that a final vote may take place as early as July and at the latest in October this year, ahead of the expected publication of updates to the European Sustainability Reporting Standards (ESRS) by the European Financial Reporting Advisory Group (EFRAG) (see below). Given that this Directive contains the ‘meat’ of the changes, it is possible that additional amendments will be proposed, and debated, during negotiations. We aim to provide regular updates on the progress of this Directive on this blog, to assist with monitoring developments.

In addition, as part of the sustainability ‘omnibus’ package, the Commission has also proposed revising and simplifying the ESRS, which companies in scope of the CSRD are required to report against. The Commission has tasked EFRAG with providing technical advice on ESRS simplification, which is required to be delivered by 31 October 2025. Last week EFRAG issued a public call for input[2] in relation to potential revisions. The deadline for feedback is Tuesday 6 May.   

The public call for input aims to gather feedback on the following points, as set out in EFRAG’s press release:

• ESRS mandatory datapoints that are least important or problematic (with separate consideration given to cross-cutting, environment, social and governance matters);
• suggestions on how to modify ESRS provisions that are deemed unclear;
• suggestions on how to improve consistency with other EU legislation;
• suggestions on how to improve the ESRS provisions on materiality to ensure that undertakings report only material information, do not report unnecessary information and do not dedicate excessive resources to the materiality assessment process;
• suggestions on how to simplify the structure and presentation of the ESRS;
• suggestions on how to enhance interoperability with global sustainability reporting standards; and
• any other modifications that could simplify the ESRS without compromising their role in supporting the EU Green Deal (the EU’s strategy to achieve climate neutrality by 2050).

Companies in scope of CSRD reporting, particularly those with experience of preparing reports this year as ‘Wave 1’ reporters, may wish to respond, in order to highlight particular pain points, useful learnings (including from disclosure regimes in other jurisdictions), or other suggestions for improving or clarifying the ESRS.  

Update made on 17 April 2025 to reflect the Directive's entry into force following publication in the Official Journal of the European Union.
 

[1]Simplification: Council gives final green light on the ‘Stop-the-clock’ mechanism to boost EU competitiveness and provide legal certainty to businesses - Consilium

[2]EFRAG launches a public call for input on ESRS Set 1 Revision | EFRAG