In February 2025, the EU Commission introduced the Omnibus Simplification Package to streamline sustainability regulations. This package includes two proposed Directives: the "Stop-the-clock" Directive, which proposes delaying the CSRD and CSDDD compliance timelines, and a second Directive that suggests substantive changes to both the CSRD and CSDDD – see details here.
The "Stop-the-clock" Directive is now close to being approved, giving businesses more certainty on the timeline for compliance.
The Omnibus – Recent developments
The "Stop-the-clock" Directive
On 26 March 2025, the Council of the European Union ("Council") has agreed on its "general approach", upholding the EU Commission's proposal to delay the CSRD reporting timeline by two years for so-called "wave 2" filers and the member state transposition and first-time application of the CSDDD by one year (to 26 July 2027 with respect to member state transposition, and to 26 July 2028 with respect to first-time application).
Last week, the European Parliament voted to fast track its work on this proposal, and on 3 April it has agreed on its position towards adopting the "Stop-the-clock" Directive as proposed by the Commission by a large majority. The Council can now endorse the Parliament's position and, following certain administrative procedures, the "Stop-the-clock" Directive will be signed and published in the Official Journal. If the Council adopts a different position than the Parliament (which we deem unlikely at this point), the file would enter a second reading among the co-legislators, meaning prolonged negotiations to reach an agreement.
While there is no official timeline available as yet, we expect the co-legislators' endorsement and the publication of the "Stop-the-clock" Directive to be completed ahead of the summer. Once published, Member States must transpose the "Stop-the-clock" Directive by 31 December 2025. In practice, this means that:
- In Member States where CSRD has been transposed, the delayed reporting timeline will only be effective once the "Stop-the-clock" Directive is transposed. Until then, obligations for wave 2 filers are still in force as per the current version of CSRD.
- In Member States where CSRD has not yet been transposed, it is likely that member states may transpose CSRD including the amended timelines stemming from the "Stop-the-clock" Directive in "one go".
Amendments to the ESRS
As part of the Omnibus Simplification Package, the Commission also announced its intention to amend the ESRS by way of a delegated act. At the end of March, the Commission officially tasked EFRAG1 with providing advice on a simplified set of the ESRS by 31 October 2025. The Commission expects reduction of the amount of mandatory data points, consistency with other pieces of EU legislation as well as enhanced interoperability with global sustainability reporting standards. The amended set of ESRS should also provide clearer instructions on how to apply the materiality principle.
The Commission envisages to adopt the amended delegated act on the ESRS in time for companies to apply the "new" set of standards for reporting on financial year 2027 (i.e., the first year of reporting for "wave 2" filers pursuant to the "Stop-the-clock" Directive). Moreover, companies may be granted the option to already apply the revised set of standards for reporting on financial year 2026 (assuming the "Stop-the-clock" Directive is approved, this would only be relevant for "wave 1" CSRD filers). On 8 April 2025. EFRAG launched a public consultation on ESRS revisions (open until 6 May 2025), and by 15 April 2025, EFRAG must communicate its internal timeline and work plan to deliver its advice on amending the ESRS to the Commission.
What's next?
Once the "Stop-the-clock" Directive procedures are completed, the co-legislators will focus on the (more cumbersome) negotiations on the second Directive proposing substantive changes to the CSRD and CSDDD. Proposed substantive changes to CSRD include new thresholds of more than 1,000 employees for EU companies or groups to fall in scope and making EU Taxonomy reporting voluntary for companies or groups with more than 1,000 employees but a turnover below EUR 450 million; and substantive changes to CSDDD include a reduction of due diligence obligations required with respect to business partners, the abolishment of the obligation to terminate supply relationships, a reduced level of required stakeholder engagement, a reduced frequency of in-depth assessments, a reduced scope of civil liability resulting from non-compliance, and the exclusion of the obligation to put a transition plan "into effect".
The European institutions are demonstrating that they take the Commission's impetus of quickly reducing bureaucracy seriously. The EU Council has called on the co-legislators to advance the Omnibus simplification package as a matter of priority, so we do expect to have more clarity at least on timelines before the summer. The following negotiations about more substantial changes will have a crucial impact on the shape of future sustainability legislation, and companies are advised to keep up with them in order to prepare proactively. Companies should also consider providing input into EFRA's ESRS consultation by 6 May 2025.
In addition to the changes to CSRD and CSDDD, the European Commission has also proposed changes to the EU Taxonomy Delegated Acts including, inter alia, introducing a materiality threshold for EU Taxonomy KPIs. Finally, the European Commission has also proposed amending the EU Carbon Adjustment Mechanism (CBAM) to exempt certain small importers from their obligations and to simplify obligations for those still remaining within scope.
1The European Financial Reporting Advisory Group, a technical advisory body for sustainability matters in the EU.