On April 3, 2025, the European Parliament voted to delay the implementation of new sustainability and due diligence reporting requirements, a move commonly referred to as the “stop-the-clock” vote.
This decision postpones the application of the EU’s Corporate Sustainability Reporting Directive (CSRD) by two years for the second and third wave of companies within its remit. There is no change for large public interest companies with more than 500 employees, those already reporting under NFRD, who will still have to comply with CSRD this year. Additionally, the implementation and national transposition of the Corporate Sustainability Due Diligence Directive (CSDDD) has been deferred by one year. The rationale behind these postponements includes reducing administrative burdens in the short term and providing companies with more time to prepare for compliance.
The final steps to bring the Directive into force are the Council’s formal approval and its publication in the Official Journal. According to the draft text, the Directive will enter into force the day after its publication. Those EU Member States that have already transposed CSRD will then have until December 31, 2025, to amend their existing laws to make the reporting delays effective. December 31, 2025, is also the transposition deadline for those EU Member States that have not yet transposed CSRD into law.
In this article, we look at the implications for businesses, provide some strategic recommendations, and look at what to expect next from EU policymakers.
Implications for Businesses
CSRD:
This delay affects compliance schedules, providing companies with additional time to align with reporting standards. For large companies with more than 250 employees that fall under the second wave of CSRD, the updated timeline with a two-year delay is as follows:
- 2028: First CSRD statement is due.
- 2027: Data collection occurs, implying the double materiality assessment (DMA) is completed.
- End of 2026 - Early 2027: Conduct a CSRD-compliant DMA.
- 2025 - 2026: It is recommended to perform a dry run DMA, following the best practices identified by wave one companies.
The updated timeline for small and medium-sized listed companies that fall into wave three is as follows:
- 2029: First CSRD statement is due.
- 2028: Data collection occurs, implying the DMA is completed.
- End of 2027 - Early 2028: Conduct a CSRD-compliant DMA.
- 2026 - 2027: It is recommended to perform a dry run DMA, following the best practices identified by wave one companies.
CSDDD:
The first wave of affected businesses — EU companies with over 5,000 employees and net turnover higher than €1.5 billion, as well as non-EU companies exceeding this threshold in the EU — will only need to apply the rules starting in 2028. The second wave of companies, including EU businesses with over 3,000 employees and turnover above €900 million, as well as non-EU companies meeting the same turnover threshold in the EU, will also begin compliance in 2028.
Strategic Recommendations for Businesses
1. Proactive Compliance Planning: Utilize the additional time to develop or enhance your sustainability reporting and governance frameworks, ensuring readiness for future compliance.2. Stakeholder Engagement: Maintain ongoing dialogue with stakeholders, including suppliers and investors, to uphold transparency and corporate responsibility commitments despite regulatory delays.
3. Leverage Technology: Adopt software platforms, like Datamaran, to streamline processes, monitor regulatory changes, and effectively integrate sustainability considerations into business strategy.
4. Monitor Evolving Landscape: Keep a close eye on the fast-evolving policy landscape and analyze the first wave of CSRD statements to understand how market practices are shaping up.
5. Consider Voluntary Reporting: Companies that are advanced in their CSRD reporting preparations should assess whether voluntary reporting makes strategic sense in the near term.
What to Expect Next from EU Policymakers
The European Commission has updated the European Financial Reporting Advisory Group's (EFRAG) mandate to review the European Sustainability Reporting Standards (ESRS), with a new deadline set for October 31, 2025. This initiative aims to simplify the reporting standards, reducing the number of mandatory datapoints and enhancing clarity. The full letter is linked here.
Additionally, negotiations are ongoing regarding changes in the scope of application of CSRD and CSDDD. Amendments tabled by various parties indicate a push towards further adjustments, with some advocating for a reduction in the regulatory burden on companies.
Conclusion
The European Parliament's "stop-the-clock" vote provides businesses with a valuable opportunity to strengthen their sustainability practices and prepare thoroughly for the eventual implementation of reporting requirements. Companies should not view this delay as a reason for complacency but as a chance to enhance their compliance strategies.
To stay informed about global regulatory changes, you can pre-register for our new community platform, Harbor, which offers updates and insights into the evolving sustainability reporting landscape to corporate sustainability professionals, along with a host of other benefits.
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