NEWS & INSIGHTS

Up-to-date.

April 2025 – On 14 April 2025, the Council of the EU gave its final green light on the so-called "Stop‑the‑clock Directive" postponing the application dates of the EU Corporate Sustainability Reporting Directive (EU) 2022/2464 ("CSRD") and the EU Corporate Sustainability Due Diligence Directive (EU) 2024/1760 (“CSDDD”). Who will benefit from this and what does this actually mean for the affected companies?

The CSRD entered into force on 5 January 2023 and aims to ensure that investors have the information they need to understand and manage the risks to which investee companies are exposed from climate change and other sustainability issues. It also aims to ensure that investors and other stakeholders have the information they need about the impacts of companies on people and the environment. It thereby contributes to financial stability and environmental integrity. This is a necessary condition for financial resources to flow to companies that pursue sustainability goals and creates more accountability and transparency towards all stakeholders regarding companies’ sustainability performance.

The CSDDD entered into force on 25 July 2024 and aims to ensure that companies operating in the EU single market contribute to attaining the European Union’s broader ambition to transition towards a sustainable and climate-neutral economy by (i) putting in place adequate governance and management systems, (ii) taking appropriate measures to identify and address adverse human rights and environmental impacts in their own operations, as well as in the operations of their subsidiaries and their global value chains, and (iii) adopting and putting into effect a transition plan for climate change mitigation.

On 26 February 2025, the European Commission adopted a new package of proposals as part of its "Omnibus I" initiative to simplify EU rules on corporate sustainability reporting and due diligence requirements to boost the competitiveness of EU companies and unlock additional investment capacity. On 14 April 2025, the Council of the EU formally approved the Commission's proposal of a Directive to amend the CSRD and the CSDDD with regard to the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements (the “Stop-the-clock Directive”). This should offer a temporary reprieve, reducing the administrative requirements of companies under CSRD and CSDDD and giving them a longer runway to implement internal due diligence mechanisms and upgrade sustainability reporting systems. The Stop-the-clock Directive was published in the EU’s Official Journal on 16 April 2025 and entered into force on the following day.

1. Postponement of CSDDD and CSRD

1. 1 CSDDD

According to the previous rules, Member States had to transpose the CSDDD by 26 July 2026. The CSDDD only applies to very large companies, i.e., companies that have more than 1,000 employees and a net worldwide turnover of more than EUR 450 million (for EU companies) or generated more than EUR 450 million turnover in the EU (for non-EU companies) or are ultimate parent companies of groups that reach these thresholds on a consolidated basis. This implementation date has now been postponed until 26 July 2027. Alongside the postponement of the "general implementation deadline", the company-dependent deadlines of the CSDDD have also been postponed in order to give companies more time to prepare for the requirements of the CSDDD and to provide them with the opportunity to take into account the guidelines to be issued by the Commission on how they should fulfil their due diligence obligations in a practical manner. Therefore, depending on the size of the company, the postponement of the application deadlines of the CSDDD will affect the companies concerned as follows:

• EU companies: > 5,000 employees and > EUR 1.5 billion turnover (net) worldwide or ultimate parent companies of groups that reach these thresholds on a consolidated basis

EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2028; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2029.

• Non-EU companies: > EUR 1.5 billion turnover (net) in the EU

Non-EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2028; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2029.

• EU companies: > 3,000 employees and > EUR 900 million turnover (net) worldwide or ultimate parent companies of groups that reach these thresholds on a consolidated basis

EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2028; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2029.

• Non-EU companies: > EUR 900 million turnover (net) in the EU

EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2028; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2029.

• EU companies: > 1,000 employees and > EUR 450 million turnover (net) worldwide or that are ultimate parent companies of groups that reach these thresholds on a consolidated basis

EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2029; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2030.

The same applies to companies that entered into or are the ultimate parent companies of a group that entered into franchising or licensing agreements in the EU in return for royalties with independent third-party companies, where those agreements ensure a common identity, a common business concept, and the application of uniform business methods and where those royalties amounted to more than EUR 22.5 million in the last financial year for which annual financial statements have been or should have been adopted, and provided that the companies generated, or are the ultimate parent company of a group that generated, a net worldwide turnover of more than EUR 80 million in the financial year for which annual financial statements have been or should have been adopted.

• Non-EU companies: > EUR 450 million turnover (net) in the EU

Non-EU companies fulfilling these thresholds shall comply with the CSDDD from 26 July 2029; Member States shall apply the measures laid down in the CSDDD to those companies for financial years starting on or after 1 January 2030.

The same applies to companies that entered into or are the ultimate parent companies of a group that entered into franchising or licensing agreements in the EU in return for royalties with independent third-party companies, where those agreements ensure a common identity, a common business concept, and the application of uniform business methods and where those royalties amounted to more than EUR 22.5 million in the EU in the financial year preceding the last financial year, and provided that the companies generated, or are the ultimate parent company of a group that generated, a net turnover of more than EUR 80 million in the EU in the financial year preceding the last financial year.

1.2 CSRD

The CSRD sets out the sustainability reporting requirements, with different application dates depending on the size of the undertaking concerned. Currently, the CSRD applies to all large companies i.e., companies and parent undertakings that fulfil two out of the three following thresholds: (i) EUR 50 million net turnover, (ii) EUR 25 million balance sheet total, (iii) 250 employees, as well as SMEs whose securities are listed on an EU regulated market.

The application timelines for the second and third waves of companies covered have changed. The new timeline for sustainability reporting is:

• Large public-interest entities: + > 500 employees on average during the financial year or parent undertakings of a large group with > 500 employees on average on its balance sheet dates, on a consolidated basis, during the financial year.

Public-interest entities that are large undertakings and fulfil the additional employee thresholds must already comply with the CSRD in 2025; Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2024.

Public-interest entities: Undertakings that are (i) governed by the law of a Member State and whose transferable securities are admitted to trading on a regulated financial instruments market of any Member State, or (ii) credit institutions, or (ii) insurance undertakings, or (iv) undertakings designated by Member States as public-interest entities, for instance undertakings that are of significant public relevance because of the nature of their business, their size, or the number of their employees.

Large undertakings / large public-interest entities: Undertakings that meet at least two of the following criteria: balance sheet total exceeding EUR 25 million, net turnover above EUR 50 million, average of more than 250 employees during the financial year, or parent undertakings of large groups consisting of parent and subsidiary undertakings that are included in a consolidation and which, on a consolidated basis, exceed the limits of at least two of the three following criteria on the balance sheet date of the parent undertaking: balance sheet total of EUR 25 million, net turnover of EUR 50 million, average of 250 employees during the financial year.

• Large undertakings: > 500 employees on average during the financial year or that are parent undertakings of a large group with > 500 employees on average on its balance sheet dates, on a consolidated basis, during the financial year.

Large undertakings falling under this definition, i.e., large undertakings that are not public‑interest entities but fulfil the employee threshold, shall comply with the CSRD from 2028. Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2027.

• Small and medium-sized public-interest undertakings, or small non-complex institutions, or captive insurance undertakings (excluding micro-undertakings).

Undertakings falling under these definitions shall comply with the CSRD from 2029. Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2028.

Micro-undertakings: Undertakings that do not exceed at least two of the following criteria: balance sheet total of EUR 450,000, net turnover of EUR 900,000, average of 10 employees during the financial year.

Small undertakings: Undertakings that do not exceed at least two of the following thresholds: balance sheet total of EUR 5 million, net turnover of EUR 10 million, average of 50 employees during the financial year.

Medium-sized undertakings: Undertakings that are neither micro- nor small undertakings and do not exceed at least two of the following thresholds: i) a balance sheet total of EUR 25 million, ii) net turnover of EUR 50 million, and iii) an average of 250 employees during the financial year.

Small and non-complex institutions: Credit institutions must only comply with the CSRD if they qualify as large or small and medium-sized public-interest entities.

Captive insurance and reinsurance undertakings: Insurance or reinsurance undertakings owned either by a financial undertaking other than an insurance or reinsurance undertaking or a group of insurance or reinsurance undertakings or by a non-financial undertaking must only comply with the CSRD if they qualify as large or small and medium-sized public-interest entities.

• Large issuers: + > 500 employees on average during the financial year or parent undertakings of a large group with > 500 employees on average on its balance sheet dates on a consolidated basis during the financial year

Issuers that are large undertakings and fulfil the additional employee threshold must already comply with the CSRD in 2025; Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2024.

Issuers: Natural persons or legal entities governed by private or public law, including a national state whose securities are admitted to trading on a regulated market.

Large undertakings / parent of a large group: Undertakings that meet at least two of the following criteria: balance sheet total exceeding EUR 25 million, net turnover above EUR 50 million, average of more than 250 employees during the financial year, or parent undertakings of large groups consisting of parent and subsidiary undertakings that are included in a consolidation and which, on a consolidated basis, exceed the limits of at least two of the three following criteria on the balance sheet date of the parent undertaking: balance sheet total of EUR 25 million, net turnover of EUR 50 million, average of 250 employees during the financial year.

• Issuers that are large undertakings and issuers that are parent undertakings of a large group:

Issuers falling under this definition, i.e., issuers that are large undertakings but do not meet the thresholds for large issuers, shall comply with the CSRD from 2028; Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2027.

• Issuers that are small and medium-sized undertakings, or small and non-complex institutions, or captive insurance undertakings and captive reinsurance undertakings (excluding micro-undertakings).

Issuers falling under these definitions shall comply with the CSRD from 2029; Member States shall apply the measures laid down in the CSRD to those companies for financial years starting on or after 1 January 2028.

Issuers that qualify as small and non-complex institutions must comply with the CSRD only if they also qualify as large or small and medium-sized public-interest entities.

Issuers that qualify as captive insurance and reinsurance undertakings must only comply with the CSRD if they also qualify as large or small and medium-sized public-interest entities.

2. Still to come

As mentioned above, the "Omnibus I" initiative is intended to bring far-reaching simplifications regarding the reporting and due diligence obligations under the CSRD and CSDDD. Thus, in addition to postponing the application deadlines, the "Omnibus I" package shall bring the following amendments to the CSDDD and the CSRD:

CSDDD

• Relieving companies from the obligation to systematically conduct in-depth assessments of adverse impacts that occur or may occur in often complex value chains at the level of indirect business partners and requiring full due diligence with respect to the value chain beyond direct business partners, only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there;
• Simplifying other aspects of sustainability due diligence requirements so that large companies avoid unnecessary complexities and costs, including by prolonging the intervals between two regular periodic assessments and updates from one year to five years, while clarifying that a company needs to assess the implementation of its due diligence measures and update them whenever there are reasonable grounds to believe that the measures are no longer adequate or effective; by streamlining the stakeholder engagement obligations; and by removing the obligation to terminate the business relationship as a last resort measure;
• Reducing the trickle-down effect further by limiting the information that companies within the scope of the CSDDD may request from their SME and small midcap business partners (i.e., companies with not more than 500 employees) to the information specified in the CSRD’s voluntary sustainability reporting standards (VSME standard). This limitation applies unless they need additional information to carry out the mapping (for instance on impacts not covered by the standards) and they cannot obtain that information in any other reasonable way.
• Deferring to the various national civil liability regimes by deleting the harmonised EU conditions for civil liability and revoking the obligation for Member States regarding representative actions by trade unions or NGOs leaving national law to define whether its civil liability provisions override otherwise applicable rules of the third country where the harm occurs;
• Aligning the requirements on the adoption of transition plans for climate mitigation with the CSRD;
• Extending maximum harmonisation to more provisions regarding core due diligence obligations to better ensure a level playing field across the EU;
• Deleting the review clause on inclusion of financial services in the scope of the CSDDD.

CSRD

• Reduction of the scope of reporting companies: Reporting requirements would only apply to large undertakings with more than 1,000 employees (i.e., undertakings that have more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet total above EUR 25 million) This will reduce the number of companies in the scope of the CRSD by about 80%. The new scope will be more closely aligned with the key scope thresholds of the CSDDD.    
• Value chain cap: For companies that will no longer be in the scope of the CSRD (up to 1,000 employees), the Commission will adopt by delegated act a voluntary reporting standard, based on the standard for SMEs (VSME) developed by EFRAG. That standard will act as a shield, by limiting the information that companies or banks falling under the scope of the CSRD can request from companies in their value chains with fewer than 1,000 employees.
• Commission's commitment to revise the European Sustainability Reporting standards (“ESRS”): The Commission will revise the delegated act establishing the ESRS, with the aim of substantially reducing the number of data points, and clarifying provisions deemed unclear, improving consistency with other pieces of legislation.
• Deletion of sector-specific standards requirement: A proposal will delete the empowerment of the Commission to adopt sector-specific standards.
• Removing the reasonable assurance standard: A proposal will remove the possibility for the Commission to propose moving from a limited assurance requirement to a reasonable assurance requirement.