“Stop-the-clock” Directive

The Council of the EU has now formally adopted the Commission’s “Stop-the-clock” Directive to postpone the application dates for the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

The final green light on the Stop-the-Clock Directive was given by the Council on 14 April. This follows the European Parliament’s approval of the Directive on 3 April.

Following the the Council’s adoption of this Directive, it will be published in the Official Journal and will enter into force the day after its publication. Member states must transpose this Directive into national law by 31 December 2025.

The Stop-the-Clock Directive

CSRD - this Directive will postpone reporting requirements under the CSRD for companies that were due to report in 2026 and 2027 (the so-called wave 2 and 3 companies) by two years.

These wave 2 and 3 companies include, for example, “large” companies that have not yet started reporting, as well as listed SMEs. Under the new Directive, these companies are not required to report until 2028 (for FY 2027) and 2029 (for FY 2028) respectively. The Directive does not amend the reporting timeframe for the largest (“first wave”) companies ie large public interest entities reporting in 2025 on financial year 2024.

CSDDD - the Stop-the-Clock Directive will also postpone the transposition deadline for the CSDDD by one year to July 2027. The application of the CSDDD to the first wave of companies will also be postponed by one year to July 2028 (instead of 2027).

The Amendment Directive

Coupled with the Stop-the-Clock Directive is the Amendment Directive which was also published by the European Commission as part of its Omnibus package. It aims to consolidate, simplify and reduce existing reporting requirements under the CSRD and the CSDDD.

The changes proposed to the CSRD by the Amendment Directive are significant and far-reaching and include, for example:

• Removing 80% of companies from the scope of CSRD bringing down the number of reporting companies from approximately 50,000 to 7,000;
• Focusing on the largest companies which are more likely to have the biggest impacts on the environment and people ie companies with over 1000 employees (as opposed to 250) and with a balance sheet total exceeding €25m or a turnover exceeding €50m;
• Ensuring sustainability reporting does not burden small companies in the value chain;
• Revising of European Sustainability Reporting Standards (ESRS) to reduce the number of data points companies are required to report under. Sector specific standards will no longer be adopted;
• Increasing the financial thresholds for turnover so that fewer third-country undertakings come within scope for reporting ie companies will now only be in scope if they generate, on a consolidated basis, a net turnover in the EEA exceeding EUR 450 million (increased from EUR 150 million).

The amendments proposed to the CSDDD will also significantly reduce the compliance requirements on effected businesses.

The postponement of the application dates for the CSRD and CSDDD in the Stop-the-Clock Directive is designed to give the European co-legislators time to agree the Commission’s substantive proposals to amend the scope of the CSRD and the CSDDD.

The new Directives will be very much welcomed in Ireland

The accelerated arrival of the Stop-the-Clock Directive gives member states (including Ireland) plenty of time to transpose it into national law. Once transposed, this Directive will be very much welcomed particularly for those Irish companies which would otherwise have come within the scope of the CSRD sustainability reporting requirements this year for reporting in 2026.

The Minister for Enterprise, Trade and Employment has indicated in a recent press release here that he “strongly supports the simplification and burden reduction agenda” to maximise the competitiveness of EU businesses and will be focused on “..quickly implementing the EU’s “Stop-the-Clock” proposal”.

Reassuringly, that press release also states: “Minister Burke will shortly be amending the existing Irish legislation governing CSRD to further clarify and reduce the scope of companies covered…”.

For more information on some of the key changes proposed by the sustainability omnibus with links to the Stop-the-Clock Directive and the Amendment Directive, click on our Eversheds-Sutherland briefings here, here and here and on the European Commission Press release.

Thanks to Tracy MacDevitt (Professional Support Lawyer, Corporate) for contributing to this article.