On 26 February 2025, the European Commission published a proposal for a directive introducing the "Simplification Omnibus Package." This proposal was subsequently adopted, and the resulting Directive (EU) 2025/794 — commonly known as the "Stop-the-Clock" Directive — entered into force in April 2025. It brings important changes to both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). With this initiative, the Commission aims to ease the administrative burden on companies by simplifying and clarifying existing sustainability rules. This article outlines the key amendments introduced by the proposal.
A. Key amendments regarding the Corporate Sustainability Reporting Directive (CSRD)
1. Scope: companies required to report
The first key amendment revises the criteria for EU companies' reporting obligations. Previously, companies with at least 250 employees, €50 million in net turnover, and €25 million in balance sheet total were required to report. Under the new proposal, reporting applies only to EU companies with more than 1,000 employees and either €50 million in net turnover or €25 million in balance sheet total. SMEs not meeting these criteria will be exempt, but voluntary reporting standards will be developed for them.
Also, for non-EU companies, the thresholds have been raised. Previously, non-EU companies with an annual turnover exceeding €150 million in the EU, and either a large subsidiary meeting the EU company criteria or a branch in the EU with an annual turnover exceeding €40 million, were required to report. The new directive raises these thresholds, now requiring non-EU companies with €450 million in turnover within the EU, and either a large subsidiary meeting the EU company criteria or a branch with an annual turnover exceeding €50 million, to report.
2. Delayed ESG-reporting dates
The European Commission has proposed a two-year delay for certain CSRD reporting deadlines. The implementation timeline is structured in several waves. Wave 1 (companies previously subject to the NFRD) remains unchanged, with reporting for the 2024 financial year due in 2025. Wave 2 (large undertakings) is postponed to 2028 (instead of 2026), covering the 2027 financial year. Wave 3 (listed SMEs, small and non-complex credit institutions, and captive insurers) is delayed to 2029 (instead of 2027), covering the 2028 financial year, with a separate proposal potentially removing these undertakings from the Directive's scope altogether. Wave 4 (non-EU companies with substantial EU activity) also remains unchanged, with reporting due in 2029 for the 2028 financial year.
3. Simplification of the reporting requirements
The European Commission will adopt a delegated act to revise the first set of European Sustainability Reporting Standards (ESRS) to ease reporting obligations. This includes a reduction in mandatory data points, prioritisation of quantitative information, and enhanced clarity and alignment with global standards.
4. Value chain reporting
The proposed revision strengthens the value chain cap by limiting the information large companies can request from entities in their value chain with fewer than 1,000 employees. This cap will align with voluntary reporting standards, significantly reducing the trickle-down burden on smaller undertakings.
5. Voluntary reporting
The proposal provides that the Commission will adopt delegated acts to establish proportionate sustainability reporting standards for companies outside the scope of the CSRD, allowing them to report voluntarily.
B. Key amendments regarding the Corporate Sustainability Due Diligence Directive (CS3D)
1. Scope remains unchanged
The scope of the CS3D remains unchanged. It applies to EU companies with at least 1,000 employees and a net worldwide turnover exceeding €450 million. It also covers EU companies operating under a franchise or licensing model with worldwide royalties above €22.5 million and a net worldwide turnover exceeding €80 million. For non-EU companies, the directive applies if they generate more than €450 million in net turnover within the EU. The same franchise or licensing threshold applies to non-EU companies: worldwide royalties over €22.5 million and a net worldwide turnover above €80 million
2. Delayed ESG-reporting dates
Implementation of CSDDD into national law has been postponed by one year. This means that EU Member States must transpose the directive by July 26, 2027 instead of July 26, 2026. The first wave of companies must apply the rules starting July 26, 2028. (i.e. those that have more than 5000 employees and report a net annual (worldwide) turnover of more than 1.5 billion euro, as well as to non-EU companies that generate more than EUR 1.5 billion net turnover in the EU)
3. Monitoring frequency
The time between required assessments of the effectiveness of due diligence measures has been amended from 1 year to 5 years.
4. Other amendments
- The notion of 'stakeholders' is limited to stakeholders that have a link to the specific stage of the due diligence process being carried out. Furthermore, the stages of the due diligence process that require stakeholder engagement is restricted
- The proposal eliminates the EU-wide civil liability regime and defers to national laws. It also eliminates representative action requirements for trade unions and NGOs.
- The European Commission has revised its approach to financial penalties.
- The duty to terminate the business relationships has been removed.
- The value chain due diligence has been limited to direct suppliers.
- The obligation to "put into effect" a transition plan has been amended.
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