To delay critical sustainability reporting and due diligence laws, such as the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), the EU Parliament has approved to delay sustainability reporting by passing the European Commission’s “stop-the-clock” directive. Although far-left and far-right parties proposed amendments either opposing the delay or attempting to extend it to 15 years, the accord was overwhelmingly approved, with 531 votes in favor and 69 against.

This decision follows the EU Council’s approval of the directive last week. It marks a significant turning point in the Commission’s broader Omnibus I package, which aims to reduce regulatory and reporting requirements related to sustainability, particularly for small and medium-sized enterprises (SMEs).

Scope of the Omnibus I Package and Key Changes

Several amendments to existing sustainability laws, including the Taxonomy Regulation, the Carbon Border Adjustment Mechanism (CBAM), the CSDDD, and the CSRD, are proposed in the Omnibus I package, which was unveiled in February. Key provisions include:

• A two-year delay in CSRD applications for businesses that haven’t begun reporting yet.
• A one-year delay in the CSDDD’s implementation and transposition.
• A reduction in mandatory data points and a relaxation of sustainability reporting standards.
• A more targeted approach to due diligence obligations, focusing primarily on direct business partners.

According to the Commission’s estimates, these changes could exempt nearly 80% of businesses from the CSRD’s sustainability reporting obligations. The Commission also issued the “stop-the-clock” directive to accelerate the implementation of these delays and provide regulatory clarity for businesses.

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Next Steps and Implementation Timeline

Following this development, the EU Parliament approved a delay in sustainability reporting, paving the way for the EU Council to formally adopt the changes in the coming weeks. A strict seven-month deadline has been set for the European Financial Reporting Advisory Group (EFRAG) to develop the technical guidelines for the CSRD’s European Sustainability Reporting Standards (ESRS). With the option to adopt them for 2026, businesses can implement the enhanced sustainability reporting requirements starting with the 2027 fiscal year.

The EU institutions will now focus on finalizing the regulatory amendments and determining their long-term strategy for corporate due diligence and sustainability reporting.

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