‘Stop-the-Clock’ Directive Clears Key Legislative Hurdle Amid Push to Ease ESG Rules

The European Parliament has officially approved the European Commission’s ‘stop-the-clock’ directive, delaying key sustainability reporting and due diligence regulations, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

What’s Changing?

CSRD delay: Companies that have not yet started reporting get two additional years.
CSDDD delay: Transposition and application postponed by one year.
Regulatory scope reduction: Up to 80% of companies could be exempt from CSRD requirements.
Sustainability due diligence limits: New rules focus primarily on direct business partners, reducing compliance burdens.
Simplified sustainability reporting: Fewer data points and revised European Sustainability Reporting Standards (ESRS).

A Strong Parliamentary Mandate for Reform

Vote outcome: 531 in favor, 69 against, despite pushback from both far-left and right-wing parties.
Omnibus I package: The broader regulatory overhaul is designed to ease burdens on companies, especially SMEs.

Read more about SEC Abandons Defense of Climate Disclosure Rules, Leaving Future Uncertain.

Next Steps: Regulatory Updates and New Standards

The European Commission has tasked the European Financial Reporting Advisory Group (EFRAG) with updating sustainability reporting standards in just seven months.
New standards will apply for financial year 2027, with a potential early adoption option for 2026.

With formal adoption expected in the coming weeks, businesses will soon get clarity on ESG reporting obligations—a major relief for many struggling with complex compliance requirements.

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