EU Delays CSRD and CSDDD Implementation with “Stop-the-Clock” Directive

On April 16, 2025, the “Stop-the-Clock” Directive was published in the EU Official Journal. It constitutes a significant amendment to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) as it key sustainability reporting and due diligence obligations.

Key Changes Introduced

• CSRD Reporting Delay: The directive postpones CSRD reporting requirements by two years for companies in “wave 2” (due to report in 2026 for financial years starting on or after January 1, 2025) and “wave 3” (due to report in 2027 for financial years starting on or after January 1, 2026). These companies now have until 2028 and 2029, respectively, to comply. Reporting for “wave 1” companies and non-EU companies (due in 2029) remains unchanged.

• CSDDD Implementation Delay: The transposition deadline for Member States to integrate the CSDDD into national law is extended by one year to July 26, 2027, with the first application phase for the largest companies (those with over 5,000 employees and €1.6 billion in net turnover) deferred to July 26, 2028.

Simplification Efforts and Impacts on Business

The adoption of the “Stop-the-Clock” Directive provides breathing room for legislators to finalize substantive amendments to both directives, including raising the CSRD employee threshold to 1,000 (potentially reducing the scope by 80%) and simplifying due diligence requirements under the CSDDD. The delay also offers relief for companies grappling with the complexity of CSRD and CSDDD compliance. It provides additional time to align internal processes, enhance data collection systems, and prepare for revised European Sustainability Reporting Standards (ESRS), which the European Financial Reporting Advisory Group (EFRAG) is tasked with simplifying by October 31, 2025.

Next Steps for CSRD and CSDDD Negotiations

With the “Stop-the-Clock” Directive in place, attention now shifts to the substantive amendments proposed for the CSRD and CSDDD under the Omnibus I package, detailed in the European Commission’s proposal COM(2025)81. These amendments aim to streamline reporting and due diligence requirements, particularly for SMEs, while maintaining the EU’s sustainability objectives.

In the European Parliament the Legal Affairs Committee (JURI) will lead the negotiations, and the process begins with an exchange of views in April 2025, followed by a draft report from MEP Jörgen Warborn reportedly scheduled for June 4, 2025. Amendments must be submitted by June 27, 2025, with committee and plenary votes scheduled for October 2025. The European Commission aims to have the directive adopted by the end of 2025, after which Member States will transpose the changes into national law.

Looking Ahead

While the “Stop-the-Clock” Directive eases immediate pressures, it has sparked debate. Some sustainability advocates warn that delays could undermine the EU’s green agenda, while others view it as a pragmatic step to balance competitiveness with environmental goals.

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