In our most recent Newsflash on the topic, we presented the proposed "Stop-the-Clock" directive as one of two major parts of the first Omnibus Package announced by the EU Commission on 26 February 2025.
In our most recent Newsflash on the topic, we presented the proposed "Stop-the-Clock" directive1 as one of two major parts of the first Omnibus Package announced by the EU Commission on 26 February 2025. The other major part is another proposed directive, the Amendment Directive,2 which aims to amend, among others, the scope and certain obligations under the Corporate Sustainability Reporting Directive (CSRD),3 the Corporate Sustainability Due Diligence Directive (CS3D)4 and the Taxonomy Regulation.5
Two days after having approved the use of the fast-track procedure under the relevant Rules of Procedure, on 3 April 2025, the EU Parliament voted in favour of adopting the proposed Stop-the-Clock directive. Stop-the-Clock amends the CSRD and the CS3D specifically with regard to the dates from which Member States must apply certain corporate sustainability reporting and due diligence requirements.
Amendments to CSRD
As regards CSRD, the EU Parliament agreed on the following changes:
| In-scope undertakings/groups | First reporting year under CSRD | First reporting year under Stop-the-Clock | |
|---|---|---|---|
| Wave 1 | NFRD entities (large issuers of securities listed in the EU, banks, insurance/reinsurance companies, with > 500 employees) | 2025 for financial year 2024 | Unchanged |
| Wave 2 | All other large companies/groups | 2026 for financial year 2025 | 2028 for financial year 2027 |
| Wave 3 | Listed SMEs, small and non-complex credit institutions, captive insurance/reinsurance companies | 2027 for financial year 2026 (with option to opt out for 2 years) | 2029 for financial year 2028 (option to opt out unchanged) |
| Wave 4 | Third-country reporting | 2029 for financial year 2028 | Unchanged |
In Member States where CSRD is not implemented into national law, like Luxembourg, Wave 1 companies are currently not obligated to publish reports containing sustainability information in accordance with CSRD and the European Sustainability Reporting Standards (ESRS). However, Wave 1 companies may still make a strategic choice to publish a sustainability report in these Member States for several reasons, such as:
- Emerging market practice: trends have seen companies preparing and disclosing their sustainability information in line with CSRD requirements to meet the regulatory requirements to disclose non-financial information under the Non-Financial Reporting Directive (NFRD)6 as implemented into Luxembourg national law. This position is strengthened by the Luxembourg regulator's endorsement of this compliance strategy.
- Using the subsidiary exemption in multinational
groups: if a subsidiary has its registered office in a
Member State where the CSRD has been implemented into national law,
thus requiring the subsidiary to publish a sustainability report at
individual level, the subsidiary is exempt from publishing such a
report if the parent undertaking mentions the consolidation of the
sustainability information in its consolidated management report in
compliance with the CSRD and the ESRS.
Certain Wave 1 parent undertakings have already adopted this approach in Luxembourg for financial year 2024 and it may also be pertinent for Wave 2 companies until Stop-the-Clock is implemented in the Member States where the original version of CSRD is in effect. - On a voluntary basis: It is noteworthy that, as alternative to the ESRS (Set 1), in light of Stop the Clock, many companies are considering refocusing their reporting exercises on the basis of the voluntary reporting standards for SMEs (VSMEs) developed by EFRAG.
Amendments to CS3D
Stop-the-Clock postpones the implementation deadline for CS3D by one year from 26 July 2026 to 26 July 2027.
Next steps
The text of the Stop-the-Clock directive approved by the EU Parliament is the same as that proposed by the EU Commission, with no amendments. The next step is the formal approval by the Council of the EU, but this is widely regarded as a formality given that the Council of the EU already expressed a favourable position on 26 March.
After publication in the Official Journal of the EU and entry into force, Member States will have until 31 December 2025 to align their national laws with Stop-the-Clock. Meanwhile, the EU co-legislators are gearing up to start negotiating the text of the Amendment Directive.
Footnotes
1. Omnibus I – COM(2025)80
2. Omnibus I – COM(2025)81
3. Directive (EU) 2022/2464
4. Directive (EU) 2024/1760
5. Regulation (EU) 2020/852
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
