European Parliament Agrees to Delay Certain EU ESG Rules

On April 3, 2025, the European Parliament adopted, by an overwhelming majority, a Directive that would “stop the clock” on certain reporting requirements under the EU Corporate Sustainability Reporting Directive (CSRD), as part of the Omnibus reform package presented by the European Commission on February 26, 2025. To become effective, the Directive now requires formal approval by the European Council and publication in the Official Journal. Both steps are considered a formality as the Council has already endorsed the Parliament’s adopted text on March 26, 2025.

The “stop the clock” Directive would delay by two years the application of CSRD for EU companies that are not already reporting under CSRD. Consequently, large companies with more than 250 employees do not have to report under CSRD until 2028 at the earliest (although subsequent Omnibus reforms may raise this threshold to 1,000 employees). Companies that are already reporting under CSRD, and non-EU groups (meeting certain thresholds that must be covered by CSRD reports in 2029 for FY2028 information) are not impacted.

Furthermore, the new Directive will postpone the application of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) by one year for companies meeting a revenue threshold of €1.5 billion in the EU (the “first wave” of companies), making them subject to the same reporting timeline as (i) EU-based companies with more than 3,000 employees and sales of more than €900 million globally; and (ii) non-EU companies generating €900 million in the EU. All would have to comply with the CSDDD from 2028.

As with all EU Directives, the “stop the clock” Directive needs to be implemented into the national law of EU member states. This implementation is required by December 31 of this year.

For example, France, which was the first country to transpose the CSRD in 2023 and has already required certain public companies to report in 2025 for FY2024 information, has already proposed its own “stop the clock” bill. The French Parliament is set to adopt its own Omnibus-style package (the “DADDUE”) on financial, economic and environmental matters, including postponing by two years the 2026 and 2027 CSRD reporting obligations.

The Commission’s Omnibus Package also includes a proposal to amend the substance of the EU ESG rules. However, the European institutions will likely need significantly more time to agree on the language for this second part of EU ESG reform, which could be further affected by potential tensions between EU and U.S. law as well as the evolving U.S. approach to trade policy and ESG regulations.