Background
On 26 February 2025, the European Commission (EC) released a new package of proposals (the Omnibus) to amend some key pillars of the European Green Deal. These are the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Taxonomy Regulations. The overall goal of the Omnibus is to reduce reporting burdens, particularly for smaller and mid-sized entities, and increase efficiency in sustainability reporting. This comes as a result of pressure to foster a growth environment in the EU.
In an effort to provide clarity to affected entities, the European Council (EC) has accelerated the approval process for the portion of the Omnibus impacting the reporting timeline - referred to as the ‘stop-the-clock' directive. On 3 April 2025, the European Parliament adopted the stop-the-clock portion of the proposal. To enter into force, the draft law now requires formal approval by the Council of the European Union, followed by transposition by each member state.
Stop-the-clock directive key dates
The stop-the-clock proposal will postpone:
- The CSRD requirements: The second wave (submitted according to the new procedure for 2027) includes large enterprises that meet at least two of the three criteria in two consecutive years: number of employees over 250, turnover over 50 million euros, volume of assets over 25 million euros.
- The third wave (submitted according to the new procedure for 2028) includes SMEs listed on the stock exchange that meet at least two of the three criteria in two consecutive years: number of employees over 10, turnover over 900,000 euros, volume of assets over 450,000 euros.
- The transposition deadline and first phase of application of the CSDDD by one year (from July 2027 to July 2028).
It is important to note that the adopted CSRD postponement measure specifically does not mention Wave 1 or non-EU reporters, and as such, the relief does not currently extend to those entities. The CSDDD postponement does apply to Wave 1 reporters.
The law only needs formal approval by the Council of the European Union for it to enter into force. The Council already approved the text at the start of April, so it is just a formality.
The postponement is the first part of a cluster of proposals, or omnibus package. Work will then continue on substantive changes.
The main substantive change is the increase in the threshold for reporting entities. While sustainability reporting entities are currently divided into three waves, according to the proposal, these waves would disappear, as only those with 1,000 employees and a turnover of at least 50 million euros or a balance sheet total of at least 25 million euros would remain obligated.
The Commission has notified EFRAG, which sets ESG standards, that the ESRS reporting standard must be revised by October 31 of this year.
Alar Urke, ESG Advisory Manager in Grant Thornton Baltic Estonia says: “The majority of Estonian large companies support the postponement of the sustainability reporting obligation, a move also approved by the European Parliament. At the same time, many companies have already begun preparations — are in the data collection phase, while a small group haven't yet started – those are in the second wave.
Businesses in Estonia also view proposed regulatory changes positively. Large companies will support raising the threshold to 1,000 employees but they will find that sustainability as a topic is important. Simplifying reporting standards is also widely welcomed.
While some companies plan to continue full reporting, businesses who are not in the mandatory sustainability reporting focus in the future are planning sustainability activities and assessments without publishing mandatory sustainability reports. Some of them are planning voluntary sustainability reports13.
“If a mandatory report is no longer needed, companies could consider the voluntary VSME standard for small and medium-sized enterprises, which is more business-friendly but still maintains structure and comparability. It gives supply chain partners an overview of the sustainability situation in the company,” says Alar Urke.
Aleksandrs Vellers, Head of Valuation and Financial advisory in Grant Thornton Baltic Latvia, says: “Introduction of sustainability reporting standards in Latvia was done according to the previously EC’s accepted timeline, including necessary amendments to local legislation both for private and state/municipal companies. State/municipal companies have already tendered the necessary advisory services to develop and introduce sustainability reporting systems and create the first sustainability reports. Many private companies falling under the first and second wave of sustainability reporting requirements have been actively preparing for the development and introduction of appropriate reporting systems.
However, considering quite new and unfamiliar specifics of sustainability matters, businesses are stressed about the timely introduction of the necessary reporting system, the quality of reports, and related costs. Postponement of the application of sustainability standards is a positive sign for businesses, allowing them to get better prepared for that. Businesses are also waiting for further updates on the acceptance of other Omnibus package’s elements, including the increase of application thresholds which will considerably decrease the number of companies falling under CSRD mandatory reporting.
It is not known if following further acceptance of the Omnibus package will change current regulation for state/municipal companies. However, we foresee that both public and private businesses will choose to prepare sustainability reports on a voluntary basis, according to the VSME standard.
Mantas Gilius, Head of Financial Advisory in Grant Thornton Baltic Lithuania says that: “Corporates that fall under the second and third wave of CSRD requirements are pleased with the European Parliament's decision to postpone the application date giving more breathing room to prepare for reporting, and plan related resources. Nevertheless, businesses in Lithuania understand well that it‘s a good time to start identifying and consolidating sustainability standards into corporate strategies.
Postponement also serves as an opportunity to review data collection systems and principles to improve and ensure accurate future reporting aligned with the sustainability standards.
Managing sustainability data within the organization and integrating it into the supply chain will help increase operational efficiency, identify cost savings, and crystallize transformations needed to save our planet.
Conclusion
We are pleased that a clear timeline for CSRD and CSDDD application has been approved. With these changes in place, the European Parliament and EC will have time to agree on the additional substantial changes to the CSRD, Taxonomy, and CSDDD as set out in the Omnibus package. Additionally, this will provide entities with some relief as they wait to see whether the remainder of the Omnibus is passed.
For the full European Parliament press release, click here.
