The European Parliament on Thursday agreed to delay the European Union’s sustainability reporting and due diligence rules.
Members of the European Parliament (MEPs) voted 531-69 in favour of a proposal to postpone the implementation of the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD).
Under the proposal, companies in the second and third phase of CSRD’s roll-out will have an extra two years to comply with the law.
That means large, non-listed firms with more than 250 employees, €50m turnover and/or €25m in assets, will have until 2028 to disclose information in line with the European Sustainability Reporting Standards (ESRS).
Listed SMEs will have until 2029.
The ‘stop-the-clock’ proposal, as it is known, is one of two tabled by the Commission in February as part of its omnibus package.
The delays are intended to provide legislators with enough breathing space to negotiate the second proposal, which lays out substantive changes to CSRD and CS3D, including major reductions in their scope and coverage.
“Until a deal is set on the second omnibus directive, companies listed on regulated markets with over 500 employees will have to continue to produce sustainability statements as part of their management reports, based on the current ESRS standards,” explained Abrial Gilbert-d’Halluin, an adviser to MEP Radan Kanev.
That is because they are not covered by the delays introduced via the stop-the-clock proposal, but could be in scope of any introduced into the second.
“Foreign companies which have no subsidiaries in Europe but do direct business in the European market are unaffected by the delays: they will still have to report in 2029,” Gilbert-d’Halluin added.
On CS3D, the first group of companies – those with more than 5,000 employees – will now have to comply with the directive by the same deadline as the second group, which are those with 3,000 employees. That means they get an extra year, and will start in 2028.
Again, more delays could be introduced as the second proposal is negotiated.
Next steps
Thursday’s vote was the final hurdle for the Commission’s stop-the-clock proposal, and it will now be rubber stamped without the usual, often lengthy political negotiations.
“The Council adopted its mandate last week, and it also accepted the Commission’s proposal as it stands,” said Julia Otten, a specialist in EU sustainability regulation at purpose-driven law firm Frank Bond.
“That means it will now pass really quickly, with no need for trialogues, because all the co-legislators agree.”
There is less clarity on the timeline of the second proposal, in part because it is likely to provoke significant disagreement among lawmakers.
Parliamentary debates on the file have already indicated major divisions among MEPs, with some wanting the proposals to go much further while others want to retain the existing regulation.
According to the latest timeline from the legal affairs committee responsible for the omnibus proposals within Parliament, MEPs would not form an official negotiating position until the fourth quarter of 2025.
Gilbert-d’Halluin believes this will still provide enough time to conclude trialogues this year.
“Everything should be wrapped up around the end of October, we think,” he told IPE.
However, Richard Gardiner, an EU policy specialist at NGO the World Benchmarking Alliance, said negotiations normally take “at least three months, and sometimes much longer”.
“If the latest timeline is anything to go by, trialogues could still be under way well into 2026,” Gardiner concluded.
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