Dive Brief:
- The European Parliament voted Thursday to “stop the clock” on reporting requirements for the European Union’s corporate sustainability and supply chain due diligence laws, according to a press release.
- The delay will give the next wave of Corporate Sustainability Reporting Directive companies and the first set of Corporate Sustainability Due Diligence Directive companies until 2028 to comply with the laws.
- The European Commission first proposed the delay in February, alongside a proposal for broader simplification of the two laws. The final procedural step is formal approval by the European Council, a formality after the bloc’s co-legislator greenlit the draft text on March 26.
Dive Insight:
The CSRD and CSDDD delays are designed to give European legislators time to simplify the bloc’s corporate sustainability reporting requirements. The European Commission proposed the delay as part of a package of laws containing changes expected to dramatically reduce the number of companies required to report and the number of reporting requirements.
Following the European Council’s approval of the draft text last week, the European Parliament overwhelmingly voted Thursday in favor of the stop-the-clock proposal. The vote was originally scheduled for April 1, but was postponed to April 3. The reporting delays passed with 531 members of parliament voting to approve, 69 opposing and 17 abstaining, according to Thursday’s release.
The delay gives the second wave of CSRD reporting companies until 2028 to comply with the law, and the third wave of companies until 2029. The simplification omnibus package adopted by the European Commission proposes increasing the employee threshold for CSRD reporting companies to 1,000 employees and revising the standards to “substantially” reduce the number of data points companies would be required to collect. The revisions would also limit the information in-scope companies can ask for from companies with under 1,000 employees. Raising the employee threshold is expected to remove approximately 80% of companies from the law’s scope.
The CSDDD delay will give the largest companies in the law’s scope until 2028 to begin the application phase. The omnibus proposed longer intervals for companies to conduct regular supply chain assessments and removed a requirement for companies to “systematically conduct in-depth assessments” of their supply chains. The omnibus proposed only requiring companies to pursue due diligence beyond direct partners “in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.”
The rapid adoption of the stop-the-clock proposal and the parliamentary vote count indicate broad support for a simplification of the bloc’s corporate reporting laws. However, an adviser to a member of parliament previously said the underlying efforts face a legislature that’s “split” on how to make it easier for businesses to operate without compromising the laws’ original purpose.
The EU laws have drawn the ire of the ruling political party in the United States, as congressional Republicans have taken aim at both laws since Republican President Donald Trump’s election. House Financial Services Chair French Hill, R-Ark., said the CSDDD should be treated as a “non-tariff barrier” for U.S. companies. Meanwhile, a member of the Senate Banking Committee, Sen. Bill Hagerty, R-Tenn., recently introduced a bill banning U.S. companies “integral to the national interests of the United States” from complying with foreign sustainability due diligence laws.
While EU legislators will use the delay to hammer out the details of the simplification, the deferred timeline will give businesses more time to align with the reporting requirements, KPMG US Sustainability Leader Maura Hodge said Thursday. She called the delay “a pragmatic recalibration that balances sustainability ambitions with business realities” in emailed comments to ESG Dive.
“This extension acknowledges the implementation challenges of complex frameworks like the CSRD and CSDDD,” Hodge said. “Companies should use this extended implementation window strategically to strengthen their sustainability data infrastructure and reporting capabilities, ensuring they're well-positioned for compliance when requirements take full effect in 2028."
The full legislative process for simplification efforts is expected to take a year, EU policy lobbyists and advisers said at a conference last month. The proposal delay also gives member-states until July 2027 to transpose the CSRD and CSDDD into their national regulatory frameworks, according to parliament’s release.
