European Parliament Confirms Postponement of CSRD ReportingRequirements

The European Parliament has now formally approved the delay in mandatory

sustainability reporting for large companies under the Corporate Sustainability

Reporting Directive (CSRD). Originally, these requirements were set to apply from

the 2025 financial year, but the new timetable postpones the obligation for most large

enterprises to the 2027 financial year. This development follows the earlier backing

from the European Commission and the recent support of the European Council,

providing clarity and breathing room for many organizations.

Below is a concise overview of the key points and implications:

1. Background on the CSRD

The CSRD is part of the European Union’s strategy to encourage greater

transparency and accountability regarding environmental, social, and governance

(ESG) impacts. By mandating more extensive and standardised

reporting, the

directive aims to help stakeholders—such as investors, employees, customers, and

regulators—better assess companies’ sustainability practices and performance.

Initially, the plan was to replace and expand upon the existing Non-Financial

Reporting Directive (NFRD) by introducing detailed disclosure requirements starting

in 2025. However, the new “stop-the-clock” directive temporarily shifts these

timetables.

2. Approved Postponement Under the approved postponement:

- Public Interest Entities (PIEs) with more than 500 employees are still

required to begin CSRD reporting from the 2025 financial year, continuing into

2026.

- Other large companies (those not classified as PIEs (Public Interest

Companies) and meeting the specified size thresholds) now have until 2027

before their reporting obligations kick in—effectively granting a two-year

extension.

This means that thousands of large enterprises across the EU will benefit from

additional time to align their internal data-gathering and compliance processes with

the extensive requirements of the CSRD.

3. The “Stop-the-Clock” Directive

The proposal to postpone these reporting obligations was introduced as part of the

European Commission’s omnibus package in late February.

Titled the “stop-the-clock” directive, it was designed to address:

- Implementation Challenges: Many companies cited difficulties preparing for

new, in-depth data collection, especially in areas like value chain emissions

and social standards.

- Standardization Issues: The European Sustainability Reporting Standards

(ESRS) are still evolving, and certain details regarding reporting frameworks

and methodologies needed greater clarification.

- Data Quality and Consistency: Ensuring the data’s accuracy and reliability

remains a challenge. Policymakers and stakeholders wanted to make sure the

systems and guidelines for data verification and audit are robust.

With the European Parliament’s backing, the “stop-the-clock” directive effectively

becomes law—awaiting only the final, largely procedural, green light from the

European Commission before it is published.

4. Practical Implications for Companies

- Extended Preparation Window: Enterprises that are no longer bound by the

2025 deadline gain two additional years to refine their sustainability data

infrastructure and reporting procedures.

- Resource Allocation: The extended timeline allows for a more measured

approach to investment in technology, training, and personnel needed to

comply with future CSRD obligations.

- Strategic Alignment: Companies now have a better opportunity to align their

sustainability strategies with long-term business goals and to integrate CSRD

reporting into broader ESG initiatives.

- Less Immediate Pressure: While the directive maintains its focus on

advancing sustainability transparency, the urgency for compliance by 2025 is

now lifted for non-PIEs.

However, it is important to note that public interest entities with more than 500

employees must still prepare for their CSRD obligations starting in 2025. They will be

acting as front-runners in adopting and showcasing best practices in sustainability

reporting and data management.

5. What to Watch Next

1. Publication of the Final Directive: Although the European Commission’s

approval is technically still pending, it is largely a formality at this stage.

Companies can expect the “stop-the-clock” directive to be published and

enacted soon.

2. Evolving ESRS Guidance: The European Financial Reporting Advisory

Group (EFRAG) continues to refine the European Sustainability Reporting

Standards (ESRS). Their guidance will be critical for companies preparing for

eventual compliance.

3. Implementation Support: Expect more guidelines, workshops, and sector-

specific support to emerge as regulators and industry associations prepare for

2027.

4. Voluntary Early Adoption: Some enterprises may still choose to align with

the CSRD framework prior to 2027, especially if they regard robust ESG

reporting as a competitive advantage or a means of nurturing trust among

investors and customers.

6. Recommendations for Businesses

1. Begin Preparations Early: Even though deadlines have shifted, sustainability

reporting is becoming a cornerstone of corporate accountability. Early

planning can help reduce compliance risks.

2. Invest in Data Systems: Consider implementing or upgrading systems that

capture, manage, and verify sustainability data—particularly for complex

areas like supply chain emissions or social metrics.

3. Engage Stakeholders: From investors to employees and suppliers, open

dialogue fosters better alignment on sustainability goals and clarifies

expectations.

4. Monitor Legislative Changes: Keep an eye on updates from the EU as well

as EFRAG’s evolving standards to ensure your reporting strategy remains on

track.

Conclusion

The European Parliament’s confirmation of the CSRD reporting delay means many

large companies can now breathe a sigh of relief. However, this reprieve should not

be mistaken for a reason to postpone essential preparations. The shift underscores

the EU’s desire for a realistic timeline that balances the ambition for transparent,

high-quality ESG reporting with the practicalities of implementation.

As the “stop-the-clock” directive takes effect and the new timetable takes shape,

companies can use this time advantageously. By investing in robust data collection,

enhancing sustainability strategies, and staying attentive to ongoing EU updates,

businesses will be well-positioned to meet the eventual 2027 obligations and

demonstrate leadership in corporate sustainability.