"Stop the clock" and raising the thresholds

Update April 16, 2025

Stop the clock is now law

Immediately after the EU Parliament, the European Council also gave its approval to Stop the Clock. Today, this part of the omnibus proposal of February 26, 2025, was published in the EU Official Journal.

This means that it is now finally clear that the two-year postponement of the initial application date will go ahead. Although the original CSRD has still not been transposed into national law in Germany, German companies can also derive certainty regarding the initial application date from this.

Update April 3, 2025

The headline “stop the clock” refers to the EU Commission's proposal to postpone the initial application date for sustainability reporting in accordance with the CSRD Directive for companies in the so-called second and third waves by two years. This proposal is part of the so-called first omnibus package.

The EU Parliament approved this proposal today. Even though the EU legislative process is not yet formally complete and implementation into national law is still pending, companies in the second and third waves can now plan ahead with certainty based on the two-year postponement.

The other proposals in the first omnibus package are currently going through the legislative process, which the EU Commission hopes to complete in such a way that implementation in national law by the member states will be possible in the course of 2025. The “stop the clock” proposal was separated from the other proposals in order to speed up the legislative process.

The companies in the second and third waves include large, non-listed medium-sized companies and groups of companies (second wave) and small listed companies (third wave). Some of these companies can hope to be completely exempted from the reporting obligation beyond the deferral period under the proposal heading “raising the thresholds.”

Post February 27, 2025

What is it all about?

In accordance with the EU CSRD Directive, a large number of companies are to be obliged to prepare a sustainability report as an extension of the management report. This also applies to unlisted SMEs. The same applies to the fulfillment of due diligence obligations regarding the supply chain (CSDDD as the successor to the national LkSG) and a CO2 border compensation for the import of CO2-intensive products (CBAM).

The reporting obligations and procedures were criticized for being too bureaucratic. The EU Commission has therefore launched an initiative to reduce the burden in this area, which has become known as the omnibus package. There will be several omnibus packages. On February 26, 2025, the EU Commission presented its ideas for Omnibus Packages I and II. 

Simplifications regarding the sustainability report and the report on green KPIs (CSRD/environmental taxonomy)

"Stop the clock": Under this heading, the companies/groups obliged to submit a sustainability report are given a two-year delay. The first sustainability report must therefore be submitted in the 2028 financial year for the 2027 financial year.

As a second simplification, the group of companies subject to reporting requirements has been significantly reduced. The reporting obligation now only applies to companies that employ more than 1,000 people and either generate more than EUR 50.0 million in sales revenue or have a balance sheet total of more than EUR 25.0 million.

If revenue is above EUR 450.0 million, the reporting obligations are more detailed than below this threshold; in particular, companies below this threshold do not have to report in accordance with the EU environmental taxonomy.

Ultimately, it is estimated that the reporting obligation will no longer apply to around 80% of the companies affected within the EU.

The concept of dual materiality for sustainability reporting remains unchanged in principle. The once planned sector-specific standards for the sustainability report will not be installed in the foreseeable future. The sustainability report remains subject to audit, but will not be auditable with reasonable assurance for the foreseeable future (only limited assurance). Details on planned simplifications and reductions regarding data points in the sustainability report (disclosure requirements) are still pending.

The CSRD has still not been transposed into national law in Germany, which means that no German company/group is currently obliged to produce a sustainability report in accordance with the CSRD. Legislators in Germany therefore need to combine the implementation of the previous status with the simplifications that are now emerging. 

Facilitation of due diligence obligations in the supply chain (CSDDD)

Here, too, a deferral of one year will be introduced for the largest companies. In the final expansion stage of the CSDDD, companies that have more than 1,000 employees and generate more than EUR 450.0 million in revenue will be obliged to fulfill due diligence obligations regarding their supply chain from the 2029 financial year.

The due diligence obligations should only have to be fulfilled for the direct business partners in the supply chain.

For companies that are not obliged themselves, the so-called trickle-down effort (reporting/information requirements in the supply chain) is to be significantly limited with regard to CSDDD and CSRD. Civil liability for breaches of due diligence should be significantly reduced.

Facilitations regarding CO2 border adjustment (CBAM)

Companies now designated by the EU Commission as small importers - i.e. companies with less than 50 tons of imports of relevant goods (e.g. iron, steel, aluminum, cement) - are completely exempt from the CBAM obligations.

Simplifications of the CBAM procedure are planned for companies that remain subject to the obligation, and the obligation to obtain corresponding certificates if affected will not begin until February 2027.

Next steps

Yesterday, the EU Commission presented a proposal. This proposal will now go into further legislation, including possibly a so-called trialogue procedure. In parallel, the EU Commission will present further proposals for reductions and simplifications of data points in detail. At least one further omnibus package is also imminent.

We will keep you up to date on further developments over the coming weeks and months. On the LinkedIn channel of our subsidiary FALK Momentum, we will gradually go into more detail about the current proposals from tomorrow.

If you have any questions, please contact our ESG experts Lars Viebrock, Sebastian Schaaf und Carsten Niehues.