A significant source of uncertainty around EU disclosure requirements was lifted on Thursday. The EU Parliament voted yes on a key part of the EU Commission’s Omnibus I package, the so-called ‘stop-the-clock’ proposal. Companies in the EU and abroad anxiously awaited the vote to get some clarity on the timing of EU disclosure requirements following the EU Omnibus announcement in late February.

The approved ‘stop-the-clock' proposal will delay the application of the EU’s Corporate Sustainability Reporting Directive (CSRD) and the associated EU Taxonomy for all companies not yet subject to their reporting obligations by two years, and the Corporate Sustainability Due Diligence Directive (CSDDD) by one year. ERM has analyzed the ‘stop-the-clock’ proposal and the other elements of the Omnibus proposal in this policy alert.

The ‘stop-the-clock’ proposal was necessary to give EU legislators sufficient time to agree on a way forward for the broader Omnibus proposal, which includes potential revisions to the number of companies subject to the underlying legislation, as well as the breadth and depth of the requirements. For many companies, the ‘stop-the-clock’ proposal thus mitigates the risk of having to comply with the existing CSRD, Taxonomy, and CSDDD, even though they may no longer fall in scope or have fewer requirements to respond to.   

The Parliament’s vote followed shortly after the European Council published its negotiation position, fully embracing the EU Omnibus and its objectives of reducing reporting efforts and costs by at least 25 percent and at least 35 percent for small and medium-sized enterprises. The Council also encouraged co-legislators to adopt the ‘stop-the-clock’ proposal before the end of June.   

However, this week’s approval doesn’t offer guarantees for the fate of the EU Omnibus itself. There is intense debate among politicians, EU institutions, and other observers about what final shape the EU Omnibus should take or if it should be approved at all. Below are some notable positions across the board.

Opinions on the EU Omnibus proposal

  • Many advocates for the EU Omnibus, including European employer organizations in France and Germany and most EU finance ministers have pointed to the report on EU competitiveness written by Mario Draghi, former President of the European Central Bank, to emphasize the urgency of regulatory simplification. However, while Draghi’s report highlights the EU’s sustainability reporting and due diligence framework as ‘a major source of regulatory burden,’ it also considers sustainability a positive overall contributor to competitiveness.
  • In a recent report, the European Central Bank argues that policymakers should preserve and possibly improve elements of their sustainable finance framework (as initiated by the 2018 EU Sustainable Finance Action Plan) that prevent greenwashing. The ECB views CSRD, CSDDD, and the EU taxonomy as integral parts of this and emphasizes the importance of robust third-party verification, enforcement, and sanctions in combating greenwashing. The report assesses the existing EU legislation but doesn’t take a direct stance on the EU Omnibus. However, the ECB likely has doubts about the focus on limited assurances and weakening of sanctions included in the EU Omnibus.
  • The Platform on Sustainable Finance, an advisory body established under the EU Taxonomy Regulation, challenges the sharp decrease in the number of companies that the EU Omnibus proposal requires to comply with the EU Taxonomy. Mandatory EU Taxonomy reporting would only apply to companies with both 1,000 or more employees AND €450 million or more in turnover. The Platform argues that this double hurdle would reduce the scope of companies too much and that it creates an imbalance between CSRD and Taxonomy reporting triggers.
  • A debate in mid-March revealed that the European Parliament is far from aligned on the broader Omnibus Proposal put forward by the Commission. Opinions ranged from members advocating for further cuts and simplification to those branding the EU Omnibus as outright deregulation rather than simplification. Despite the ‘stop-the-clock’ proposal passing Parliament, businesses and investors should prepare for an extended period of heated debate on other elements of the Omnibus proposal.
  • Meanwhile, the European Commission is trying to maintain momentum. It recently sent a letter to the European Financial Reporting Advisory Group (EFRAG), which drafted the existing European Sustainability Reporting Standards (ESRS) under the CSRD, requesting that EFRAG develop a revised set of ESRS standards by October 31, 2025. The Commission asked EFRAG to prioritize quantitative over qualitative disclosures, remove low-materiality requirements for general-purpose reporting, and further elaborate on how to translate topical materiality assessments into applicable disclosure requirements, as well as the distinction between mandatory and voluntary disclosures. The EU Commission aims for the adoption of the new standards in time for financial years starting on or after January 1, 2027, with the potential option of voluntary compliance by January 1, 2026.

What companies should do now?

Even now that the ‘stop-the-clock’ proposal has been approved, businesses and investors will continue to face uncertainty about the exact outcome of the EU Omnibus approval process and the modifications that could be made along the way. Since opinions on the EU Omnibus are far apart, the current EU Omnibus is likely to undergo some changes to achieve a compromise. However, the ‘stop-the-clock’ approval means that companies avoid having to comply with regulations that could soon become obsolete. It also gives them a few more years to prepare.

This does not mean that companies can afford to press pause on sustainability altogether. While it is likely that some proposed simplifications in the EU Omnibus will reach the finish line, the final scope remains uncertain. Regardless of the exact outcome, sustainability in general and the net-zero transition of the economy, in particular, remain key factors of medium- to long-term competitiveness that no company can afford to ignore.

Stay informed

ERM will closely track further regulatory developments and provide detailed interpretation and recommendations for companies by our leading experts. For more information on the EU Omnibus, you can listen to our latest webinar here or read our policy alert here.