By Nicole Phinopoulou
In what has been dubbed the ‘Stop-the-clock’ mechanism, the EU Council formally announced on April 14 that it has adopted a decision that will reverberate across boardrooms and sustainability departments throughout Europe and beyond.
It gave the green light to a directive that delays key corporate sustainability obligations — namely the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
To the casual observer, this might look like another technical policy update in Brussels. In reality, it is a move with deep political, economic and strategic implications.
The delays — two years for many CSRD obligations and one year for the CSDDD — come in response to mounting concerns from businesses and member states about the growing complexity and cost of complying with overlapping sustainability regulations.
Companies have been scrambling to prepare for new rules requiring them to disclose how their operations affect the environment and society, and to conduct due diligence on their value chains. For many, especially European SMEs, the timeline was simply unmanageable.
The fast-track adoption of the postponement, as part of the European Commission’s broader Omnibus I package, reflects a rare consensus: the sustainability reporting architecture, as ambitious and necessary as it is, had become unwieldy.
The Commission’s commitment to a 25% reduction in reporting burdens for large companies and 35% for SMEs underscores this recalibration.
From Idealism to Implementation
This decision should not be considered as step back from sustainability, but a shift in how it is and should be pursued, especially for regulatory compliance.
The delays indeed provide a short breathing space — not only for companies but for regulators too — to refine a framework that must balance ambition with feasibility.
It’s no coincidence that the European Commission is already working to revise the guidelines on European Sustainability Reporting Standards (ESRS) to reduce data points, clarify ambiguities, and align with other legislation.
The message is clear: the EU still wants to lead on sustainability — but it wants to do so without crushing its businesses under regulatory compliance weight.
Another crucial dimension of this decision is legal certainty.
Companies have been living in limbo, unsure of the exact timing and scope of their obligations. By clarifying that many requirements will not kick in until 2028 or later, the EU offers a chance to prepare in earnest rather than in panic.
It also gives the co-legislators time to negotiate more substantive, durable reforms to the CSRD and CSDDD. This is particularly impactful for Wave 2 and Wave 3 companies (those previously set to report in 2026 and 2027), many of which are now effectively out of scope.
According to estimates, this move could reduce the number of companies required to report by up to 80% under the previous regime.
Is Sustainability Losing Momentum?
Delays might create false comfort, leading some companies to pause rather than prepare. This would be a mistake.
The underlying direction of EU policy has not changed. Double materiality remains central. Due diligence is still coming. The climate clock is still ticking.
The EU will not want its global leadership in sustainability to weaken. Having positioned itself as the regulatory vanguard, the EU will try to ensure that simplification doesn’t erode its credibility or the moral authority it has built over years of policy innovation.
Based on the above, companies rather than celebrating or relaxing, should view this as a strategic window of opportunity and use the time to:
- Reassess their sustainability strategy in light of the clarified timelines;
- Prepare internal systems to meet eventual reporting and due diligence requirements;
- Engage with voluntary standards, especially if they are smaller companies in a larger supply chain;
- Monitor legislative updates, as more changes are likely under the next phase of the Omnibus II package.
The EU’s decision to delay — but not derail — its corporate sustainability mandates, reflects a shift from idealism to grounded realism. It’s not an abandonment of the European Green Deal, but an acknowledgement that transformation requires workable paths.
The EU isn’t stepping back. It’s pausing to get the map right. Let’s hope businesses don’t mistake the silence of the clock for the end of the journey.
Nicole K. Phinopoulou is a lawyer specialising in banking and financial services, ESG and sustainable finance, and regulatory compliance
