Key takeaways
- The European Commission has published an omnibus package of proposals to amend the EU's framework for sustainability reporting under the CSRD.
- In-scope undertakings would be narrowed to EU large undertakings with 1,000+ employees and large third country undertakings with an EU nexus.
- Irish SPVs and listed SMEs would be removed from scope for CSRD mandatory reporting obligations.
- The Stop-the-Clock Directive, which would postpone application of Wave Two and Wave Three mandatory reporting obligations by two years, is expected to be adopted by June 2025.
On 26 February 2025, the European Commission (Commission) published an omnibus package (Omnibus Package) of proposals to amend the EU's framework for sustainability reporting, including under the CSRD ((EU) 2022/2464). The Omnibus Package, first formally outlined at the Budapest Conference in October 2024, forms part of a broader initiative to simplify the regulatory environment, remove excessive administrative burden and foster competitiveness within the EU. It reflects the recommendations of the Draghi Report and the strategic focus on competitiveness contained in Commission's 2025 Work Programme and more recently in the EU's Competitiveness Compass.
The Omnibus Package includes proposals for the following.
- Directive to amend the CSRD, the Accounting Directive (2013/34/EU), the Audit Directive (2006/43/EC) and the CSDDD ((EU) 2024/1760) (Amending Directive).
- Directive to postpone the application date of certain elements of the CSRD and the CSDDD (Stop-the-Clock Directive).
- Delegated Act to amend reporting obligations under certain Taxonomy Regulation ((EU) 2020/852) level two measures.
- Regulation to amend the Carbon Border Adjustment Mechanism Regulation ((EU) 2023/956).
- Regulation to amend the InvestEu Regulation ((EU) 2021/523).
This advisory focuses on the Amending Directive and the Stop-the-Clock Directive insofar as they concern Irish SPVs and listed SMEs.
Existing CSRD framework — scope and application
The CSRD's mandatory reporting obligations are applied on a phased basis, with Wave One applying to large public interest companies (including banks and insurers) in respect of financial years from 1 January 2024. Wave Two and Wave Three capture, respectively, large companies (to report in respect of financial years from 1 January 2025) and SMEs with securities listed on EU regulated markets (to report in respect of financial years from 1 January 2026, with an opt-out on a comply or explain basis for two years). Lastly, in Wave Four, in-scope third country undertakings will be required to report in respect of financial years from 1 January 2028.
Under the existing framework, an Irish SPV, depending on its size and activity, may fall to report in Wave One, Wave Two or Wave Three.
Proposed changes relevant to Irish SPVs and listed SMEs
Narrowed scope
The Amending Directive would limit the scope of CSRD mandatory reporting obligations to undertakings with (1) more than 1,000 employees and (2) either (a) a balance sheet total of €25 million or (b) a net turnover of €50 million. This would reduce the number of undertakings subject to CSRD mandatory sustainability reporting by approximately 80% and align the CSRD's thresholds more closely with those in the CSDDD.
If implemented, the revised thresholds would remove from scope many undertakings falling within the existing Wave One or Wave Two. This would mean in practice that Irish SPVs, which typically have no employees, would not be subject to CSRD mandatory reporting obligations.
The Omnibus Package would also remove the specific reporting requirements for listed SMEs (Wave Three).
Lastly, many third country undertakings (Wave Four) would fall out of scope with a tripling of the threshold for EU net turnover to €450 million, although they will not have the benefit of the 1,000-employee threshold available to EU undertakings.
Stopping the Clock
The change of scope envisaged by the Amending Directive by itself would have created a dilemma for Wave Two and Wave Three undertakings: should they continue to prepare for CSRD mandatory reporting or stand-down ongoing work in reliance on legislative proposals that could be altered by the European Parliament (Parliament) or the Council of the EU (Council)? To remove this uncertainty and provide breathing space to negotiate the Amending Directive, the Commission tabled the standalone Stop-the-Clock Directive. This measure would delay by two years the application of reporting obligations for Wave Two and Wave Three undertakings, thereby effectively relieving them entirely of CSRD mandatory reporting obligations.
The Commission requested the Parliament and Council to prioritise the Stop-the-Clock Directive in order to provide legal clarity in particular for undertakings in Wave Two that are currently required to report for the first time in respect of financial year 2025. On 26 March 2025, the Council agreed its negotiating mandate for the Stop-the-Clock Directive, endorsing the text proposed by the Commission. The same text was approved without amendment by the Parliament under its urgent procedure on 3 April 2025. The co-legislators have been called upon to adopt the Stop-the-Clock Directive by June 2025.
Streamlined reporting obligations
For those undertakings that remain in-scope for CSRD mandatory reporting, the Omnibus Package also proposes to streamline the current regime. This includes a substantial reduction in of the number of data points required by the European Sustainability Reporting Standards and limiting the potential for new data points by removing the Commission's power to adopt new sector-specific standards. However, undertakings required to report in 2025 in respect of financial year 2024 (Wave One) will still be required to report in line with the existing regime.
Voluntary reporting
Undertakings falling outside the proposed new scope for CSRD mandatory reporting would have the option to report on a voluntarily basis pursuant to simplified voluntary standards to be adopted by the Commission and based on voluntary standards for SMEs developed by the European Financial Reporting Advisory Group.
Commentary
Many Irish SPVs currently within scope for CSRD mandatory reporting obligations in either Wave One or Wave Two have already committed substantial resources to meeting these obligations. There can be considerable implementation and on-going compliance costs for companies which are within the scope of CSRD. Accordingly, this simplification will be a welcome development for SMEs and SPVs that were facing a significant burden under this regime.
Next steps
The Stop-the-Clock Directive is now subject to interinstitutional negotiations between the Parliament and Council. Given that the co-legislators have settled on the same text, this process should be swift and allow for adoption by the requested June 2025 date. Once adopted, the Stop-the-Clock Directive will be published in the Official Journal of the EU (Official Journal) and enter into force 20 days thereafter. The current text of the Stop-the-Clock Directive envisages transposition in the EU Member States by 31 December 2025.
The Amending Directive remains subject to scrutiny and amendment by the Parliament and the Council. If adopted, it will enter into force after publication in the Official Journal, following which it will require transposition by EU Member States.
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