The 'Stop-the-clock' directive has been adopted

On 14 April 2025, Directive (EU) 2025/794, the so-called ‘Stop-the-clock’ directive was adopted by the Council of the EU. The directive amends the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) and postpones the dates of application of certain corporate sustainability reporting and due diligence requirements, as well as the transposition deadline of the due diligence provisions.

The Stop-the-clock directive is part of the sustainability omnibus package, which aims to simplify sustainability reporting requirements and to reduce the administrative burden and costs for businesses while maintaining the EU's overall environmental and social objectives. 

The directive entails the following changes to the CSRD and CSDDD: 

• The application of the reporting requirements under the CSRD for large companies and parents of large groups that have not yet started reporting pursuant to the CSRD and for listed SMEs (Wave 2 and 3) is postponed by two years. 
• The transposition date for the CSDDD is postponed by one year and the first phase application will be postponed by one year, meaning that the largest companies will start applying it in 2028. 

Member states must transpose the directive into national legislation by 31 December 2025, at the latest. Until the directive is transposed, any previously implemented provisions of the CSRD shall remain in force.

It is important to note that the ‘Stop-the-clock’ directive only concerns the timing of the application of the CSRD and the CSDDD. In parallel, negotiations are on-going regarding the substantial changes to both directives. This includes, for example, the scope of companies subject to the legislation, where it is currently proposed that the thresholds for being in-scope will become significantly higher compared to today. In parallel, the European Sustainability Reporting Standards (ESRS) are being revised, with the aim to significantly reduce the number of data points to be reported. The phase-in provisions for certain ESRS disclosure requirements which, under the current framework, would need to be reported during 2025 and 2026 are also subject to review. 

What does this mean for Sweden? 

Sweden has already implemented the CSRD through amendments to the Annual Reports Act, Chapter 6. These provisions will continue to apply and remain in force until the new directive has been implemented into Swedish law.

On 12 May 2025, the Ministry of Justice issued a proposal to implement the changes deriving from the ‘Stop-the-clock’ directive into Swedish national legislation, by way of amending the Annual Reports Act and other relevant legislation. The proposal has been referred for consideration to relevant bodies and the deadline for submitting responses is 12 June 2025. Provided that the proposal is adopted by the Swedish parliament, the changes will take effect on 31 December 2025.

The proposal aligns with the ‘Stop-the-clock’ directive and entails the following changes:

• Large companies and parent companies of large groups, which do not have more than 500 employees or that have more than 500 employees but are not listed, will apply the sustainability reporting requirement for the for the first time for financial years starting after the end of 2026. 
• Small and medium-sized listed companies shall apply the sustainability reporting requirement for the first time for financial years starting after the end of 2027. 
• Small and non-complex institutions and captives shall apply sustainability reporting requirement for the first time for financial years starting immediately after the end of 2027. 

Companies which are already required to report pursuant to the CSRD under the current legislation will not be affected by the ‘Stop-the-clock’ directive or the now proposed changes in the Swedish legislation. Such companies should nevertheless monitor the legislative developments, and in particular the revisions of the ESRS.

Many Swedish companies were required to prepare a less extensive sustainability report already before the CSRD entered into force. According to the proposal, companies that were required to prepare a sustainability report before the introduction of the CSRD shall continue to prepare a sustainability report in accordance with the old rules, until they are required to start reporting in accordance with the CSRD.

What's next?

The negotiations regarding the substantial changes of the CSRD and the CSDDD, such as the thresholds for being in-scope of the CSRD, are currently on-going and it remains to be seen what the final proposal will look like. The initial proposal in the sustainability omnibus package as regards the thresholds was that only companies with more than 1,000 employees would be required to report under the CSRD. This threshold is subject to much debate and may end up higher or lower than the original proposal. Regardless of where the thresholds ultimately end up, the current negotiations and political majorities within the EU strongly indicate that many companies that would have had to report under the CSRD will not have to do so in the future.

Do you want to know more about how this impacts your company? At DLA Piper, we are closely monitoring the legislative developments. Do not hesitate to contact us if you have questions on sustainability regulations or how this may impact your company.

Contact: Anna Berntorp