by David Mangan April-10-2025 in Corporate
A. EU simplification reforms
European companies will receive significant relief from looming sustainability reporting rules under an EU proposal that received the overwhelming endorsement of the European Parliament on 3 April 2025.
The reforms – which have been welcomed by Ireland’s Minister for Enterprise, Trade and Employment, Peter Burke – are part of an “Omnibus” simplification package targeting the burden of red tape and corporate compliance in the EU. The package is part of a broader EU agenda to boost competitiveness by streamlining regulation, following recommendations from Mario Draghi’s high-level report on European competitiveness, which specifically highlighted the overlapping standards and disproportionate compliance costs associated with the EU’s sustainability reporting rules.
For Irish companies, the proposed changes would significantly narrow the range of businesses caught by the reporting regulations and delay when the first sustainability reports are due. The Irish government has signalled that amending legislation is currently in preparation to “further clarify and reduce the scope of companies covered” by the Irish transposition of these rules, which inadvertently brought smaller listed and unlisted companies within the scope of the reporting obligations.
B. Key EU proposals: the Omnibus Package and “Stop the Clock”
The European Commission’s proposals will overhaul two flagship sustainability laws: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD, which greatly expanded the sustainability reporting requirements on European companies, is set to be dramatically reduced. The EU estimates that around 80% of companies would be removed from the scope of the CSRD by raising the size threshold for in-scope companies from large companies with 250 employees to 1,000 employees and providing a proportionate standard for listed SMEs.
The Omnibus proposal also aims to limit the trickle down of reporting obligations on smaller companies. This to be done by extending and strengthening the so-called “value-chain cap”, which has the objective of preventing larger in-scope companies from simply pushing down reporting obligations onto smaller firms in their supply chains. The enhanced value-chain cap will protect companies with 1,000 or fewer employees by prohibiting in-scope companies from seeking more extensive sustainability information from out-of-scope companies than such companies would be required to provide under the proportionate standard for listed SMEs.
A headline element of the package is the so-called “Stop the Clock” proposal, which will pause the implementation timeline of CSRD reporting requirements by two years for certain companies. Under the original implementation schedule, many companies would have needed to start reporting for financial periods beginning in 2025 or 2026. The Stop the Clock proposal pushes out these deadlines by two years for those not already reporting under the first wave of implementation.
The Omnibus package also targets the CSDDD – the EU’s rules for companies to conduct due diligence on human rights and environmental impacts in their operations and supply chains. The proposed implementation deadline for the CSDDD, which was due to come into effect by July 2026, will be postponed by one year, which is expected to significantly reduce compliance requirements for affected businesses.
C. Impact on Irish companies and clarification of scope
If adopted, the EU reforms will significantly ease the compliance burden on many Irish companies that were gearing up in advance of the sustainability reporting deadlines – either by bringing them outside scope or delaying the first reporting periods.
A separate aspect of the Irish regulations that has caused some confusion in the market is the apparently unintentional inclusion within the Irish transposition of CSRD of smaller PLCs that are either listed on non-regulated markets (such as Euronext Growth) or, more broadly, are ineligible for qualification as small or medium companies under company law rules. It is hoped that these companies – which were never expected to be within scope of CSRD – will be excluded from the scope of the revised reporting requirements.
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About the Author
David Mangan
David is a partner in our Corporate team. He advises clients on structuring and executing domestic and cross-border transactions, including mergers & acquisitions, joint ventures, private equity investments and capital markets transactions.