By Rachel Bukowitz
After fast-tracking the vote on the ‘stop-the-clock’ directive, on April 3rd, the European Union (EU) Parliament voted to approve the European Commission’s delay in implementing the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
The CSRD’s implementation is delayed by two years, and the CSDDD’s is delayed by one year. This means that a company that was in scope to report to the CSRD in 2026 (covering 2025 data) now has until 2028 before they are required to report for CSRD (on their 2027 data). Following the Council’s adoption of the ‘stop-the-clock’ directive, EU Member States must transpose it into their national law by the end of 2025.
Five Actions for Making the Most of the Next Two Years
The two-year delay of CSRD provides companies with a critical window of opportunity to be well-prepared for their regulatory reporting requirements by 2028 while meeting stakeholder expectations and demands in the interim. Below are 3R’s five recommendations for companies to be best positioned to comply with the CSRD, meet customer demands, and use sustainability data to drive business value.
1: Complete a double materiality assessment (DMA) & map your value chain
Completing a DMA is required for CSRD compliance, even under the proposed CSRD changes described in the Omnibus Simplification Package. Beyond compliance, the DMA process enables companies to identify their material sustainability-related impacts, risks, and opportunities (IROs) across their direct operations and value chain. IRO identification provides immense value when developing business and risk mitigation strategies and resilience planning.
Given that the material topic outputs from a DMA provide the foundation for CSRD’s management approach-based reporting, the earlier a company completes its DMA, the better prepared it will be for CSRD reporting. Likewise, since value chain mapping is integrated into the DMA process, conducting a DMA sets companies up for CSDDD compliance, which requires companies to have visibility into tier one suppliers.
2: Use the output from your DMA to add value to your business
The output from a DMA can be used to drive value in your business. Once you have done the work to define your material IROs, this information can drive business performance and set the foundation for the following actions for adding value:
- Defining your sustainability strategy
- Determining your management approach to address material topics
- Building IRO management into decision-making, business planning, and functional processes including operations, research and development, and Enterprise Risk Management
- Defining IRO ownership and governance
- Setting KPIs and goals
- Tracking performance towards goals
- Reviewing trending data to inform performance improvements
- Establishing management review cycles for continued improvement
3R can help define your sustainability strategy.
3: Publish a voluntary sustainability report using the VSME or ISSB standards
By publishing voluntary reports using internationally recognized standards, companies can identify gaps in their data and reporting and take proactive steps to close these gaps well before their regulatory reporting. Additionally, voluntary reports can be a tool for communicating a company’s progress, commitments, and management approach across each material topic to stakeholders. Under the Omnibus’ proposed ‘value chain cap’, companies in scope for the CSRD will be limited to asking their suppliers for data requests covered within the VSME standard. Therefore, if the value chain cap proposal is approved, reporting using the VSME standard will leave the reporter well-positioned to respond to data requests from customers or other stakeholders.
In addition to preparing for the CSRD and meeting stakeholder information requests, voluntary reports can be used as supporting documentation for sustainability assessments, raters, and rankers. EcoVadis, CDP, GRESB, and others award credit to companies that publish sustainability reports.
Lastly, the data collected through the reporting process provides valuable insights for companies to leverage for improving business performance. Identifying trends in sustainability data can help companies understand the effectiveness of their sustainability actions and uncover opportunities for continued improvement.
4: Complete a gap assessment & make a plan for gap closure
In addition to identifying gaps through the annual reporting process, it is important to take stock of sustainability-related governance structures, strategies, risk management, and data availability through regular management reviews. Completing a gap assessment now will allow companies to proactively identify weaknesses or areas where data is not readily available. Once those gaps are identified, use the next two years to develop or advance systems and processes to close these gaps and integrate sustainability management into business models. This gap closure will position a company for CSRD compliance and build business resilience.
3R can help with setting and implementing strategies.
5: Engage your auditors
The CSRD will require limited assurance for at least the first year of reporting. Regular touchpoints with auditors can ensure that an organization is on the right path towards compliance, allowing time to create or update necessary documentation for a clear audit trail that meets third-party assurance requirements. Preparation for assurance readiness also helps promote data reliability and reporting credibility.
Sustainability Assurance Services can help with audit readiness.
Stay informed as the CSRD requirements evolve
Below are some of the key 2025 dates related to the CSRD and the European Financial Reporting Advisory Group (EFRAG), the group that provides technical guidance to the European Commission for the ESRS:
Present – May 6, 2025: EFRAG is soliciting public input from all relevant stakeholders in relation to potential revisions for simplifying the ESRS.
October 31, 2025: EFRAG is to provide the European Commission with technical advice to revise and simplify the existing ESRS.
December 31, 2025: EU Member States must transpose the ‘Stop-the-clock’ Directive (ie. the two-year delay of the CSRD and 1-year delay of CSDDD) into national law.
Amid an evolving regulatory landscape, 3R stays versed in the latest updates. Whether you are in scope and preparing for the CSRD, want to voluntarily align with the CSRD requirements, or want to realize the value of using the reporting to add business value, 3R is here to help: Follow us on LinkedIn, Sign Up for our Newsletter, or Contact Us.
Disclaimer: This article is written as of April 22, 2025. The other proposed changes to the CSRD, CSDDD, EU Taxonomy, and CBAM, as presented in the Omnibus Simplification Package, will evolve as the EU Parliament and Council negotiate the details.