The EU and Switzerland are adjusting corporate sustainability reporting frameworks in response to complex implementation challenges, stakeholder demands, and the need for greater clarity. The “Stop the Clock” Directive marks a strategic pause for simplifying requirements and rebalancing ambitions with feasibility as companies prepare for evolving ESG disclosure obligations.
The Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) marked a significant step towards greater corporate transparency and accountability within the EU when they were introduced in 2021 and 2022. Adopted as part of the European Green Deal, the EU directives significantly expanded sustainability reporting obligations and requirements. Upon their adoption, they were positioned as pivotal in shaping the future of sustainable corporate governance and disclosure in the EU. Switzerland, usually aligning with key EU regulations, amended Article 964 a - c of the Swiss Code of Obligations in to maintain international alignment.
At the centre of these regimes lies the European Sustainability Reporting Standard (ESRS), which provides the technical instructions and requirements for corporate sustainability disclosures. Together with the EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation (SFDR), and Capital Requirements Regulation (CRR3), these instruments form a broader regulatory architecture designed to ensure consistency across financial and non-financial sustainability reporting.
Why the “Stop the Clock” Directive was needed?
The rollout of the Directives sparked concerns over reporting fatigue, stakeholder overload, interpretative challenges, and potential impact on EU competitiveness. Responding to these concerns, the European Commission introduced the “Stop the Clock” Directive in April 2025, deferring key reporting deadlines to allow targeted revisions and simplification. At the same time, other important simplifications are underway: reporting requirements under CRR3 have been eased through more proportionate disclosure templates, including simplified options for smaller institutions, under Commission Implementing Regulation (EU) 2024/3172. The Taxonomy Regulation is being streamlined by Commission Delegated Regulation of 4 July 2025, and the SFDR is being simplified and aligned with the CSRD. For financial institutions (FIs) in particular, these adjustments are equally significant, as they reshape the regulatory landscape in parallel to the CSRD and CSDDD developments. Meanwhile, Switzerland announced a suspension of its mandatory climate disclosures to develop “pragmatic” alternatives.
As the legislative frameworks continue to evolve, including major amendments and a planned reduction in the number and scope of companies subject to reporting, businesses and policymakers are reassessing compliance strategies. Throughout these shifts, the goal remains consistent: embedding sustainability in corporate governance and disclosures, facilitating informed decision-making, and enabling the EU and Switzerland to meet their Paris Agreement obligations.
Where are we now?
For many large FIs, the CSRD has not been an abstract regulatory concept but a concrete operational reality. EU-headquartered banks in scope for Wave One1 have already embedded sustainability reporting processes into their governance, IT, and data management frameworks. Many have built cross-functional ESG reporting teams, upgraded systems to track hundreds of datapoints under the ESRS, and integrated sustainability metrics into risk management and strategic planning.
Despite this progress, the introduction of the “Stop the Clock” Directive in 2025 has created mixed impacts. For Wave One companies, which are still required to report for the 2024 fiscal year in 2025, the delay provides only limited immediate relief. Instead, it extends uncertainty about future ESRS evolutions and ongoing regulatory adjustments. Similarly, many Swiss firms had advanced their sustainability reporting initiatives only to face uncertainty after Swiss regulators suspended the Ordinance on Mandatory Climate Disclosures and mandated the development of more pragmatic legislative alternatives.
For Wave Two and Three companies, which were preparing for later reporting deadlines, the two-year postponement offers temporary relief from immediate reporting pressures but also risks dampening momentum and weakening internal business cases for sustained investment in compliance activities. The split landscape between early reporters who have committed significant resources and later reporters who benefit from the delay further complicates the regulatory environment. Switzerland is reflective on this, having paused its own legislative process in alignment with the broader regulatory pause.
Overall, while the postponements reduce short-term burdens, they also prolong the period of uncertainty and call for careful strategic planning by all companies impacted by CSRD reporting and due diligence requirements.
CSRD defines four categories of companies that are in scope for reporting, so called Waves One to Four.
ESRS – setting the reporting standards
Wave One companies are required to begin reporting in 2025 for the 2024 fiscal year. However, on 11 July 2025, the Commission adopted “quick fix” amendments to the first set of ESRS, aiming to reduce the reporting burden and provide greater clarity for early reporters. These amendments remove the obligation to disclose anticipated financial effects and scale back several other requirements, leaving only a limited set of reporting standards in place for the initial years.
In parallel with these amendments, the Commission has tasked EFRAG (European Financial Reporting Advisory Group) with leading the revision of the ESRS. According to EFRAG’s update at the end of July, mandatory datapoints have been cut by 57%, and the full set of disclosures has been reduced by 68%. Further, the overall length of the standards has been shortened by over 55%.
Key levers for simplification identified by EFRAG include:
- Streamlining the Double Materiality Assessment
- Enhancing readability and conciseness
- Modifying the interplay between Minimum Disclosure Requirements and topical specifications
- Improving understandability, clarity, and accessibility
- Incorporating additional burden-reduction reliefs
- Boosting interoperability with global standards
A public consultation on the proposed standard is running till the end of September, with technical advice due by the end of November 2025. The changes created are designed to deliver immediate relief for early reporters and set a foundation for a more interoperable, user-friendly framework going forward.
What is happening on the political front?
Following the “Stop the Clock,” a sweeping revision of the CSRD and CSDDD is currently taking place. Members of Parliament (MEPs) produced over 500 amendment proposals. The EU Council has released its proposal document to amend the directives. Further discussions between the political parties of Parliament are expected between July and October and a parliamentary vote is scheduled for 12 October 2025. Thereafter, the stage is set for negotiations between the Parliament and the Council between October and December prior to final votes in December 2025 or January 2026.
A central focus of the revision process is the scope of the CSRD. The Commission’s Omnibus proposal suggests a remarkable 80% reduction in the number of companies subject to reporting obligations. Under this proposal, only companies with at least 1,000 employees and either €25 million in total assets or €50 million in net turnover would remain in scope. For non-EU companies, the threshold is €450 million in EU net turnover, combined with either an EU subsidiary that meets the above criteria or an EU branch generating at least €50 million in turnover.
Within Parliament, opinions on the directive’s scope diverge sharply. Some see the CSRD as a powerful tool that should cast a wide net, ensuring broad corporate accountability. Others warn that, after painstakingly developing a sophisticated and far-reaching framework, applying it too broadly risks overburdening companies and undermining competitiveness. A more hardline group even questions whether such extensive regulation should exist at all. The debate reflects a tension between regulatory ambition and economic pragmatism - a tension that will need to be resolved before the October vote.
Further, German Chancellor, Friedrich Merz and the French President, Emanuel Macron have requested for the CSDDD to be completely abolished. Meanwhile, the Parliament is internally divided with far-right groups wishing for abolishment and left and green parties wanting to hold the legislative line. To complicate matters further, the proposal must be adopted in a single package, i.e. the CSRD and the CSDDD cannot be separated, and therefore the Parliament and the Council must vote on both at the same time.
The Swiss perspective
Switzerland, while not an EU Member State, closely aligns with EU regulatory developments in sustainability reporting. The Federal Council has announced it will determine how to proceed with adjustments to Swiss corporate sustainability governance once the EU finalises its revisions, but not later than spring 2026. The objective remains to ensure that Swiss corporate governance remain internationally consistent, safeguarding the competitiveness of Swiss companies within the European market. Federal Council wants Swiss law on sustainable corporate governance to be internationally aligned.
Strategic considerations for companies
Wave One:
For Wave One companies, the priority is to leverage the progress already made. With reporting obligations still effective, they should focus on streamlining internal reporting processes, integrating quick-fix ESRS amendments efficiently, and preparing for possible further simplifications without dismantling existing systems. Early adopters can also position themselves competitively by embedding sustainability data into strategic planning and investor communications, turning compliance into an asset rather than a burden.
Wave Two and Three:
For Wave Two and Three companies, the two-year delay offers breathing space but also creates a risk of losing momentum. These firms should use the time to conduct readiness assessments, pilot reporting frameworks, and test data-collection mechanisms in anticipation of the revised ESRS. Building internal governance structures now, while pressure is lower, will enable a smoother transition once requirements become binding.
Swiss firms:
For Swiss firms, alignment with EU rules remains highly probable. Proactively tracking EU developments, while engaging with domestic regulators and industry groups, will help shape pragmatic compliance strategies and avoid last-minute adaptation.
Across all waves, the key recommendation is not to pause entirely, but to recalibrate: treat this regulatory pause as an opportunity to refine data strategies, strengthen governance, and explore technological solutions that will reduce costs and complexity in the long run.
Conclusion
What began as a legislative leap toward embedding sustainability into corporate DNA has now entered a period of recalibration. The “Stop the Clock” Directive and other initiatives do not signal a withdrawal from the EU’s sustainability ambitions, but it does acknowledge the complexities that come with implementing such transformative regulation at scale.
The ongoing revisions to the CSRD, CSDDD, and ESRS reflect a growing awareness among EU institutions: that ambition must be matched with clarity, proportionality, and administrative feasibility. While the policymakers broadly agree on the need for simplification, the details remain contested. The months ahead will determine whether the EU can achieve a balance between sustainability targets, industry requirements, and the EU’s competitiveness.
Meanwhile, Switzerland is watching closely, preparing to adjust its own frameworks in the footsteps of the European Union. For companies, regulators, and practitioners alike, the next six months will be decisive. The sustainability reporting may have paused, but it has not stopped. The Paris Agreement and sustainability targets remain imperative for the values of the European Union.
For banks and other FIs, this means the rulebook is still being written – early engagement, planning and data gathering will allow smooth adoption once the new requirements are locked in.
Talk to Synpulse about how to future-proof your sustainability reporting strategy.
References
1. European Commission, Omnibus I (2025)
2. European Parliament, Amendments 1-514 (2025)
3. European Council, Council's Proposal (2025)
4. EFRAG, ESRS Revision: Progress Report (2025)
6. European Central Bank, Letter on the collateral framework (2025)
