EU Commission Offers Breathing Room for Companies Leading on Sustainability Reporting

Key Takeaways

• Targeted Relief for Early Reporters: Companies already reporting under ESRS for 2024 can omit certain risk-related disclosures in 2025 and 2026.
• Level Playing Field: Larger companies (750+ employees) get access to many of the same phase-in benefits as smaller firms.
• Bridging a Policy Gap: The fix compensates for wave one’s exclusion from the “stop-the-clock” Directive adopted in early 2025.
• Bigger Reforms on the Way: A full ESRS overhaul is in progress, aiming to simplify and clarify sustainability reporting requirements by 2027.

Deep Dive

The European Commission has stepped in with a timely adjustment to ease pressure on companies already navigating the EU’s sustainability reporting rules. On July 11, the Commission adopted a “quick fix” to the first set of European Sustainability Reporting Standards (ESRS), giving a break to companies that began reporting for financial year 2024, commonly referred to as “wave one” reporters. These companies will now be able to skip certain additional disclosures for two more years, covering financial years 2025 and 2026.

Specifically, they won’t need to report on the expected financial effects of certain sustainability-related risks, something the original standards required starting next year. The move ensures that companies won’t face extra reporting demands in 2025 and 2026 compared to what was required for 2024.

Larger wave one companies, those with more than 750 employees, will also benefit from many of the same transitional allowances that were originally meant for smaller firms. In other words, they’ll get some breathing room too.

Filling the Gap Left by the “Stop-the-Clock” Directive

This quick fix is filling an important gap. Earlier this year, the Commission adopted the so-called “stop-the-clock” Directive as part of the Omnibus I legislative package, which delayed reporting deadlines for wave two and wave three companies by two years. But wave one companies were left out of that reprieve, until now.

With this adjustment, the Commission is trying to balance the scales and offer a bit more certainty for the companies that had to go first.

This won’t be the last update. The Commission is also in the middle of a broader review of the ESRS, aiming to simplify the standards, cut down the volume of required data, and align them more closely with other EU laws. That more comprehensive revision is expected to land by the 2027 financial year.

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