The EU’s recent “Stop the Clock” mechanism delays key ESG reporting requirements—but not the corporate momentum behind sustainability. Luxembourg ESG entrepreneur Patrizia Luchetta weighs in on what this means for Europe’s green future.
In November 2022, the European Commission adopted the Corporate Sustainability Reporting Directive (CSRD), introducing stricter requirements for non-financial reporting, particularly on environmental, social and governance (ESG) aspects. The legislation establishes a new standard requiring nearly 50,000 companies to report their climate and environmental impact, aiming to empower consumers and investors to make more sustainable choices. The legislation replaces and builds on the Non-Financial Reporting Directive (NFRD). On February 26, 2025, as a follow-up to EU leaders’ call, the European Commission put forward two “Omnibus” packages (“Stop the Clock” mechanism), aiming to simplify existing legislation in the fields of sustainability and investment.
On April 14, 2025, the Council adopted the mechanism, delaying the implementation of CSRD requirements by two years for large companies that have not yet begun reporting, as well as for listed SMEs. The deadline for implementing the first phase of the application (covering the largest companies) was postponed by one year. Patrizia Luchetta—ESG champion, creative strategist, and independent director—shares her insights on the EU executive’s recent decision and how ESG and AI could drive positive global change.
Patrizia Luchetta, what is your take on the “Stop the Clock” mechanism?
These regulatory rollbacks by the EU executive on ESG risk slowing down the collection of reliable data and progress on sustainability. However, despite this turnaround, large companies in both Europe and the US continue to make ESG efforts, driven by consumer demand and the need to remain competitive. Before the Directive was announced, some of them had begun to map their impacts and organise operations in a more sustainable way, because it was in their vision of the future. This ultimately puts the European Commission and the European Council at odds with reality.
However, one of the big mistakes in the initial text was the number and complexity of KPIs. There should be fewer of them, they should be better explained and easier to collect. What is sad about the Omnibus decision is the likely oversimplification of KPIs as well as the elimination of sector-specific KPIs. In addition, there has been a big push on the political side, to limit the number of companies that will have to carry out this reporting. Now, almost 80% of them are no longer covered by the CSRD. This is a significant step backwards because a good part of the data comes from the value chain of companies. So, if we exclude all these companies, it becomes difficult to create a database with comparable data and therefore to carry out benchmarking.
How is ESG perceived and implemented in Luxembourg?
Luxembourg has been slow to implement the CSRD directive, in particular because of lobbying by Fedil. It must be said that the country has many medium-sized companies and few large companies. With the amendment of the ‘Stop the Clock’ mechanism, the country now has a two-year period for the obligations contained in the CSRD Directive to come into force. This creates uncertainty and a contradiction with all the efforts made by the country in terms of sustainable finance. This is detrimental to Luxembourg’s image. Yet, large companies established in the Grand Duchy have continued and continue to make efforts in terms of ESG, driven by consumer demand and the need to remain competitive.
What are the risks of AI in ESG?
AI is talked about a lot in the context of ESG, when it comes to using software that consumes energy, producing and storing massive data. However, AI offers remarkably interesting tools for organisations to solve the sustainability problems we face. It becomes complicated when AI is used in the external context of the company.
“In terms of energy consumption related to the use of AI, I believe it is not so much the companies that are creating a problem, but rather the individual consumer”
In terms of energy consumption and CO2 emissions related to the use of AI, I believe it is not so much the companies that are creating a problem, but rather the individual consumer. Today, the majority of people who go home after work, are bored, and may ask random questions of an AI tool, just to have something to do. We don’t realise that we are emitting a lot of CO2. On the other hand, there will certainly be job cuts, but I don’t think they will be massive. What scares me the most is the loss of critical thinking skills among individuals as a result of AI.
How can AI improve the ESG approach of companies?
AI can help benchmark against companies’ activities, provided that you have access to complete and verifiable databases. It can also help identify the best solutions to move forward in terms of sustainability.
However, it is necessary to have access to databases that are as complete as possible and verifiable. Also, these regulatory rollbacks penalise us in the medium and long term because the collection of reliable data will be slowed down. This delays the possibility of using AI to search for the best business solutions.
This articles was published in the 7th edition of Forbes Luxembourg.
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