Quick Guide: Key Sustainability Disclosure Regimes: EU CSRD

The CSRD entered into force in 2023, and EU Member States had until 6 July 2024 to transpose it into national law. To date, certain EU Member States have still fallen short of this implementation requirement. Iceland, Liechtenstein and Norway are also obliged to transpose the CSRD into national law after it is formally incorporated into the European Economic Area (“EEA”) Agreement, although they may choose to do so earlier.

The CSRD introduced new requirements for companies established or operating in the EU to report on a wide range of sustainability matters, including environmental, social, human rights, and governance topics. 

It amended the previous regime under the Non-Financial Reporting Directive 2014 (“NFRD”) to expand the scope to a broader range of companies and require increased sustainability disclosures.

However, as number of changes are being made to the CSRD as part of the EU Omnibus simplification initiative (see below). 

In February 2025, the European Commission published the Omnibus I package which proposed a number of changes to the CSRD. The aim of the Omnibus is to reduce the regulatory burden for businesses operating in the EU and to increase EU competitiveness.

The Omnibus I package contained two separate proposals from the European Commission:

• a proposal for a “Stop-the-Clock” Directive to delay by two years the application of the CSRD for in-scope companies that have not yet started reporting (so-called “second wave” and “third wave” companies); and
• a proposal making more substantial changes to the CSRD, including changes to the scoping rules (the so-called “Requirements Proposal”). 

The Stop the Clock Directive came into force in April 2025 and is in the process of being transposed in the EU Member States (see our blog post and transposition tracker). 

The Requirements proposal was finalised in December 2025 (see our blog post). We are now waiting for the final text to be published in the Official Journal of the EU.  

For more information on the Omnibus, see our EU Omnibus Tracker. 

CSRD as originally adopted 

Application of the CSRD was originally intended to be phased in as follows: 

• “Fist wave” companies - From financial years starting on or after 1 January 2024 for large public interest entities already subject to the NFRD;
• “Second wave” companies - From financial years starting on or after 1 January 2025 for organisations that are not presently subject to the NFRD but which fall within the original CSRD’s enlarged scope;
• “Third wave” companies - From financial years starting on or after 1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings;
• Non-EU companies - From financial years starting on or after 1 January 2028. 

First wave companies are EU and non-EU issuers (i.e., entities which have equity or debt listed on an EEA regulated market) which are:

• large undertakings exceeding the average number of 500 employees; or
• parent undertakings of a large group exceeding the average number of 500 employees on a consolidated basis. 

Large undertakings and large groups are defined as those meeting at least two of the following criteria on two consecutive balance sheet dates (either individually or on a consolidated basis): (i) more than 250 employees, (ii) a balance sheet total of more than €25 million and (iii) a net turnover of more than €50 million.

Second wave companies are EU undertakings and non-EU issuers which are:

• large undertakings, other than those already within scope; or
• parent undertakings of a large group, other than those already within scope.

Third wave companies are:

1. SMEs which have equity or debt listed on an EEA regulated market and which are not micro-undertakings (“in-scope SMEs”); or
2. small and non-complex credit institutions, as well as captive insurance and reinsurance undertakings provided in each case that they are large undertakings or in-scope SMEs.

The CSRD applies to non-EU companies with over €150 million annual net turnover in the EU and either a large or in-scope SME subsidiary in the EU or a branch located in the EU with an annual net turnover of more than €40 million.

Changes under “Stop the Clock” Directive 

Second wave companies which were due to report in 2026 (in respect of the 2025 financial year) will now need to report in 2028 (in respect of the 2027 financial year).

Third wave companies which were due to report in 2027 (in respect of the 2026 financial year) will now need to report in 2029 (in respect of the 2028 financial year).

There are no changes to the timing for non-EU companies under the Stop the Clock Directive so these companies will still need to report in 2029 (in respect of FY 2028). 

Changes under the Omnibus proposal 

Under the Requirements proposal, which was finalised in December 2025 (see our blog post), a number of changes have been made to the application thresholds so that the CSRD will now only apply as follows:

• EU undertaking and non-EU issuer which on an individual or group basis has:

  • more than EUR 450 million net turnover; and 

  • more than 1,000 employees on average during the financial year.

• Non-EU ultimate parent undertakings that have:

  • more than EUR 450 million net turnover generated in the EU (individually or on a consolidated basis) for each of the last two consecutive financial years; and 

  • an EU subsidiary or a branch in the EU with more than EUR 200 million net turnover in the preceding financial year.

• First wave companies that are already reporting under the CSRD which would fall out of scope of the CSRD under these revised tests will need to continue reporting until the financial year starting on or after 1 January 2027, unless the relevant Member State opts to exempt them.

The CSRD requires in-scope companies to report in accordance with mandatory European Sustainability Reporting Standards (“ESRS”). 

The ESRS for large undertakings and parent undertakings of large groups were developed by the European Financial Reporting Advisory Group (“EFRAG”) and approved by the European Commission as a Delegated Act to the CSRD. 

The ESRS require companies to use a “double materiality” perspective when making sustainability disclosures – i.e., they oblige entities to report both on their impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the entity.

The current ESRS contain:

• two cross-cutting standards: ESRS 1 (General Requirements) and ESRS 2 (General Disclosures); and
• topical (sector-agnostic) standards:
  1. five standards related to the environment (climate, pollution, water and marine resources, biodiversity and ecosystems and resource use and circular economy);
  2. four social standards (own workforce, workers in the value chain, affected communities and consumers and end-users); and
  3. one standard on governance (business conduct).

ESRS 1 sets general principles to be applied when reporting under all of the ESRS and does not itself set specific disclosure requirements. 

ESRS 2 specifies essential information to be disclosed irrespective of which sustainability matter is being considered. ESRS 2 is mandatory for all in-scope companies.

All the other ESRS and the individual disclosure requirements and datapoints they contain are subject to a materiality assessment. This means that the entity will need to report only relevant (material) information and may omit information that is not relevant for its business model and activity.

Omnibus changes to existing ESRS

The European Commission plans to simplify the existing (non-sector specific) ESRS, including by substantially reducing the specific information that in-scope entities are required to disclose.  (The power in the CSRD for the Commission to adopt sector-specific ESRS has been removed as part of the Omnibus changes.)   

It asked EFRAG to prepare a draft of the revised ESRS by 30 November 2025. EFRAG sent their recommendations for the revised ESRS to the Commission on 3 December 2025 (see our blog post).

The European Commission plans to approve the revised ESRS within six months after the Requirements Proposal comes into force. This is expected to happen in Q2 2026.

"Quick Fix" Delegated Act

Under the CSRD as originally adopted, first wave companies could omit information on, amongst other things, the anticipated financial effects of certain sustainability‑related risks in the first year of reporting. 

In July 2025, the Commission adopted a Quick Fix Delegated Act (see our blog post) to amend the existing ESRS to allow wave one companies to omit that same information for financial years 2025 and 2026. This means that wave one companies will not have to report additional information compared to financial year 2024. In addition, for financial years 2025 and 2026, wave one companies with more than 750 employees will benefit from most of the same phase-in provisions that currently apply to companies with up to 750 employees. 

Other ESRS standards and technical guidance

EFRAG was developing a set of sector-specific ESRS and tailored ESRS for certain non-EU companies operating in the EU (“N-ESRS Standards”), as well as ESRS for in-scope SMEs. 

The power in the CSRD for the Commission to adopt sector-specific ESRS has been removed as part of the Omnibus changes

The development of the other ESRS has been paused pending the outcome of the Omnibus negotiations.

EFRAG has published non-binding technical Implementation Guidance on the application of the ESRS: 

• on materiality assessment;
• value chain; and
• detailed ESRS data points. 

However, given that the CSRD and ESRS are being significantly revised by the Omnibus changes, this guidance will likely need to be amended in due course.

The CSRD requires in-scope companies to disclose a transition plan for climate change mitigation, if they have one. 

Under the ESRS, this needs to include, by reference to the company’s GHG emission reduction targets, an explanation of how those targets are compatible with the limiting of global warming to 1.5°C in line with the Paris Agreement. 

If the company does not have a transition plan, it must disclose whether and, if so, when it will adopt one. 

The detailed requirements of what information must be disclosed on transition plans are set out in the ESRS. 

EFRAG was working on draft Implementation Guidance on Transition Plans, but this work was put on pause in February 2025 in light of the Omnibus negotiations.

The Omnibus did not change the transition plan requirements in the CSRD. 

The Corporate Sustainability Due Diligence Directive (“CSDDD”) (as originally adopted) required in-scope companies to produce a transition plans. However, that requirement has been deleted as part of the Omnibus changes.  

For more information, see our Quick Guide on Transition Plans. 

Sustainability information under the CSRD must be published together with the “limited assurance” opinion of a statutory auditor or, if the Member State allows it, an independent assurance services provider. 

The CSRD (as originally adopted) foresaw a future uplift to a “reasonable assurance” requirement under certain conditions. 

The CSRD also required the European Commission to adopt standards for sustainability assurance by means of delegated acts by 1 October 2026.

The Omnibus changes removed the provisions in the CSRD that contemplate an uplift in assurance requirements from limited assurance to reasonable assurance. And instead of requiring the European Commission to adopt assurance standards by 1 October 2026, the Omnibus changes require the European Commission to issue targeted assurance guidelines by that date.

In May 2024, the ISSB, the European Commission and EFRAG published interoperability guidance to illustrate the alignment between the ISSB standards (IFRS S1 and IFRS S2) and the ESRS. 

In July 2024, the Global Reporting Initiative (“GRI”) published a Q&A on what the ESRS mean for users of the GRI standards, which stated that there is strong alignment between the two sets of standards.

The GRI focusses on the impacts of an entity on the economy, environment and people (impact materiality). The ISSB focuses on risks and opportunities for the business (financial materiality). While the ESRS combines both (double materiality).   

In June 2024, the Taskforce on Nature-related Financial Disclosures (“TNFD”) and EFRAG jointly published a correspondence mapping for the ESRS and the TNFD’s recommended disclosures, noting strong alignment between both sets of standards (both use double materiality), though TNFD is narrower in scope given its focus on nature.

Impact of Omnibus

As part of the revised ESRS, EFRAG has recommended several changes to promote compatibility with ISSB standards. These include emphasising that the ESRS is a “fair presentation” framework, aligning terminology for common provisions, and implementing certain ISSB reliefs, such as exemptions where reporting would result in undue cost or effort.

The GRI has published an updated Q&A addressing the Omnibus process. The GRI notes that, while the Omnibus changes eliminate sector standards, entities may use relevant GRI Sector Standards to help comply with the ESRS. 

Sanctions will depend on the implementing legislation of the relevant EU Member State. 

The CSRD requires Member States to provide for "effective, proportionate and dissuasive" penalties for infringements of national legislation adopted in accordance with the CSRD. 

• CSRD
• Delegated Act with ESRS
• Stop-the-Clock Directive
• Quick Fix Delegated Act
• European Commission FAQs
• EFRAG implementation guidance and Q&A
• Interoperability Guidance with ISSB standards
• GRI and Sustainability Reporting in the EU Q&A
• GRI Q&A on the EU Omnibus
• TNFD - ESRS Correspondence Mapping

• EU Omnibus I: CSRD and CS3D amendments finalised: what do you need to know?
• EU: changes to CSRD and CSDD under Omnibus I reach the finish line: video
• EU CSRD: EFRAG submits revised ESRS to the European Commission
• EU Omnibus Tracker
• EU Stop-the-Clock Directive Transposition Tracker
• EU CSRD demystified materials
• EU CSRD Transposition Tracker