**Directive (EU) 2022/2464** of the European Parliament and of the Council, of 14 December 2022, on corporate sustainability reporting ([CSRD](/en/glossary/csrd) — *Corporate Sustainability Reporting Directive*), significantly extends the scope of companies required to publish sustainability reports. In 2026, this obligation extends to **large companies** that until now were not subject to the non-financial information framework.
Implementation calendar
| Financial year | Report in | Companies required |
|---|---|---|
| 2024 | 2025 | Public-interest entities with >500 employees (already subject to the NFRD) |
| 2025 | 2026 | Large companies meeting 2 of 3 criteria |
| 2026 | 2027 | Listed SMEs (with opt-out possibility until 2028) |
Criteria for large companies (2 of 3)
- More than 250 employees on average during the financial year.
- Net turnover exceeding €40 million.
- Total assets exceeding €20 million.
ESRS standards (European Sustainability Reporting Standards)
Reports must be prepared in accordance with the European Sustainability Reporting Standards (ESRS), adopted by the European Commission via Delegated Regulation (EU) 2023/2772. The ESRS cover:
Cross-cutting standards
- ESRS 1: General requirements.
- ESRS 2: General information (corporate governance, strategy, impact management).
Thematic standards
- Environment: climate change (E1), pollution (E2), water and marine resources (E3), biodiversity (E4), circular economy (E5).
- Social: own workforce (S1), workers in the value chain (S2), affected communities (S3), consumers and end users (S4).
- Governance: business conduct (G1).
Double materiality
The CSRD introduces the concept of double materiality, which requires companies to assess:
- Financial materiality: how sustainability factors (climate risks, regulatory changes, social pressure) affect the company’s financial position, performance and cash flows.
- Impact materiality: how the company’s activities affect the environment and society (emissions, labour conditions in the value chain, community impact).
The company must report on all topics that are material under either perspective.
Electronic format and digital tagging
The sustainability report must be integrated into the management report and presented in XHTML format, with digital tagging in accordance with the ESEF taxonomy. This allows automated reading of data by investors, regulators and ESG rating agencies.
Mandatory verification
Sustainability information must be verified by an independent third party (statutory auditor or other accredited verification service provider). In the initial phase, verification is carried out with a limited assurance level, with a view to moving towards reasonable assurance in future financial years.
Omnibus proposal: potential simplification
In February 2025, the European Commission published the Omnibus proposal to simplify sustainability reporting obligations. If approved, it could:
- Raise the application thresholds (from 250 to 1,000 employees for the first phase).
- Reduce the number of mandatory indicators.
- Postpone the entry into force for listed SMEs.
However, until final approval, the current CSRD obligations remain in force.
Implications for the value chain
Even if a company is not directly required to report, if it forms part of the supply chain of a company subject to the CSRD, it may receive requests for information on its environmental, social and governance practices. This particularly affects SME suppliers of large companies.
New CSRD sustainability reporting obligations (energy sector, 2026)
The energy sector — generation, distribution and commercialisation of electricity, gas and renewables — presents a specific situation under the CSRD. Energy companies with more than 250 employees must report in accordance with ESRS E1 (climate change and greenhouse gas emissions) and ESRS E2 (pollution) standards, which in this sector are of utmost relevance given their exposure to physical and transition risks. The financial materiality of stranded assets in fossil fuels and the impact materiality of direct (Scope 1) and indirect (Scope 2 and 3) emissions must be assessed and documented in accordance with climate scenario analysis.
Additionally, energy companies are subject to CNMC sector regulation, which in 2026 may require alignment of CSRD reports with the European energy sector sustainability reporting obligations (RED III, Green Taxonomy Regulation). Although the Omnibus proposal could simplify some indicators, sectoral standards for the energy sector will remain demanding.
For more context on supply chain due diligence complementing the CSRD, see our analysis on CSDDD and supply chain due diligence.
Recommendations
- Assess applicability: verify whether the company meets the size criteria for the 2025 financial year.
- Conduct the double materiality analysis: identify material ESRS topics and document the assessment process.
- Adapt information systems: ensure that sustainability data (emissions, workforce, value chain) is collected in a structured manner.
- Designate the verifier: engage the independent auditor or verifier with sufficient lead time.
- Monitor the Omnibus proposal: keep abreast of possible threshold changes and simplifications.
At BMC we advise companies on compliance with their sustainability and ESG obligations. Find out about our CSRD and ESG reporting services and our External Data Protection Officer (DPO) services.
