Latest update (Nov. 10, 2026): The simplified European Sustainability Reporting Standards (ESRS) enter into force on November 10, 2026. The European Commission adopted the ESRS on July 3. After the Parliament and the Council of the EU scrutiny period, they were published in the Official Journal on September 21 as Delegated Regulation (EU) 2026/1563. As a delegated regulation, the standards apply directly and do not need to be transposed into national law. They are mandatory for financial year 2027 and optional for 2026.
The CSRD, as amended by the Omnibus I Directive (EU) 2026/470, sets out who must report; the ESRS set out what they must report. Bear in mind that EU countries still have until March 2027 to transpose the Directive into national law (different requirements from the standards). The European Financial Reporting Advisory Group’s (EFRAG) consultation on ESRS-40a, the standard for non-EU parents, closed October 31; its advice to the Commission is expected in early 2027.
1. What is CSRD?
TL;DR: The EU’s Corporate Sustainability Reporting Directive (CSRD) requires large companies with EU operations to report their sustainability impacts, risks, and opportunities against the European Sustainability Reporting Standards (ESRS), with third-party assurance. EFRAG develops draft standards as technical advice and the European Commission adopts them as law. In early 2026, the Omnibus I revisions cut the number of in-scope companies significantly. Omnibus I has been in force since March 18, 2026, leaving member states until March 19, 2027 to transpose the Directive. The ESRS, which set out what in-scope companies must report, entered into force on November 10, 2026 and are mandatory for FY 2027.
2. Who does it apply to?
Only the largest groups remain in scope. U.S. groups can be caught at the EU-subsidiary level, the global-parent level, or both.
|
Group |
Threshold |
First report |
|
Companies already reporting (large public-interest entities such as listed companies, banks and insurers) |
Already reporting; For FY 2026 can use the existing ESRS, the existing ESRS plus a set of reliefs from the new regulation, or the revised ESRS in full. From FY 2027, the revised ESRS are mandatory. |
|
|
EU companies and groups, including EU subsidiaries of non-EU groups |
More than 1,000 employees and over €450M net turnover |
2028, on FY 2027 data Under Article 40a, the report is prepared at the level of the non-EU parent group but published by its EU subsidiary or branch. |
|
Non-EU parents, including U.S. parents (Article 40a) |
Over €450M EU net turnover in each of the last two years and an EU subsidiary or branch with over €200M net turnover. |
2029, on FY 2028 data |
|
Companies already reporting that now fall below the thresholds |
Below the revised thresholds 1,000 or fewer employees, or €450M or less net turnover. |
May be out of scope for FY 2025–2026, depending on national transposition; out of scope from FY 2027 |
|
Listed SMEs (former Wave 3) |
n/a |
Out of scope; can report using the Voluntary Standard |
|
All other companies/ Below the thresholds/ Out of scope |
n/a |
May report voluntarily using the Voluntary Standard. |
A U.S. parent that publishes a group-wide report under the full ESRS can exempt its in-scope EU subsidiaries, provided the report meets the CSRD conditions (including assurance) and the subsidiaries reference it in their management reports.
Out of scope isn’t unaffected: Customers will still ask for data, but from FY 2027, companies with 1,000 or fewer employees can’t request more than what the EU’s Voluntary Standard covers for CSRD reporting purposes.
3. What are the requirements?
Double materiality: Report on topics that affect the company’s financial performance and on the company’s impacts on people and the environment. Every topic, including climate, is subject to materiality, and a top-down assessment is allowed. The assurance provider will need to review the DMA results and methodology.
Simplified ESRS: In-scope companies must report under the 2026 ESRS (see table above for exceptions).
Limited assurance: An auditor must review the report and the DMA. The EU is still building its assurance standards, which are due by July 1, 2027, and a long-term move to reasonable assurance has been dropped.
Format: The report sits in the management report; digital tagging follows once EU tagging rules are adopted.
National rules: Member states must transpose Omnibus I by March 19, 2027, so filing, language, and publication rules vary by country.
Non-EU parents: Must report under the full ESRS or ESRS-40a (previously called N-ESRS), which is still in draft and focuses on impacts and excludes risk, opportunity, and Taxonomy reporting. Adoption is expected in mid-2027.
4. What do I need to do?
- Reconfirm whether your organization fits in the two primary thresholds listed in the first rows of the chart above at both EU-subsidiary and parent level. Track national transposition in each member state where you have in-scope subsidiaries.
- Determine which standards you need to use: ESRS or ESRS-40a.
- Refresh your double materiality assessment; consider the top-down approach.
- Conduct an ESRS or (draft) ESRS-40a gap assessment to see what is needed compared to current status.
- Build data foundations: GHG emissions (Scopes 1–3), workforce and governance, using a reliable data source with documented methodology for all calculations.
- Engage your assurance provider early.
- If out of scope, prepare for customer requests and consider reporting against the voluntary standard.
tPX provides compliance readiness support; this article is for general information.
Niamh O’ Mara brings 20 years of corporate strategy and program management experience to her sustainability strategy work at thinkPARALLAX, with a background in ESG frameworks, regulatory compliance, and materiality assessments.. Her career spans professional services, manufacturing, supply chain, consumer goods, and luxury industries, including Glanbia and Richemont, with experience across China, Europe, and the U.S.
Cam Hotto contributed to the reporting of this article. As a Strategist at thinkPARALLAX, Cam has supported clients across a wide range of industries, including agriculture, pharmaceuticals, and insurance. He has led sustainability strategy and communications projects for organizations such as Bloomin’ Brands, Blue Diamond Growers, and Merck.
