How to comply with the requirements of the CSRD (Corporate Sustainability Reporting Directive) and the ESRS standards that govern European sustainability reporting.
On September 21, 2026, the European Commission adopted the revised version of its sustainability reporting standards, the ESRS (European Sustainability Reporting Standards). Member states have until March 19, 2027, to transpose these new rules into national law.
How can companies prepare for this major change, which poses a challenge for all European businesses?
Positivéco answers the six most frequently asked questions about CSRD obligations for companies and the ESRS standards that govern European sustainability reporting.
Our article takes into account the relief provisions introduced in early 2026 by the Omnibus I Directive and will be updated and following transposition into the national laws of Member States. Positivéco also shares its insights from the first few years of implementing the original CSRD.
1. What is the CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is the European standard for sustainability reporting. It prescribes how sustainability reporting should be prepared in terms of both content and form.
In early 2024, the CSRD replaced the European NFRD, which governed non-financial reporting by European companies. The year 2026 marks the third reporting year under the CSRD for companies in the first wave.
The ambitious CSRD reinforces the European Union’s sustainable finance objectives by promoting international convergence in sustainability reporting. It requires large European companies to disclose a comprehensive list of non-financial data. These data points must also adhere to an electronic format that allows for unrestricted use and comparison.
The goal of the CSRD is to improve the transparency and consistency of ESG reporting in Europe. To this end, the directive requires large European companies to report annually on their sustainability performance. Investors will thus have the means to redirect their investments toward more sustainable technologies and industries, as they will have access to reliable, comparable, and forward-looking information.
While the NFRD provided only guidelines for ESG reporting, the CSRD introduces mandatory sustainability standards for all large companies, known as ESRS. Affected companies must provide enhanced, standardized, and audited non-financial reports that adhere to the principle of double materiality.
This marks a significant step forward for ESG reporting. Indeed, under the CSRD, ESG information is subject to the same assurance standards as financial reports. Affected companies must therefore now treat sustainability data with the same rigor as their financial data.
The CSRD: lessons learned from an ambitious sustainability reporting directive.
The publication of the new ESRS marks the culmination of a revision process that has been underway for nearly three years. The European Union had to revise its initial ambitions, which were presented in 2022 as part of the CSRD.
Initially, the CSRD requirements were intended to directly apply to more than 50,000 companies in Europe, imposing ambitious transparency requirements on environmental, social, and governance issues.
Coming into effect on January 1, 2024, the CSRD, however, was notable for the complexity of its design and numerous drafting errors at the time of its publication. As a result, companies in the first wave had to invest considerable resources to ensure the compliance of their first sustainability report.
The principle of double materiality introduced by the directive represents a significant step forward in guiding sustainability reporting. However, the lack of a precise methodological framework for assessing impacts and producing the corresponding information ultimately led some companies to narrow the scope of the topics considered material.
Furthermore, in the absence of European sector-specific standards, the voluntary disclosure of additional information represents an extra effort that is difficult to justify amid a profound transformation of reporting practices. As a result, sustainability reports have at times lost their sector-specific focus.
During a workshop held in Paris in the summer of 2026, the CDP also highlighted the decline in the quality of published sustainability information. According to the organization, market participants are expressing a need for additional information-particularly through thematic or sector-specific reporting-to better meet their expectations.
The new CSRD requirements reduce the administrative burden associated with sustainability reporting.
Effective in March 2026, the Omnibus Directive significantly amended the CSRD requirements to reduce the administrative burden on companies and correct errors in the framework's design. The new version of the ESRS standards was published in the Official Journal of the EU on September 21, 2026.
Reduction of the scope of companies required to apply the CSRD
The scope of application has been drastically reduced. From now on, only companies with more than 1,000 employees and more than 450 million euros in net revenue are required to publish a sustainability report. As a result, the number of affected entities has dropped by 80%, from approximately 50,000 to 10,000.
For other companies: recommendation to apply the European voluntary standard.
Companies with fewer than 1,000 employees are encouraged to use a voluntary standard: the Voluntary Sustainability Reporting Standard, formerly known as the Voluntary SME Standard. This framework includes a core module and an additional module, a variety of data points, and specific provisions for companies with fewer than 10 employees. Designed for SMEs, this voluntary standard now applies to a wide range of companies. The assurance requirement does not apply to the disclosure of voluntary information.
Furthermore, the revision of the directive introduced protections for its citizens against excessive requests for information. Thus, the “value chain cap” mechanism protects SMEs and mid-market companies from an administrative ripple effect. Suppliers with 1,000 employees or fewer now have a legal right to refuse: requests for data fromtheir clients are capped at the requirements of the voluntary ESRS standard.
Ultimately, the sustainability statement must provide a fair presentation of the company’s exposure to current and anticipated financial effects arising from impacts, risks, and opportunities (‘IROs’).
In short, the new CSRD obligations reflect the legislator’s commitment to prioritizing practicality and proportionality. The revised version of the directive reduces the reporting burden and introduces new mechanisms to tailor requirements to the size, resources, and profile of companies.
For their part, reporting entities will need to focus on the relevance of the sustainability report and the fair presentation of the disclosed information. In other words, the published information must be capable of influencing the decisions of report users and be based on neutral and accurate data.
2.Which companies are affected by the CSRD and the ESRS, and when?
The new CSRD requirements narrow the scope of the NFRD: the directive applies to approximately 10,000 companies, compared to 11,700 under the previous rules. However, simplified joint-stock companies, which were largely excluded from the scope of the NFRD, are no longer exempt from sustainability reporting requirements.
Only companies with more than 1,000 employees and revenue exceeding 450 million euros are required to publish a sustainability report aligned with the ESRS. For non-European companies, the criteria are revenue exceeding 450 million euros and the presence of a significant subsidiary in the EU. Smaller companies are therefore subject only to the voluntary reporting standard.
The new version of the framework applies to fiscal years beginning on or after January 1, 2027. For fiscal years beginning in 2026, companies may choose to apply either the currently effective standards or the revised standards.
3. How to choose which data to report? What is double materiality?
To determine which data to disclose, there are now three scenarios introduced by the new CSRD requirements.
For mandatory reporting: double materiality guides CSRD reporting.
Companies affected by CSRD requirements are required to adopt a double materiality approach at the heart of their management and reporting.
The Sustainable Finance Disclosure Regulation (SFDR) governs the publication of sustainability information in the financial services sector. This European regulation has defined the concept of double materiality:
- Financial materiality refers to the impact of ESG‑related risks and opportunities on a company’s results.
- Impact materiality refers to a company’s impact on its economic, social, and environmental environment.
For the AMF (the French Financial Market Supervisory Authority), the double materiality analysis should identify the main ESG risks, opportunities, and impacts related to a company’s activities and value chain. Double materiality enables companies to provide investors with a comprehensive view.
The CSRD marks the end of purely descriptive sustainability reports. Collecting data once a year, without strategic direction, is no longer sufficient.
Companies must now conduct a double materiality analysis to identify which ESG topics require data collection. Climate issues are automatically considered material for all entities by the European Commission. Companies claiming otherwise must provide a detailed justification.
To familiarize themselves with this exercise, companies can consult the EFRAG guide on double materiality analysis.
For non-mandatory reporting: the voluntary standard applies.
Companies that are not subject to CSRD requirements and have up to 1,000 employees can rely on a voluntary European standard: the Voluntary Standard (VS).
The Voluntary Standard is structured around two modules. The core module covers the essential environmental, social, and governance information that companies must disclose. The supplementary module allows for more in-depth reporting by incorporating additional data on sustainability-related policies, objectives, and risks.
The standard also includes provisions tailored to smaller organizations, with specific exemptions for companies with up to 10 employees. This approach aims to limit the administrative burden while facilitating the production of structured and comparable information.
Finally, since use of this framework is voluntary, it does not require companies to have the published information verified by an independent body. Companies remain responsible for the accuracy of the information, however, and may be required to justify the data they provide to their business or financial partners.
For reporting within the value chain: the "value chain cap" protects small businesses.
The “value chain cap” protects companies with fewer than 1,000 employees from excessive requests for sustainability information. This mechanism sets limits on the data that their customers subject to the CSRD may require as part of their value chain reporting. Their requests are therefore limited to the data specified by the voluntary standard. This cap helps reduce the administrative burden on SMEs and limits the proliferation of ESG questionnaires.
However, this protection does not prohibit the voluntary sharing of sector-specific information. Nor does it eliminate disclosure obligations arising from other legal or contractual provisions.
4. In what format should this sustainability data be presented? What are the CSRD’s ESRS standards?
For companies subject to CSRD requirements, the non-financial data required by the CSRD must be published in a dedicated section of the company’s annual report. It is therefore not possible to produce a separate sustainability report whose publication could be deferred. Four sections of information are required in a specific order: general, environmental, social, and governance.
Companies subject to CSRD requirements must align their reporting with European Sustainability Reporting Standards (ESRS).
12 European standards for sustainability reporting.
Two cross-cutting standards, ESRS 1 (general requirements) and ESRS 2 (general information), apply to all sustainability topics. Ten thematic standards address the three ESG pillars. Companies must therefore assess which topics are material to their business. The CSRD's ESRS indicate what must be assessed, measured, and disclosed, including relevant indicators and targets.
5 environmental standards
- ESRS E1 – Climate change
- ESRS E2 – Pollution
- ESRS E3 – Water and marine resources
- ESRS E4 – Biodiversity
- ESRS E5 – Resource use and circular economy
4 social standards
- ESRS S1 – Workers
- ESRS S2 – Workers in the value chain
- ESRS S3 – Affected communities
- ESRS S4 – Consumers and end‑users
1 governance standard
- ESRS G1 – Business conduct
The revised version of the ESRS published in September 2026 reduces the number of mandatory data points by more than 60% and the total number of data points by 70%.
EFRAG provides a comprehensive tool on its website to facilitate the use of the ESRS and the comparison of the old standards with the revised ones.
ESRS provisions must ensure the credibility of ESG reporting
Certain CSRD and ESRS requirements aim to prevent deliberate and accidental greenwashing. Any company referring to “low‑carbon” or “sustainable” activities must demonstrate alignment with the European taxonomy.
In addition, companies must publish their management reports in a single European xHTML electronic format. Digital tags are embedded to facilitate reading, data comparison, and research.
Finally, an independent body must audit all data published under the CSRD ESRS standards. The auditor also reviews the double materiality analysis, as the assurance covers data selected through this process. This external insurance requirement does not apply to voluntary reporting.
5. Are SMEs affected by the European directive on sustainability reporting?
The revision of the CSRD is a game-changer for small and medium-sized enterprises. Most SMEs are not directly subject to sustainability reporting requirements, which are now focused on companies that exceed the thresholds set by the revised European framework. They can, however, use the voluntary standard to structure their non-financial information.
However, this change does not mean that SMEs can ignore the challenges of sustainability reporting. Those that work with large companies may still be asked to provide data on their practices and impacts. To limit this administrative burden, the “value chain cap” mechanism will help prevent disproportionate sustainability questionnaires.
The voluntary standard thus serves as a tool to meet the expectations of business and financial partners. Its implementation will also make it possible to assess the extent to which this framework meets the needs of companies and their stakeholders.
6. How to prepare your sustainability reporting and comply with the CSRD?
- Strengthen their competitive positioning
Even if they are not subject to the CSRD, SMEs may be approached by their customers when collecting ESG information. Structuring their sustainability approach with the voluntary standard is therefore an opportunity for SMEs to promote their commitments.
- Conduct a thorough strategic analysis
The CSRD reporting process constitutes a comprehensive strategic analysis for all companies. By applying a strategic perspective to the development of ESG reporting, SMEs can identify areas for improvement, enhance their operational efficiency, and foster innovation. It is not merely a matter of checking regulatory boxes but of building a sustainable and resilient business model.
- Fully inform decision-making
Collecting and analyzing data on sustainability-related impacts, risks, and opportunities involves delving into the details of operations and supply chains. This enables the company to better understand its social and environmental impact and to have relevant data for decision-making, risk management, and cost-reduction strategies.
- Build closer relationships with stakeholders
Embarking on the development or improvement of ESG reporting also provides an opportunity to engage with stakeholders: customers, employees, investors, suppliers, and others. Committing to corporate transparency and acknowledging their negative impact on the environment and society can thus enable SMEs to create new business opportunities and ensure talent retention.
- View sustainability as a long-term strategy
By implementing regular sustainability system, SMEs generally shift from a compliance-based approach to a strategic one. Integrating non-financial factors into their overall strategic approach enables these companies to define a long-term vision for their sustainability strategy and thus address responsibilities.
Large, medium, and small companies would be wise to start aligning now to this transition to ESG reporting
The CSRD marked a turning point for European sustainability reporting. While its revision has refocused obligations on a smaller number of companies, sustainability challenges within the value chain remain.
The European model, which potentially covers companies of all sizes, is now in place. The most basic version of the framework is accessible to all companies. By 2027, failing to comply with these requirements will be seen as a weakness. Therefore, 2026 is the time to prepare.
The first step is to identify key impacts and ESG risks and opportunities, conduct a gap analysis to determine the next steps, and mobilize staff and available resources. The voluntary standard provides a proportionate framework for structuring their process.
Do you think you won’t be able to achieve this by 2027? Would you like to structure your reporting, verify the relevance of your analysis, or ensure the reliability of the information you publish? Contact us to discuss your situation and identify the next steps.
About Positivéco
At Positivéco, we see new national and international CSR regulations as vectors for positive growth.
Our job: to improve the readability of your activities for better valuation.
Since 2009, we have been supporting financial institutions, public players, and listed and unlisted companies in the evaluation of their CSR policies, the production of their extra-financial reporting and the implementation of their climate investment and aid projects. Development.
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