Corporate Sustainability
Reporting Directive
The EU's most ambitious sustainability disclosure framework -- replacing the NFRD with standardised, auditable, machine-readable ESG reporting. Now reshaped by the 2026 Omnibus simplification.
The Corporate Sustainability Reporting Directive is an EU law that requires large companies to publish detailed information about their environmental impact, how they treat workers, and how they govern themselves. Think of it as the sustainability equivalent of annual financial statements -- structured, audited, and publicly available. Before CSRD, companies could choose what to report and how. Now there are clear standards, mandatory checks by auditors, and digital formatting that makes the data searchable by anyone.
The rules apply in stages. The largest companies -- banks, insurers, and other public-interest entities with 500 or more employees -- started reporting in 2025. The next group, companies with over 1,000 employees and more than EUR 450 million in turnover, will follow from financial year 2027. Smaller companies that were originally in scope have been removed entirely following a major simplification in early 2026. The overall effect: roughly 10,000 companies are directly covered, down from an initial estimate of 50,000.
Even if a company is not directly required to report, CSRD still matters. Large reporters must disclose information about their entire supply chain, which means they will ask suppliers, service providers, and partners for sustainability data. In practice, thousands of additional businesses -- many of them mid-sized -- will need to collect and share ESG information to keep their biggest customers.
The reports themselves follow a set of standards called ESRS (European Sustainability Reporting Standards). These cover topics like climate change, pollution, biodiversity, working conditions, and business ethics. Companies do not have to report on every topic -- only those that are "material" to their business, meaning they either affect the company financially or the company has a meaningful impact on that issue. This two-way test is called "double materiality" and it is the foundation of every CSRD report.
Switzerland is not an EU member, but CSRD reaches Swiss companies in two ways. First, Swiss groups with large EU subsidiaries or branches may fall under the non-EU company rules (Wave 4, from FY 2028) if they exceed EUR 450 million in EU net turnover. Second, Swiss firms in the value chains of EU reporters will face data requests from their European customers and partners.
Domestically, the Federal Council paused its own sustainability reporting reform in March 2025, waiting for the EU Omnibus outcome. A new legislative proposal -- expected to broadly align Swiss obligations with the post-Omnibus CSRD, applying to companies with 1,000+ employees and CHF 450 million+ turnover -- is anticipated by mid-2026. Until then, existing Swiss non-financial reporting rules under the Code of Obligations remain in force, but they are far less detailed than CSRD.
The Omnibus Directive (EU) 2026/470, adopted on 24 February 2026 and published in the Official Journal on 26 February 2026, fundamentally reshaped CSRD. Combined with the earlier "stop-the-clock" Directive (EU) 2025/794, the changes reduced scope by approximately 80% and delayed Wave 2 by two years, while removing listed SMEs (Wave 3) entirely.
CSRD applies in waves based on company size and listing status. The Omnibus package delayed and narrowed all waves beyond Wave 1.
Large public-interest entities already subject to the NFRD (500+ employees, listed, banks, insurers)
First reports published in 2025. PwC analysis of 100+ initial reports showed wide variance -- 30 to 300+ pages, with 75% of companies using phase-in options.
The first CSRD reports landed in early 2025. Analysis by PwC, Grant Thornton, and Frank Bold of 100+ initial reports revealed significant variance and several recurring patterns.
The European Sustainability Reporting Standards (ESRS), developed by EFRAG, define what companies must disclose. ESRS 1 and ESRS 2 are cross-cutting and mandatory; topical standards (E1-E5, S1-S4, G1) apply based on your double materiality assessment. The original 1,144 data points are being reduced to ~320 under simplified ESRS.
Adopted in December 2022, the Corporate Sustainability Reporting Directive replaced the Non-Financial Reporting Directive (NFRD) with a far more comprehensive framework. Where the NFRD applied to approximately 11,700 large public-interest entities with loose disclosure guidance, CSRD introduced standardised European Sustainability Reporting Standards, mandatory third-party assurance, digital tagging in XBRL, and a dramatically expanded scope. The ambition was clear: make ESG data as rigorous, comparable, and accessible as financial statements.
Central to the framework is double materiality. Companies must report not only on how sustainability issues affect their financial performance (financial materiality) but also on how their operations impact people and the environment (impact materiality). This two-lens approach, codified in ESRS 1, drives the entire reporting architecture. The materiality assessment determines which of the twelve topical standards apply, which data points must be disclosed, and what level of value chain data is required.
The first Wave 1 reports, published in early 2025, revealed the scale of the challenge. Analysis of over 100 initial reports showed enormous variance: report lengths ranged from 30 to over 300 pages, and companies disclosed anywhere from 15 to 80+ impacts, risks, and opportunities. Three-quarters of reporters relied on phase-in provisions, particularly for Scope 3 emissions and biodiversity data. Cross-functional coordination -- spanning finance, HR, IT, procurement, and legal -- emerged as the most significant operational hurdle.
Then came the Omnibus. In February 2025, the European Commission proposed a sweeping simplification package. By February 2026, Directive (EU) 2026/470 was adopted, replacing the old "2-of-3" test (250 employees, EUR 50M turnover, EUR 25M balance sheet) with a cumulative threshold: companies must exceed both 1,000 employees and EUR 450M net turnover to remain in scope. Approximately 80% of originally in-scope companies were removed, and listed SMEs were taken out of mandatory scope entirely. The earlier "stop-the-clock" Directive (EU) 2025/794 had already delayed Wave 2 by two years. The Commission was mandated to adopt simplified ESRS -- reducing data points from 1,144 to approximately 320 -- within six months.
Despite the narrowing, CSRD's influence extends well beyond directly in-scope companies. The value chain reporting requirements mean that large reporters will push data requests upstream and downstream to suppliers and customers, creating a cascading compliance effect. The EU Taxonomy Regulation requires CSRD reporters to disclose taxonomy-aligned revenue, CapEx, and OpEx, linking sustainability reporting directly to the EU's sustainable finance framework. And the XBRL digital tagging requirement will feed the European Single Access Point (ESAP) from 2028, making sustainability data machine-readable and publicly accessible at scale.
For companies navigating CSRD in 2026, the strategic calculation has shifted. Wave 1 reporters are refining their processes for the second reporting cycle. Companies originally in Wave 2 -- now delayed to FY 2027 -- have an unexpected window to build data infrastructure using the simplified ESRS as a baseline. And companies removed from scope entirely must still decide whether voluntary reporting provides competitive advantage, particularly as investors, customers, and regulators increasingly expect sustainability data regardless of legal mandate.
Select your company type for tailored compliance guidance.
CSRD is not a single act but a legislative chain. Five key instruments define the current framework.