What is the EU Corporate Sustainability Reporting Directive (CSRD)?
Letizia La Sorte
Solutions Expert
11 May 2026
About 5 mins
The Corporate Sustainability Reporting Directive (CSRD) represents a significant step change in how organisations report on sustainability. Designed to make sustainability reporting as rigorous, reliable and decision‑useful as financial reporting, CSRD strengthens transparency and accountability across environmental, social and governance (ESG) topics.
As expectations from regulators, investors and other stakeholders continue to rise, CSRD aims to ensure that sustainability information is consistent, comparable and credible, helping support the EU’s transition to a more sustainable and resilient economy. As a global leader in supply chain transparency, Sedex supports organisations as they respond to CSRD and embed sustainability into core business practices.
CSRD at a glance
CSRD builds on and replaces the Non‑Financial Reporting Directive (NFRD), responding to growing demands for enhanced transparency,accountability and standardisation in corporate sustainability reporting. It operationalises the European Green Deal and the EU Sustainable Finance agenda.
Importantly, CSRD also complements the Corporate Sustainability Due Diligence Directive (CSDDD).
Together, these two directives form a coherent regulatory framework:
- CSRD focuses on transparency and performance, requiring companies to identify, assess and disclose their sustainability impacts, risks and opportunities.
- CSDDD focuses on conduct and responsibility, requiring companies to prevent, mitigate and remediate the most severe adverse impacts, particularly across value chains.
When implemented together, CSRD helps companies understand what matters most, while CSDDD drives action on those priorities.
What changed under the Omnibus I Directive?
On 18 March 2026, the Omnibus I Directive entered into force, introducing amendments to CSRD aimed at simplifying requirements and reducing administrative burden.
Under Omnibus I:
- Scope thresholds were revised, reducing the number of companies in scope by approximately 85%.
- Limited assurance only is mandated, with no transition to reasonable assurance.
- ESRS requirements were simplified, with data points reduced from 1,073 to 320 (a 70% cut), clearer guidance on double materiality, and flexibility where data collection would require undue cost or effort.
- Sector-specific standards were removed (additional guidance may follow at a later date).
- Protections were introduced for smaller business partners to avoid disproportionate information requests.
EU Member States must transpose the CSRD‑related provisions of Omnibus I into national law by 19 March 2027.
Who is in scope under CSRD?
EU companies
EU‑based companies are in scope if they meet the following thresholds:
- €450 million annual turnover and/or €450,000 total assets
- 1,000 employees
These companies will be required to report from FY2027, with reports published in 2028.
Non‑EU companies
Non‑EU companies are in scope if they:
- Generate more than €450 million annual turnover in the EU for each of the last two consecutive years, and
- Have an EU‑based subsidiary or branch with more than €200 million annual turnover
There is no employee threshold for non‑EU companies. Reporting applies from FY2028, with reports published in 2029.
Companies that had already started reporting under the original CSRD but are no longer in scope under the revised thresholds must continue reporting until FY2027, unless exempted by Member States.
Estimates suggest the revised CSRD scope will affect approximately 4,000–6,000 companies in the EU.
What does CSRD require companies to report?
Under CSRD, companies must include a sustainability statement as part of their annual management report. This must be aligned with the European Sustainability Reporting Standards (ESRS) and is subject to limited third‑party assurance.
Key reporting requirements include:
Double materiality
Companies must assess and disclose:
- Their impacts on people and the environment, and
- How sustainability issues affect financial performance.
Business model and strategy
How sustainability considerations are integrated into the company’s business model, strategy and risk management.
Sustainability targets and performance
Clear disclosure of sustainability targets, metrics and progress over time.
Corporate governance
Information on governance structures, oversight and management responsibilities for sustainability matters.
Policies and due diligence
Details of sustainability policies and due diligence processes used to identify, prevent and address adverse impacts.
Value chain reporting
Information on value chains, including suppliers and products or services.
To avoid over‑burdening smaller partners, Omnibus I introduced protections for businesses with fewer than 1,000 employees (“protected undertakings”), which may decline to provide information beyond the Voluntary Sustainability Reporting Standard for SMEs (VSME).
Companies must also disclose material risks, opportunities and impacts across environmental, social and governance topics, including climate change, resource use, human rights, equal opportunities and business ethics.
What are the implications of non‑compliance?
Implications for non‑compliance vary by Member State and may include the following penalties and consequences:
- Financial penalties, potentially ranging from thousands to millions of euros
- Criminal sanctions in some jurisdictions for severe violations
- Operational consequences, such as exclusion from public procurement or suspension of subsidies
- Reputational damage, affecting investor, customer and stakeholder trust
- Increased legal and regulatory risk, including litigation and complaints
As of Q1 2026, some Member States are still transposing CSRD and Omnibus I into national law, meaning enforcement regimes may vary locally.
CSRD implementation: challenges and opportunities
Key challenges
- Complex data collection across global value chains
- Integration into corporate strategy and risk management
- Initial costs associated with systems, processes and assurance
Key opportunities
- Improved stakeholder trust and credibility
- Better access to sustainable finance
- Stronger risk management and decision‑making
- Greater alignment between reporting and due diligence
From reporting to action: CSRD and CSDDD together
CSRD is not just a reporting exercise. By identifying and prioritising the most severe and likely sustainability impacts, risks and opportunities, CSRD creates a strong foundation for effective due diligence under CSDDD.
Together, CSRD and CSDDD support a shift from disclosure to action, helping organisations strengthen resilience, credibility and long‑term value across their operations and value chains.
Sedex’s tools and expertise support this journey by helping organisations identify what is material, gather reliable value‑chain data, and take meaningful action to manage sustainability risks and impacts.
