Short answer
An in-scope company must place a sustainability statement in its management report, using the European Sustainability Reporting Standards (ESRS). It reports both its material impacts on people and the environment and material sustainability risks and opportunities affecting the business. The statement covers governance, strategy, policies, actions, targets, metrics and relevant value-chain matters. EU Taxonomy disclosures and limited assurance sit alongside that process.
Scope cannot be answered from the original Corporate Sustainability Reporting Directive (CSRD) timetable alone. Directive (EU) 2025/794 delayed the second and third reporting waves. Directive (EU) 2026/470 then narrowed future mandatory reporting to undertakings or groups exceeding both EUR 450 million net turnover and 1,000 employees. Member States must transpose that change by 19 March 2027 and may exempt smaller first-wave reporters for financial years 2025 and 2026. National law therefore remains decisive during the transition.
As reviewed on 31 July 2026, the 2023 ESRS, as amended by the 2025 “quick fix”, remain the operative standards. Revised ESRS were adopted by the Commission on 3 July 2026 but had not yet been published in the Official Journal or entered into force.
First decide which reporting year and national law apply
The CSRD amended the Accounting Directive, Directive 2013/34/EU. National transposition controls the applicable thresholds, exemptions and timing.
First-wave public-interest entities with more than 500 employees reported for financial years beginning in 2024. The 2025 stop-the-clock Directive moved the former second wave to financial years beginning in 2027 and the former listed-SME wave to 2028. The 2026 Omnibus I Directive then removed listed SMEs from future mandatory scope and replaced the large-company test. Its amended Article 19a rule is:
Undertakings which, on their balance sheet dates, exceed a net turnover of EUR 450 000 000 and an average number of 1 000 employees during the financial year shall include in their management report information necessary to understand the undertaking’s impacts on sustainability matters, and information necessary to understand how sustainability matters affect the undertaking’s development, performance and position. —
Both thresholds must be exceeded. The same test applies on a consolidated basis to parent undertakings of groups. It applies from financial years beginning in 2027 once implemented nationally. For financial years beginning in 2025 or 2026, Member States may exempt a first-wave undertaking or issuer that fails either threshold. That exemption is optional, so a company cannot assume it applies without checking the relevant national measure.
Certain non-EU groups face a separate future regime: generally more than EUR 450 million EU turnover in two consecutive years and an EU subsidiary or branch exceeding EUR 200 million turnover. Group and financial-sector rules can change the result.
What belongs in the sustainability statement?
The statement is part of the management report, not a free-standing marketing report. At individual or consolidated level it explains:
- the business model, strategy and resilience to sustainability risks;
- material sustainability opportunities and transition plans;
- time-bound targets, progress and relevant greenhouse-gas reductions;
- the role and expertise of administrative, management and supervisory bodies;
- policies, actions, resources and sustainability-linked incentives;
- due-diligence processes and principal actual or potential adverse impacts;
- principal risks, dependencies and their management; and
- metrics needed to understand performance over short, medium and long horizons.
The ESRS organise those disclosures through two cross-cutting standards and topical standards on climate, pollution, water, biodiversity, circular economy, own workers, value-chain workers, affected communities, consumers and business conduct. If a material matter is not adequately covered, entity-specific information is required.
For non-financial undertakings, Article 8 of the adds disclosures on the proportion of turnover, capital expenditure and operating expenditure associated with Taxonomy-eligible and Taxonomy-aligned activities. simplified templates and introduced materiality reliefs for reporting taking place from 2026. Taxonomy alignment is a classification question; it is not the same as ESRS materiality.
Technical screening criteria can be judicially reviewed. In Case T-77/24, Dassault Aviation v Commission, the General Court annulled the Taxonomy aircraft-manufacturing section for manifest error of assessment. Reporters should therefore check current delegated acts and judgments for their activities.
Double materiality selects the relevant topics
ESRS use double materiality. A matter can be reportable because the company affects people or the environment (impact materiality), because it creates material financial risks or opportunities for the company (financial materiality), or both:
A sustainability matter is “material” when it meets the criteria defined for impact materiality ... or financial materiality ..., or both. —
Impact materiality includes actual and potential, positive and negative impacts across the company's operations, products, services and business relationships. Severity drives actual negative impacts; severity and likelihood inform potential impacts, with severity taking precedence for potential human-rights impacts. Financial materiality asks whether a matter has or could reasonably have a material influence on development, financial position, performance, cash flows, access to finance or cost of capital.
Materiality is not permission to omit the assessment. Under the operative 2023 standards, ESRS 2 general and specified process disclosures apply irrespective of the result. Material topics require the relevant topical and entity-specific detail. The assessment process and evidence should be documented for assurance.
Value-chain reporting does not require perfect primary data
The reporting boundary extends beyond financial consolidation and direct suppliers. Material impacts, risks and opportunities may arise upstream or downstream through indirect business relationships. Policies, actions and targets must also describe relevant value-chain coverage.
Current ESRS require reasonable efforts to obtain data, but expressly permit estimation when primary information cannot be collected:
In these circumstances, the undertaking shall estimate the information to be reported about its upstream and downstream value chain, by using all reasonable and supportable information, such as sector-average data and other proxies. —
Estimates must still be relevant, faithfully represented, comparable, verifiable and understandable. The company should record its methodology, assumptions and uncertainty rather than treat a missing supplier response as a zero.
Once Directive 2026/470 is transposed, an undertaking in the value chain with no more than 1,000 employees will be a “protected undertaking”. For CSRD reporting requests it may refuse information beyond the voluntary standard. Reporting companies must not contract around that cap and must notify a protected undertaking when requesting extra information. The cap does not block voluntary sharing, due-diligence requests or data needed for another legal purpose. A reporter respecting the cap is deemed compliant with the value-chain obligation and may combine directly obtained information with estimates.
The Commission adopted a delegated act establishing a voluntary standard for this cap on 3 July 2026, but it was not yet in force on the review date. Until that act becomes effective and national Omnibus transposition applies, companies should distinguish the existing 2025 VSME Recommendation from a binding refusal right.
Assurance tests the process as well as the numbers
CSRD sustainability statements require limited assurance under national implementing law. The opinion reaches beyond selected metrics:
express an opinion based on a limited assurance engagement as regards the compliance of the sustainability reporting with the requirements of this Directive —
The engagement covers ESRS compliance, materiality identification, required electronic mark-up and Taxonomy Article 8 reporting. Estimates remain uncertain. Evidence should connect governance, source systems, controls, estimates and conclusions.
Omnibus I retains limited assurance and removes the planned move to mandatory reasonable assurance. It moves the Commission's deadline for EU limited-assurance standards to 1 July 2027. Until harmonised standards apply, the national transposition and applicable professional standards determine the engagement framework.
The 2026 standards revision requires version control
For financial years beginning in 2025, first-wave reporters can use phase-in relief expanded by Delegated Regulation (EU) 2025/1416, including relief for difficult value-chain and anticipated-financial-effect disclosures.
On 3 July 2026 the Commission adopted substantially revised ESRS. The adopted but unpublished act says companies may elect the revised version for financial year 2026 and must use it from financial years beginning in 2027. It reduces datapoints and simplifies materiality, presentation and value-chain rules. It cannot be treated as operative until it enters into force following Official Journal publication and scrutiny. A 2026 sustainability statement should clearly identify the ESRS version and reliefs actually used.
A practical compliance sequence
- Map the legal entity, group, reporting year, national transposition and both size thresholds.
- Confirm any first-wave exemption, subsidiary exemption or non-EU-group rule.
- Freeze the applicable ESRS and Taxonomy versions before designing the data model.
- Perform and document double materiality across own operations and the value chain.
- Map material matters to ESRS disclosures, entity-specific information and Taxonomy KPIs.
- Apply reasonable-effort, estimation, phase-in and value-chain-cap rules transparently.
- Build evidence and controls for limited assurance before the reporting date.
Conclusion
EU sustainability reporting is not a checklist of every environmental, social and governance datapoint. It is a management-report statement built around double materiality, supported by ESRS, value-chain evidence and limited assurance. The difficult compliance question in 2026 is also temporal: national scope, optional exemptions, phase-ins and the operative ESRS version must be fixed for the exact reporting year before data collection begins.
Sources
This article provides general legal information, not advice for a specific matter. Laws, facts and procedural deadlines may change the result. Follow the linked primary sources and obtain local advice before acting.