In January 2023, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD), which requires EU and non-EU companies with activities in the EU to file annual sustainability reports alongside their financial statements.
From January 2024, large public interest companies (e.g. those with over 500 employees) that were already subject to the Non-Financial Reporting Directive (NFRD) must meet their CSRD reporting obligations, with first submission due in 2025.
Following the 2025 Omnibus Simplification updates, the scope for other companies has been narrowed to focus on the largest entities to reduce administrative burdens. Large companies with more than 1,000 employees and/or more than €450 million in net turnover must now comply starting from January 2027, with first reports due in 2028 (under the “Stop-the-Clock” two-year delay).
While listed SMEs were originally included, the latest directive has moved them to a voluntary CSRD reporting framework, though they may still opt to report using the simplified “VSME” standards to maintain access to capital. Finally, from 2028 onwards, non-EU parent companies with significant EU operations (generating over €450 million in the EU) must comply with the directive. Even where a legal mandate does not yet apply, proactive alignment with these standards is considered best practice to ensure commercial resilience and meet the increasing transparency demands of lenders, insurers, and tier-one customers.
CSRD reporting must be prepared in accordance with European Sustainability Reporting Standards (ESRS). Wave 1 companies began reporting in compliance with these standards as early as the 2024 reporting period. However, for those still in scope, the Omnibus package has streamlined the ESRS, reducing mandatory data points by roughly 60% to focus on the most material quantitative metrics. The standards remain notable for their granularity, requiring disclosure on sustainability policies, greenhouse gas emissions (including a phased approach to Scope 3), and double materiality.
Companies must conduct a double materiality assessment to determine which ESG topics of financial or impact significance require disclosure. For firms now falling outside the mandatory scope, this assessment remains a best-practice tool for voluntary “opt-in” reporting.
The key benefits of complying with CSRD/ESRS include:
In January 2023, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD), which requires EU and non-EU companies with activities in the EU to file annual sustainability reports alongside their financial statements.
Yes, the CSRD does apply in the UK, even though the UK has left the European Union. The CSRD applies to companies that may have subsidaries in the EU or have significant turnover in the EU.
From January 2024, large public interest companies (e.g. those with over 500 employees) that are already subject to the Non-financial Reporting Directive (NFRD) must transition to CSRD reporting, with first submissions due in 2025. Large companies with more than 250 employees and/or more than €40 million in net turnover and/or more than €20 million in total assets must comply from January 2025 with report due in 2026. Listed SMEs will need to comply from 2026 with reports due in 2027 (although there is an option to opt-out until 2028 for certain industries. Finally, from 2028 onwards, all non-EU parent companies need to comply with the directive.
Small and medium sized businesses who employ less than 250 people or have a turnover less than £44 million are exempt from CSRD reporting.