The Corporate Sustainability Reporting Directive is the most significant mandatory sustainability reporting framework to arrive in Europe in a generation, and it applies to more companies than many assume. The current scope covers companies with more than 1,000 employees and more than €450 million in annual turnover — both conditions must be met simultaneously. Approximately 10,000 companies fall within this threshold across the EU. The first reports covering financial year 2027 data are due for publication in 2028. For companies now entering CSRD scope, that timeline is closer than it appears: the double materiality assessment, stakeholder engagement processes, and data infrastructure required to produce a credible ESRS-aligned report cannot be built in the months before submission.
The most significant recent development for smaller companies in scope is the introduction of simplified European Sustainability Reporting Standards — the ESRS LSME — designed specifically for the larger SME category. These simplified standards become mandatory from FY2027 data, which means this is the reporting year for which companies in this category first have clear, defined requirements. Simplified does not mean optional: the requirement to identify material impacts, risks, and opportunities through a structured double materiality process remains. What changes is the granularity of required disclosure, not the analytical rigour expected of the underlying assessment.
The second year of CSRD reporting has produced evidence of genuine progress. The EY CSRD Barometer 2026, which assessed 196 sustainability statements from the first wave of ESRS reporters against FY2025 financial year data, found that companies have moved beyond initial compliance toward more structured reporting: clearer double materiality narratives, more focused stakeholder engagement, and improved data quality. The three most frequently identified material topics were climate change (ESRS E1), own workforce (ESRS S1), and business conduct (ESRS G1). For companies earlier in the process, these findings provide a useful calibration point — a starting benchmark from which your own materiality assessment may diverge, but which reflects where the weight of evidence currently sits.
Three gaps remain persistent from the first wave. Alignment with 1.5°C pathways is uneven: companies disclose climate targets, but fewer demonstrate that transition plans are consistent with the science. Greenhouse gas Scope 3 management remains patchy, as upstream and downstream emissions data are difficult to collect at adequate quality across complex supply chains. Financial resourcing for sustainability reporting functions is insufficient in many organisations, which affects data quality and limits the ability to strengthen assurance over time.
For companies preparing for FY2027, the clearest priority is to begin the double materiality assessment now. Its quality determines the scope and depth of every disclosure that follows. The second priority is Scope 3 data: even a partial baseline — starting with the most significant upstream or downstream categories — is more useful than a disclosure gap. Nearly all first-wave sustainability statements carry limited assurance; building the data trail and internal controls that will eventually support stronger assurance is work that needs to begin before the reporting year, not during it.
Sources: EY CSRD Barometer 2026 CSRD & CSDDD: Next Compliance Wave — Linari Law Why CSRD Double Materiality Assessments Are Bound to Fail — IMD