No ESG manager but need to get to grips with EU legislation? We got you!

The European Union (EU) is leading the charge with ambitious climate policies to achieve its near and long-term sustainability targets. New legislation adopted by the member states will directly impact businesses' environmental, social, and governance (ESG) reporting.

‍

Keeping track of climate regulations is essential to avoid non-compliance and ensure you do your part to curb carbon emissions. Unfortunately, not every business has the capacity or resources to have a dedicated ESG manager to keep track of policy changes.

‍

So, what should you do? Fork out tons of cash? Hire an ESG manager on the cheap? Google it? Maybe not. With the right information and a little bit of elbow grease, you can quickly get up to speed on everything related to ESG legislation.

‍

In this article, we'll provide all the details regarding the new ESG legislation passed in the EU, particularly the Corporate Sustainability Reporting Directive (CSRD), so that you can get by without needing a dedicated ESG manager. Woohoo!

‍

Europe's climate ambitions

Before we discuss the new reporting requirements applicable in the EU and the greater European Economic Area (EEA), it's worth revisiting the climate targets set by the bloc. These targets align with the Paris Agreement and provide the impetus for the new rules that are much more comprehensive and stricter than their predecessors.

‍

• The Paris Agreement requires signatories to pursue efforts that keep the global temperature rise at 1.5 °C compared to pre-industrial levels
• The EU has committed to reducing its net carbon emissions by 55% by 2030 (compared to levels in 1990)
• ‍'Fit for 55' is a package of proposals to revise EU legislation regarding emissions reporting, trade, and carbon credits to help the bloc reach a 55% reduction in emissions by 2030
• By 2050, the EU plans to achieve complete carbon neutrality through balance and removal of emissions
• As part of the 'Fit for 55' proposals, member states must renovate existing buildings to have net-zero emissions by 2050 by implementing building efficiency best practices and using renewable energy

‍

The Emissions Trading System (ETS) aims to reduce emissions of the impacted sectors (large industries and power plants) by 62% by 2030 (compared to 2005 levels)

New EU ESG reporting requirements

To ramp up efforts to reach its climate goals by 2030 and 2050, the EU has adopted new legislation, the CSRD. This directive replaces the 2014 Non-Financial Reporting Directive (NFRD) in phases. CSRD extends the ESG reporting requirements, bringing even more companies into the mandatory reporting bracket. To implement the directive, the EU has introduced the European Sustainability Reporting Standards (ESRS).

‍

CSRD and ESRS

First off, here's everything you need to know about the CSRD:

‍

• CSRD began its phased rollout in January 2024. Wave 1 – large companies already reporting under the NFRD – reported for FY 2024. Waves 2 and 3 were delayed by two years under the Stop-the-Clock Directive (April 2025). Wave 2 companies now report for FY 2027 (first publication 2028); Wave 3 for FY 2028 (first publication 2029)
• It will mandate ESG reporting for EU and EEA companies and non-EU businesses with a presence in member countries through subsidiaries
• It will make third-party assurance and external auditing mandatory to ensure transparency and accuracy
• Companies must perform a materiality assessment to determine their environmental and climate change impact (this was already required under the NFRD)
• Companies must report material impacts, risks, and opportunities (IRO) for business operations and the value chain (upstream and downstream)
• Companies must provide targets and metrics to measure material sustainability and tie them to their financial reporting
• The directive's scope has been significantly narrowed since it was first adopted
• It targets the companies' direct and indirect emissions (Scope 1, 2, and 3)

‍

And now, the ESRS. Introduced in July 2023, the ESRS provides a common framework for reporting for companies impacted by CSRD. ESRS consists of 12 standards covering various aspects of ESG reporting. This includes two general standards, five environmental standards, four social standards, and one governance standard. In brief, the ESRS provides guidance for preparing the ESG reports by companies as per the CSRD.

‍

Note: EFRAG submitted simplified draft ESRS standards in late 2025. Final revised standards are pending formal adoption – the 12-standard framework described above may be updated once that process concludes.

‍

It's a lot of initialisms, we know.

‍

Who is affected by the new ESG reporting requirements?

The CSRD impacts primarily medium and large enterprises in the EU and EEA. All publicly listed companies (listed on regulated markets in the EU) must comply with CSRD and follow the ESRS for reporting.

‍

Following the EU Omnibus Directive (Omnibus I, in force March 2026), the eligibility criteria have changed. The previous two-out-of-three threshold no longer applies. Companies must now meet both of the following conditions to fall within the mandatory CSRD scope:

‍

• More than 1,000 employees
• More than €450 million net annual turnover

‍

For non-EU companies, the threshold has also been substantially raised. Reporting now applies where the parent undertaking has a net EU turnover above €450 million, and the EU subsidiary or branch has a net turnover above €200 million. Wave 1 companies – those already subject to the NFRD – reported for FY 2024 as originally scheduled. Wave 2 companies now report for FY 2027, with first publication in 2028.

‍

Take a sigh of relief because you may not need an ESG manager right now after all if you're part of a small or medium-sized enterprise (SME). Under Omnibus I, listed small and medium-sized companies are no longer in mandatory CSRD scope. But, as of early June 2026, the voluntary sustainability reporting standard for SMEs (VSME) is expected to transition from a recommended framework to an officially adopted, streamlined standard intended to harmonise data requests.

‍

That's a wrap

If you're a business in the EU or abroad impacted by the CSRD, you'll need to follow the new standards for ESG reporting. The new directive, although more stringent and wider-reaching, is designed to make carbon accounting more accurate and transparent. And you know, help save the world.

‍

It's high time European and international organisations took even stronger initiatives to reduce and offset emissions. Fortunately, the CSRD and ESRS will push and inspire companies to do more and assess the carbon footprint of their operations, subsidiaries, and supply chains.