On 26 February 2026, the Official Journal of the European Union published Directive (EU)
2026/470 (the Directive), which materially reshapes the EU sustainability framework.
The objective is clear: to simplify ESG reporting obligations, reduce compliance burdens
for companies – particularly SMEs, and bolster the competitiveness of the European economy.
The Directive amends two foundational pillars of the EU sustainability rulebook:
- the CSRD (Directive (EU) 2022/2464) on corporate sustainability reporting; and
- the CSDDD (Directive (EU) 2024/1760) on corporate sustainability due diligence in the value
chainla
CSRD: A Reduced Scope of Application
The Directive raises the size thresholds for the application of sustainability reporting obligations,
significantly reducing the number of companies subject to the CSRD.
Who remains required to prepare a sustainability report?
The CSRD will apply exclusively to:
(i) EU companies with more than 1,000 employees and at least EUR 450 million in annual net turnover; and
(ii) non‐EU companies with net turnover exceeding EUR 450 million in the European Union, as well as their branches and subsidiaries with turnover above EUR 200 million in the EU.
No changes to the timeline
The Directive does not modify the CSRD application timelines, which remain those already
redefined by Directive (EU) 2025/794, the so‐called “Stop the clock.” In brief:
- Public‐interest entities with more than 500 employees continue to apply the CSRD from
2024 (publication in 2025); - Other large undertakings: reporting from the financial year starting on 1 January 2027
(first publication in 2028); - Listed SMEs (excluding micro‐undertakings): reporting from the financial year starting on
1 January 2028 (first publication in 2029); - Non‐EU undertakings above the threshold: same timeline 2028–2029.
Simplified Reporting Requirements
To reduce the complexity of compliance activities, the Directive provides for a thorough revision
of the ESRS (European Sustainability Reporting Standards). Within six months of the Directive’s
entry into force, the Commission will adopt a delegated act aimed at:
- eliminating less relevant information;
- prioritising quantitative data over narrative descriptions;
- clarifying more sharply the distinction between mandatory and voluntary
information; - clarifying the application of the materiality principle, so as to limit disclosures to
information that is genuinely material; - improving interoperability with the main global standards (e.g., GRI, ISSB).
The expected outcome is more effective, comparable and proportionate reporting.
CSDDD: Reduced Scope and Delayed Applicationa
The Directive also lightens the sustainability due diligence regime.
CSDDD obligations will apply only to EU companies with more than 5,000 employees and
EUR 1.5 billion in global net turnover, as well as to non‐EU companies with annual
turnover exceeding EUR 1.5 billion in the European Union.
The entry into operation of the obligations is also deferred to 2029 to allow for a gradual transition.
In addition, “protected” companies – i.e., those that do not exceed the 1,000‐employee threshold
– may not be required, within value‐chain due diligence, to provide ESG information that
exceeds what is set out in the voluntary reporting standards referred to below.
Voluntary Reporting: A New Opportunity for Non-Subject Companies
The Directive introduces a voluntary sustainability reporting regime, based on the adoption,
by 19 July 2026, of simplified principles and standards inspired by the VSME – Voluntary
Standard for SMEs developed by EFRAG.
The voluntary standards – designed in a manner proportionate to the organisational and operational capacities of companies not subject to mandatory reporting – constitute an EU‐recognised framework for efficiently meeting the information requests of banks, investors and major commercial counterparties.
The voluntary standards also enable non‐in‐scope companies to communicate their sustainability commitments in a reliable and comparable manner, facilitating access to sustainable finance and increasing transparency in economic relations with stakeholders.
