About
On 21 April 2021, the European Commission published a proposal for a comprehensive review of Directive 2014/95/EU on non-financial reporting (the "NFRD") by way of the CSRD. The CSRD was adopted by the European Council on 28 November 2022, and entered into force 5 January 2023. The EU member states were required to implement national legislation transposing CSRD by 5 July 2024.
The CSRD aims to ensure interoperability with other EU sustainable finance frameworks by, inter alia, facilitating disclosures by investee companies on the information financial market participants need in order to fulfil their reporting requirements under the SFDR.
The CSRD entails several changes in the European sustainability reporting regime.
First, the CSRD extends the scope of undertakings required to report sustainability-related information. Originally, all "large undertakings" and parent undertakings in "large groups" would eventually have to report, but under revised thresholds introduced in the adopted Omnibus I Directive, only undertakings with more than 1,000 employees and a net annual turnover exceeding EUR 450 million (and parent undertakings in groups exceeding those thresholds in a consolidated basis) will be in scope.
Second, the CSRD introduces more detailed reporting requirements based on the principle of double materiality, focusing both on an undertaking's positive or negative impact on sustainability matters (an inside-out perspective) and sustainability factors that financially affect the undertaking (an outside-in perspective).
Finally, the CSRD introduces reporting in accordance with detailed and mandatory European Sustainability Reporting Standards (ESRS). It was intended to publish two sets of ESRS. The first set, applicable from 1 January 2024, covers both certain general, "cross-cutting" standards, as well as environmental, social and governance-related standards. While the general disclosures are mandatory for all undertakings in scope of CSRD, the other standards and the individual disclosure requirements and datapoints are mandatory only if the information is considered material for its business model and activity pursuant to the undertaking's own materiality assessment.
The envisioned second set of ESRS, covering sector-specific reporting standards and standards for certain third country (i.e., non-EU/EEA) undertakings, will no longer be adopted as mandatory standards, as the Commission's empowerment to adopt sector-specific ESRS has been deleted under the Omnibus I amendments and replaced with the ability to issue non-binding sector-specific guidance. The Commission is also tasked with adopting a simplified version of the existing set of ESRS within six months of the entry into force of the Omnibus I Directive (i.e., by 18 September 2026). A draft from EFRAG, an expert group advising the Commission on financial and sustainability reporting, is under review by the Commission. The amendments would also entail significant simplifications of the value chain reporting requirements, enhancing flexibility in the use of estimates and reducing not only the regulatory burden of the reporting entities, but also the "trickle down" effect for entities in the value chain of the reporting entities
For undertakings with transferable securities (such as stocks or bonds) listed on an EEA regulated market, amendments to Directive 2004/109/EC (the Transparency Directive) require the sustainability report to be included in the annual report. The aim is to help investors, consumers and other stakeholders to evaluate the undertakings' sustainability performance.
The sustainability reporting by listed undertakings in Norway is supervised by the Norwegian Financial Supervisory Authority (NFSA) as competent authority under the Securities Trading Act. On 5 July 2024, ESMA published its final report guidelines for national competent authorities on enforcement of sustainability information, which it should be expected that the NFSA will look to in its supervisory activity. The NFSA has stated that it, when reviewing sustainability reporting for the financial year 2025, will organise its control activities in 2026 so as to prioritise undertakings falling within the new scope once the legislative amendment has been implemented. In the longer term, the objective is for the review of sustainability reporting to have the same scope and approach as the established review of financial reporting.
Who does it impact?
The following EU/EEA entities will have to report under the revised CSRD scope:
- Reporting in 2026 on the financial year 2025: The same companies that reported in 2025 for FY 2024 ("wave 1") will need to report in 2026 for FY 2025 regardless of whether they fall out of scope under the revised thresholds. "Wave 1" undertakings are public-interest entities (meaning banks, insurance companies, and companies that are issuers of transferable securities trading on a regulated market in an EU/EEA state) that are "large undertakings" or parent undertakings in a "large group" exceeding on their balance sheet dates the average number of 500 employees during the financial year.
- Reporting in 2027 on the financial year 2026: The Omnibus I amendments have effect from the financial year 2027. This means that all "wave 1"-entities falling out of scope will still have to report for FY 2026 unless the relevant Member State adopts exemptions (which the Omnibus I allows for). The Norwegian Ministry of Finance has stated that it intends to adopt such exemption. In such case, only entities within the revised scope report in 2027 for FY 2026.
- Reporting in 2028 on the financial year 2027: From FY 2027, the Omnibus I amendments will have effect. This means that only undertakings and parent undertaking in a group with more than 1,000 employees and a net annual turnover exceeding EUR 450 million (individually or on a consolidated basis) are to report.
- Reporting in 2029 on the financial year 2028: Subsidiaries or branches of non-EU/EEA ultimate parent companies with more than EUR 450 million net turnover in the EU (individually or on a consolidated basis), where the subsidiary/branch generates a turnover exceeding EUR 200 million are to report on 2029 for FY 2028. This is an increase in thresholds compared to the original scope, but the timeline remains the same.
For undertakings established outside the EU/EEA, a nexus to the EU/EEA member states may still trigger reporting requirements. This could be the case if (i) the third country undertaking is listed on an EU/EEA regulated market and exceeds the size thresholds and/or (ii) if the third country undertaking has an EU/EEA subsidiary or branch and earnings in the EU/EEA area exceeding certain thresholds (as referred to above).
Parent undertakings may report for their groups on a consolidated basis, thereby exempting from reporting subsidiaries that themselves exceed the thresholds.
Under the original CSRD, the scope reporting entities as determined by reference to size categories set out in the Accounting Directive. With the revised thresholds, this is no longer necessary. Note, however, that the Commission is to assess the need for extending the scope yet again. This may re-introduce the references to "large undertakings" and SMEs in the context of sustainability reporting.
Companies outside the adjusted scope (i.e., companies/parent undertakings in groups with either fewer than 1,000 employees or less than EUR 450 million in annual net turnover) may choose to report voluntarily on the basis of a simplified voluntary standard developed by EFRAG – the VSME – published in December 2024 and adopted by the Commission in the form of a recommendation in July 2025.
Status: In force
In force in the EU and in Norway. Simplification amendments adopted in the EU – proposed in Norway.
The CSRD entered into force in the EU 5 January 2023, and EU member states were required to transpose the rules into national law by 5 July 2024.
The first set of ESRS were adopted by the European Commission 31 July 2023, in the form of a delegated regulation, and apply from 1 January 2024. This first set of ESRS covers both certain general, "cross-cutting" standards, as well as environmental, social and governance-related disclosure requirements. While the general disclosures are mandatory for all undertakings in scope of CSRD, the other standards and the individual disclosure requirements and datapoints are mandatory only if the information is material to its business model and activity.
The second set of ESRS, covering sector-specific reporting standards and standards for certain third country (i.e., non-EU/EEA) undertakings, have been cancelled as mandatory standards; the Commission's empowerment to adopt sector-specific ESRS was deleted under the Omnibus I amendments and replaced with the ability to issue non-binding sector-specific guidance.
The Norwegian amendment act implementing the CSRD into Norwegian law through amendments in, inter alia, the Accounting Act and Securities Trading Act, was adopted in June 2024 and entered into force 1 November 2024. Transitional rules effective from the same date set out a timeline for the phasing in of reporting requirements that correspond to the timeline set out for the EU countries.
The Norwegian implementation has been completed despite the CSRD not yet being incorporated into the EEA Agreement. A draft Joint Committee Decision regarding such incorporation was sent to the European Commission on 9 October 2024.
On 26 February 2025, the European Commission proposed changes that, if adopted, would reduce the number of in-scope entities by approx. 80% through increasing the relevant size thresholds. In addition, to alleviate companies that were set to report in 2026 and 2027 under the then-current regime from having to prepare reports in the period until the increased thresholds would enter into force, the Commission proposed to postpone the first-time reporting dates for those companies with two years (the "Stop-the-Clock Directive"). The EU adopted the Stop-the-Clock Directive on 14 April 2025, and Norway implemented it on 3 July 2025.
The Commission also announced that it will simplify the existing ESRS and has deleted its empowerment to adopt the sector-specific ESRS. The empowerment has been replaced with the ability for the Commission to develop non-binding sector-specific guidance. EFRAG, an expert group advising the Commission on financial and sustainability reporting, published a draft simplified ESRS on 25 July 2025. The draft has been subject to public consultation, and EFRAG submitted its final technical advice on to the Commission on 3 December 2025. The Commission must adopt revised ESRS by delegated act within six months of the entry into force of the Omnibus I Directive (i.e., by 18 September 2026). The amendments also entail significant simplifications of the value chain reporting requirements, enhancing flexibility in the use of estimates and reducing not only the regulatory burden of the reporting entities, but also the "trickle down" effect for entities in the value chain of the reporting entities.
On 13 November 2025, the European Parliament agreed on its position going into the trilogue with the Commission and the Council on the Omnibus I proposal. In respect of in-scope businesses, the Parliament sought to subject to reporting requirements only those businesses employing on average over 1750 employees and with a net annual turnover of over EUR 450 million.
On 9 December 2025, the Council and Parliament reached a provisional agreement on the final text. The European Parliament formally approved the agreed trilogue text on 16 December 2025, and the Council gave its formal approval on 24 February 2026. The Omnibus I Directive (Directive (EU) 2026/470) was published in the Official Journal of the EU on 26 February 2026 and enters into force on 18 March 2026. Member states must transpose the CSRD amendments by 19 March 2027. The adopted Directive also introduces a statutory value chain cap limiting information requests to undertakings with fewer than 1,000 employees, and grants member states the option to exempt wave 1 companies that fall outside the revised scope from reporting obligations for financial years 2025 and 2026.
The European supervisory authorities (ECB, EIOPA, ESMA and EBA) have all expressed concerns in formal opinions. Among other things, the ECB pointed out that the cumulative reliefs and flexibilities in the revised ESRS may undermine the availability of decision-useful quantitative information and interoperability with ISSB standards. EBA called in its opinion for three-year deadlines (until financial year 2029) for key reliefs.
In Norway, a consultation on a proposal for implementing the Omnibus I amendments was launched 16 February 2026 with a 17 April deadline. It is proposed to exempt entities that remain in scope until the revised scope enters into force (FY 2027) from reporting for FY 2026.
Relation to other initiatives and regulations
- There is a high level of alignment between ESRS and the standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).
- Several data points correspond to reporting requirements under other EU/EEA disclosure frameworks, including the SFDR and banking regulation (namely, the pillar 3 requirements under CRR).
Participants
EU/EEA States
Thommessen's comments
The reporting obligations under the CSRD, detailed in the European Sustainability Reporting Standards (ESRS), have been widely criticised for being too burdensome and far-reaching, disproportionally affecting smaller companies. The European Commission sought to accommodate these concerns in its "Omnibus I"-proposal published 26 February 2025 as part of its broader "simplification agenda". The final legislative act will lead to approx. 90% fewer undertakings being subject to sustainability reporting, and a process for simplifying he ESRS is underway.
While we expect that a reduced scope and simplified requirements are ultimately welcomed by many stakeholders, the legislative process leading up to the adoption of the Omnibus I Directive caused significant legal and commercial uncertainty in the midst of an ongoing phasing-in period of reporting requirements. Remedial measures were taken during this period, including the "Stop-the-Clock" Directive and the Commission's "Quick Fix", but the core uncertainty for many companies of whether they would ultimately be required to report or not, remained. And under the revised CSRD, the Commission is required to assess whether the scope should be extended once again.
We also register criticism of not only the legal process, but also the simplification agenda, especially related to the decreased focus on sustainability it may lead to among corporates, as well as to the legislative process itself due to a lack of an impact assessment.