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  • TCFD vs CSRD: What UK Companies Need to Know About Climate Disclosure Alignment

    By Sai Shankar, Guest Author

    For UK companies, climate disclosure now sits at the intersection of two frameworks. TCFD-aligned reporting has been mandatory for large UK companies since April 2022. CSRD, with its European Sustainability Reporting Standards, applies to UK subsidiaries of EU-headquartered groups and to UK-listed companies within the FCA’s aligned disclosure requirements.

    The two frameworks are related, but they are not the same. Treating them interchangeably creates gaps that surface during assurance. Understanding where they align and where they diverge is the starting point for a disclosure programme that satisfies both without duplicating work.

    What TCFD Actually Is

    The Task Force on Climate-related Financial Disclosures published its final recommendations in 2017, structured around four thematic pillars:

    • Governance: the board’s oversight of climate-related risks and opportunities, and management’s role in assessing and managing them
    • Strategy: the actual and potential impact of climate-related risks and opportunities on the business, strategy, and financial planning
    • Risk Management: the processes for identifying, assessing, and managing climate-related risks
    • Metrics and Targets: the metrics and targets used to assess and manage relevant climate-related risks and opportunities, including Scope 1, 2, and where relevant Scope 3 emissions

    The TCFD itself was dissolved in 2023, with its monitoring role transferred to the IFRS Foundation. TCFD’s four-pillar structure was carried directly into IFRS S2 Climate-related Disclosures, which now serves as the international successor standard.

    In the UK, TCFD-aligned reporting has been mandatory since 6 April 2022 for certain categories of large companies, including UK-listed companies, large private companies, and large limited liability partnerships. The requirement sits within the Companies Act framework and forms part of the Strategic Report.

    What CSRD Requires on Climate

    CSRD requires reporting against the European Sustainability Reporting Standards. The climate-related requirements are concentrated in ESRS E1, which is one of the ten topical ESRS and one of the most detailed.

    ESRS E1 covers disclosures across:

    • Transition plan for climate change mitigation
    • Material impacts, risks, and opportunities and their interaction with strategy and business model
    • Policies related to climate change mitigation and adaptation
    • Actions and resources in relation to climate policies
    • Targets related to climate change mitigation and adaptation
    • Energy consumption and mix
    • Gross Scope 1, 2, and 3 emissions and total GHG emissions
    • GHG removals and mitigation projects financed through carbon credits
    • Internal carbon pricing
    • Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

    The structural similarity to TCFD is intentional. The four TCFD pillars are recognisable throughout ESRS E1, and the European Commission has confirmed that CSRD reporting is designed to satisfy TCFD-aligned expectations.

    Where the Two Frameworks Overlap

    The overlap between TCFD and ESRS E1 is substantial. Both require:

    • Board and management oversight of climate matters
    • Description of climate-related risks and opportunities
    • Scenario analysis to assess resilience
    • Metrics and targets, including Scope 1, 2, and material Scope 3 emissions
    • Transition plan disclosure

    For a UK company already producing a TCFD-aligned disclosure, the underlying data and analysis will feed directly into most of the ESRS E1 requirements. The governance narrative, risk identification process, scenario assumptions, and emissions figures are all reusable.

    Where They Diverge

    The differences matter and are the source of most reporting gaps. Four are particularly worth understanding:

    1. Materiality Approach

    TCFD is grounded in financial materiality. It asks how climate-related risks and opportunities affect the business.

    CSRD requires double materiality, which combines financial materiality with impact materiality. The company must disclose not only how climate change affects it, but also how it affects climate change and the wider environment. This significantly expands the scope of what must be reported.

    2. Level of Prescription

    TCFD provides principles-based recommendations. Companies have flexibility in how they interpret and structure their disclosures.

    ESRS E1 is prescriptive. It sets specific datapoints, defined disclosure requirements, and mandatory structures. A TCFD-aligned narrative is a starting point but rarely sufficient to satisfy ESRS E1 datapoint requirements without supplementation.

    3. Assurance

    TCFD disclosures are not subject to a specific assurance requirement in the UK, although they sit within the Strategic Report and are subject to normal audit expectations.

    CSRD requires limited assurance from the outset, moving to reasonable assurance over time. This changes the standard of evidence, documentation, and control that must sit behind the reported numbers.

    4. Scope 3 Treatment

    TCFD recommends Scope 3 disclosure where material. In practice, many UK TCFD disclosures have deferred detailed Scope 3 reporting or have limited it to a small number of categories.

    ESRS E1 requires disclosure of gross Scope 3 emissions across the relevant GHG Protocol categories, with a clear explanation of any category excluded on materiality grounds. The bar for Scope 3 completeness is meaningfully higher.

    The Practical Implication for UK Companies

    For UK companies within scope of both frameworks, the practical question is how to structure the reporting programme to satisfy both without duplication.

    Three principles are useful:

    • Build the data once: structure the underlying data collection to satisfy the more demanding framework (ESRS E1), and derive the TCFD-aligned narrative from the same source
    • Design for assurance from the start: the CSRD assurance requirement effectively sets a documentation standard that TCFD did not require, but that will improve the quality of the TCFD disclosure as a by-product
    • Treat double materiality as the anchoring assessment: conducting the double materiality exercise properly generates the strategic input needed for both frameworks

    A well-designed CSRD programme will produce a defensible TCFD disclosure with limited additional effort. The reverse is rarely true.

    What About IFRS S2?

    IFRS S2, published by the ISSB in 2023, is the international successor to TCFD and forms the basis of the UK’s proposed Sustainability Reporting Standards. The UK Government is expected to endorse UK versions of IFRS S1 and S2, which would in due course replace the current TCFD-aligned disclosure regime.

    For companies currently reporting under TCFD, the transition to UK-endorsed IFRS S2 will be an incremental change rather than a wholesale one. For companies also within CSRD scope, the picture is that both frameworks will continue to apply in parallel, with different materiality approaches and different levels of prescription.

    How Horizon ESG Supports Dual-Track Climate Reporting

    Horizon ESG is ISSB reporting software that lets organisations manage climate disclosure across TCFD, ESRS E1, and IFRS S2 from a single underlying dataset. Teams can:

    • Capture Scope 1, 2, and 3 emissions once and map them to each framework’s specific structure
    • Document governance, strategy, risk management, and metrics narratives with framework tagging
    • Run and store scenario analyses that satisfy both TCFD and ESRS E1 requirements
    • Maintain the double materiality assessment as a live document rather than an annual exercise
    • Generate framework-specific outputs from the same underlying source

    The result is a climate disclosure process that reuses data rather than duplicating it, and that is designed for the assurance standard CSRD demands.

    Getting Started

    If your organisation is producing TCFD disclosures today and preparing for CSRD, this is the right moment to review whether the current data foundation will scale. The answer is often that the underlying methodology is sound but that the documentation and control environment needs strengthening before it will satisfy assurance requirements.

    Book a free ESG reporting software demo to see how Horizon ESG helps teams manage TCFD and CSRD climate disclosure from a single, audit-ready platform.

  • Setting Science-Based Targets: What SBTi Validation Actually Requires

    By Sai Shankar, Guest Author

    Announcing a Net Zero commitment is now commonplace. Getting that commitment validated as a science-based target is a considerably more involved exercise, and it is where many organisations discover that their emissions data, methodology, and internal alignment are less complete than they had assumed.

    The Science Based Targets initiative provides the most widely recognised framework for setting corporate climate targets that are consistent with the goals of the Paris Agreement. Its validation process serves as an independent check on whether a target is credible, whether the underlying inventory is fit for purpose, and whether the commitment is anchored in a defensible pathway.

    What SBTi Is and Why It Matters

    The Science Based Targets initiative is a partnership between CDP, the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature. It sets criteria for corporate emissions reduction targets, validates targets submitted by companies, and publishes those validations for public reference.

    A validated SBTi target is increasingly a market expectation rather than a differentiator. It is referenced by:

    • Investor stewardship teams assessing portfolio company climate credibility
    • Customers embedding supplier decarbonisation requirements into procurement decisions
    • Ratings agencies and ESG data providers
    • Regulators and policymakers evaluating corporate transition claims

    An announcement of intent, without SBTi validation, no longer carries the same weight it did a few years ago.

    The Overall Structure of an SBTi Target

    Under the SBTi framework, a company committing to science-based targets is required to set:

    • Near-term targets: covering a period of typically 5 to 10 years from the base year, addressing Scope 1 and 2, and Scope 3 where it is material
    • Long-term targets: setting the level of decarbonisation required to reach Net Zero, typically by 2050 or earlier depending on the sector and the standard applied
    • Net Zero commitment: a formal statement of the year in which the company will reach Net Zero across the required scopes

    The near-term and long-term targets are not alternatives. Both are required under the Corporate Net-Zero Standard, and the near-term target is the immediate accountability mechanism.

    Scope 3: The Requirement Most Companies Underestimate

    SBTi requires the setting of a Scope 3 target where Scope 3 emissions represent 40 per cent or more of the company’s total emissions. In practice, this threshold captures the majority of companies in almost every sector outside heavy industry.

    The Scope 3 target must cover at least two-thirds of total Scope 3 emissions in the near term. This is where the operational challenge sits. For many companies, Scope 3 accounts for 80 to 95 per cent of the total inventory, and the largest categories are often supply chain (Category 1) and use of sold products (Category 11).

    Setting a defensible Scope 3 target therefore requires:

    • A reasonably complete Scope 3 inventory across the material categories
    • Sufficient data quality to establish a credible base year
    • A pathway that reflects real levers, not aspirational reduction assumed to occur in the future
    • Clarity on which categories are included and excluded, with reasoning

    Companies that submit an SBTi validation with a weak Scope 3 foundation frequently need to withdraw and resubmit. Getting the inventory right before targeting is faster than the reverse.

    The Validation Process

    The SBTi validation process moves through five broad stages:

    • Commit: the company signs a commitment letter, publicly declaring intent to set a science-based target
    • Develop: the company develops emissions reduction targets consistent with the SBTi criteria
    • Submit: the company submits its targets to SBTi for formal validation, along with the required supporting information
    • Communicate: once validated, the company communicates its targets publicly and inputs them into the SBTi target dashboard
    • Disclose: the company reports progress against its targets annually and provides an updated GHG inventory

    Validation is a paid service, with the fee tied to company size. It is not a rubber stamp. Validators assess the target ambition, the inventory boundary, the methodology, and the internal consistency of the submission. Rejections and requests for resubmission are common.

    What SBTi Actually Reviews

    The specifics of the review vary by company and target type, but common areas of focus include:

    1. Base Year Selection

    The base year must be recent and representative. Choosing a base year in which emissions were unusually high, for example due to a one-off event, is likely to be challenged. The base year inventory must be complete, calculated to a consistent methodology, and recalculable if the company boundary changes.

    2. Target Ambition

    Near-term Scope 1 and 2 targets must be consistent with limiting warming to 1.5 degrees Celsius, which for most sectors means a minimum linear annual reduction of 4.2 per cent from the base year. Scope 3 targets may be aligned with either 1.5 degrees or well below 2 degrees, depending on the target type and sector.

    3. Boundary and Coverage

    The target must cover at least 95 per cent of Scope 1 and 2 emissions across the corporate boundary. Any exclusions must be justified. For Scope 3, the two-thirds coverage requirement applies as noted above.

    4. Methodological Consistency

    Emissions must be calculated using recognised methodologies, typically the GHG Protocol Corporate Standard and Corporate Value Chain Standard. Inconsistent application, undocumented emission factors, or unclear boundary decisions are common reasons for rework.

    5. Sector-Specific Guidance

    Certain sectors, including power, financial institutions, forest, land and agriculture, and others, have specific SBTi guidance and methodologies. A submission that does not follow the applicable sector guidance will not be validated.

    Recent Evolution: The Corporate Net-Zero Standard

    SBTi’s Corporate Net-Zero Standard sets the requirements for corporate Net Zero targets. A revised version of the standard has been under consultation, with proposed changes including clearer treatment of Scope 3, changes to the role of carbon removals and offsets, and refined requirements for hard-to-abate sectors.

    Companies currently developing or refining SBTi targets should track the standard’s evolution closely. Targets validated under one version of the standard may need to be revisited when a subsequent version becomes effective, particularly where the treatment of Scope 3 or carbon removals changes materially.

    Where Companies Get Stuck

    The most common failure modes we see in SBTi target-setting programmes:

    • Incomplete Scope 3 inventory: committing to a target before the underlying Scope 3 data foundation is in place, leading to rework and delays
    • Base year issues: selecting a base year without documenting why it is representative, or without a clear restatement policy for subsequent boundary changes
    • Overreliance on offsets in the pathway: assuming that offsets or removals will close the gap, when SBTi requires reductions to come primarily from operational and value chain decarbonisation
    • Sector guidance overlooked: submitting targets without applying the applicable sector-specific methodology
    • No internal governance: targets set by the sustainability team without formal approval by finance, operations, and executive committees, leading to weak accountability and slow progress
    • Progress reporting deferred: committing to annual disclosure but not building the underlying system to produce it, so that year-on-year reporting becomes a fire drill

    How Horizon ESG Supports SBTi Target-Setting and Tracking

    Horizon ESG’s Targets and Baselines module and Emissions Pathway module are designed to support the full lifecycle of a science-based target. Teams can:

    • Establish a base year inventory with structured methodology documentation
    • Model reduction pathways aligned with 1.5 degree and well below 2 degree scenarios
    • Structure Scope 3 targets with defined category coverage and inclusion rules
    • Track annual performance against near-term and long-term targets in a single view
    • Manage restatement of base year figures where boundary changes occur
    • Generate progress disclosures consistent with SBTi reporting expectations

    The result is a target-setting and progress-tracking process that is defensible during validation and sustainable over the ten-year performance horizon that SBTi requires.

    A Practical Starting Point

    If SBTi validation is on the roadmap but the Scope 3 inventory is not yet complete, sequence the work. Building the inventory first, and using it to inform the target, produces a stronger submission than the reverse.

    Book a free demo of our ESG reporting software to see how Horizon ESG supports the full path from inventory to target-setting to annual progress reporting.

  • ESRS S1: Reporting on Your Own Workforce Under CSRD

    By Sai Shankar, Guest Author

    The environmental standards under CSRD have attracted the majority of attention so far, and understandably. Carbon accounting is where most organisations start, and ESRS E1 is where most of the technical complexity lives. But for many companies preparing their first sustainability statement, the social standards will be the harder ones to close out.

    ESRS S1, covering own workforce, is the largest and most involved of the four social standards. It touches employment data that sits in HR systems, payroll processes, health and safety records, and diversity monitoring. For companies that have never brought these datasets together for reporting purposes, S1 can be the standard that consumes the most cross-functional time.

    What ESRS S1 Actually Covers

    ESRS S1 addresses the impacts, risks, and opportunities relating to a company’s own workforce. It is structured around four main topics:

    • Working conditions: including secure employment, working time, adequate wages, social dialogue, freedom of association, collective bargaining, work-life balance, and health and safety
    • Equal treatment and opportunities for all: including gender equality and equal pay, training and skills development, employment and inclusion of persons with disabilities, measures against violence and harassment in the workplace, and diversity
    • Other work-related rights: including child labour, forced labour, adequate housing, and privacy
    • Characteristics of the workforce: the demographic breakdown of employees and non-employees, contract types, and geographic distribution

    Crucially, the standard covers not only direct employees but also non-employees in the company’s own workforce. This includes self-employed contractors and workers provided by third-party agencies. The boundary of who counts as own workforce is broader than many organisations initially assume.

    Who ESRS S1 Applies To

    ESRS S1 applies to companies within the scope of CSRD where own workforce topics have been assessed as material through the double materiality assessment. In practice, own workforce impacts and risks are material for almost every company, because employment relationships inherently create actual or potential impacts on workers.

    Materiality determines the specific disclosure requirements that apply, not whether the standard applies at all. Companies concluding that no aspect of ESRS S1 is material should expect that conclusion to face scrutiny during assurance, and they will need to disclose their reasoning.

    The Main Disclosure Requirements

    ESRS S1 includes disclosure requirements covering strategy, policies, actions, targets, and metrics. Some of the most demanding include:

    • Description of the material impacts, risks, and opportunities relating to own workforce and their interaction with strategy and business model
    • Policies related to own workforce, including how the company respects human rights
    • Processes for engaging with own workforce and their representatives
    • Channels for own workforce to raise concerns
    • Actions and resources dedicated to addressing material impacts, risks, and opportunities
    • Targets related to managing material impacts, risks, and opportunities
    • A defined set of workforce characteristics, remuneration, and health and safety metrics

    The metric requirements are where the operational challenge concentrates. They require quantitative data at a level of granularity that many organisations do not currently produce for internal reporting, let alone external disclosure.

    The Quantitative Metrics: Where the Work Sits

    A non-exhaustive summary of the quantitative metrics required under ESRS S1 includes:

    • Workforce characteristics: total number of employees broken down by gender, country, contract type (permanent, temporary), and full-time or part-time status
    • Non-employee workers: the number of non-employees in the company’s own workforce, with a description of the most common types
    • Collective bargaining coverage and social dialogue: the percentage of employees covered by collective bargaining agreements
    • Training and skills development: average training hours per employee, broken down by gender
    • Health and safety: the percentage of workforce covered by the health and safety management system, number of fatalities, recordable work-related accidents and ill health, and days lost
    • Remuneration: the gender pay gap and the ratio of annual total compensation for the highest-paid individual to the median annual total compensation for all other employees
    • Diversity: gender distribution at top management level and age distribution across the workforce
    • Adequate wages: confirmation that all employees are paid at least an adequate wage, benchmarked against applicable reference wages
    • Incidents of discrimination and harassment: including complaints filed, fines, and remediation actions

    Where Organisations Get Stuck

    The most common operational challenges we see with ESRS S1:

    1. Data Ownership Is Fragmented

    Workforce data sits across HR systems, payroll platforms, health and safety records, learning management systems, and diversity monitoring processes. Bringing these together at the level of granularity ESRS S1 requires is a cross-functional exercise that no single team owns by default.

    2. Non-Employees Are Not Systematically Tracked

    Most HR systems are configured for employees. Contractors, agency workers, and self-employed individuals working for the company are often invisible to the core HR data model, yet ESRS S1 requires them to be counted, characterised, and in some cases assessed for exposure to material risks.

    3. Definitions Do Not Match Internal Reporting

    The ESRS definitions of full-time, temporary, and non-employee do not always match how the organisation classifies workers internally. A person recorded as a fixed-term employee for payroll purposes may need to be classified differently under ESRS S1. Building a mapping between internal categories and ESRS categories is a step organisations frequently overlook until data collection is well underway.

    4. Pay Gap Calculations Are Not Straightforward

    Calculating the gender pay gap and the CEO-to-median compensation ratio requires clean, consistent compensation data across the workforce, including bonuses and equity awards where applicable. Many organisations have this data but not in a form that produces a clean, disclosable figure without significant manual reconciliation.

    5. Human Rights Due Diligence Documentation Is Thin

    ESRS S1 assumes that the company has a functioning human rights due diligence process, aligned broadly with the UN Guiding Principles on Business and Human Rights. Where this process exists only informally, the documentation to support the required disclosures typically needs to be built.

    What Assurance Providers Will Look For

    Under CSRD’s limited assurance requirement, an assurance provider will focus on whether the data is complete, whether definitions have been applied consistently, and whether the narrative disclosures are supported by evidence.

    For ESRS S1 specifically, this tends to mean:

    • A clear mapping between the population reported and the underlying HR and payroll data
    • Consistent application of contract type and worker type definitions
    • Documented calculation methodology for pay gap, training hours, and health and safety metrics
    • Evidence of the processes described in the narrative, such as engagement channels and grievance mechanisms
    • A defensible position on the completeness of non-employee data

    The single most common assurance finding on ESRS S1 is inconsistency between how the workforce is defined in the narrative and how it is counted in the metrics. A clear boundary definition, applied consistently, addresses most of the risk.

    How Horizon ESG Supports ESRS S1 Reporting

    Horizon ESG structures ESRS S1 data collection to reduce the cross-functional burden and improve the audit trail. Teams can:

    • Configure ESRS S1 datapoints once and collect against the same structure each reporting cycle
    • Import HR, payroll, and health and safety data through standard file formats
    • Apply and version-control worker classification mappings, so that internal categories map cleanly to ESRS definitions
    • Calculate and store metrics with the underlying data linked, supporting audit reproducibility
    • Document policies, actions, and targets alongside the metrics they support
    • Track incidents and grievances with structured evidence retention

    The result is an ESRS S1 disclosure that is complete, consistent, and defensible under assurance, without requiring the HR and sustainability teams to rebuild the dataset each year.

    A Practical Starting Point

    If ESRS S1 has been deferred while the carbon workstream progresses, this is a good moment to begin the data mapping. The workforce data required is available in most organisations, but assembling it in the form the standard requires takes longer than the reporting timeline usually allows if left too late.

    Book a free ESG software demo to see how Horizon ESG helps teams operationalise ESRS S1 alongside the environmental standards in a single, structured platform.

  • SEC Climate Rollback Won’t Free US Multinationals

    The headlines are tempting: the SEC is moving to scrap the climate-disclosure rules it adopted in 2024, and some commentators have read that as the end of mandatory climate reporting for US companies. For any business with revenue in California or operations in Europe, the opposite is closer to the truth. The federal rule was only ever one of several overlapping regimes — and the others are advancing, not retreating.

    If your reporting plan hinges on the SEC standing down, this is the moment to stress-test it. Below is what is actually happening in Washington, why it changes less than it appears to, and what reporting teams should do while the noise settles.

    What the SEC is actually doing

    On 3 June 2026, the SEC’s proposed rescission of its 2024 climate-related disclosure rules was published in the Federal Register, opening a comment period that runs through 3 August 2026. Two points are easy to miss in the headlines. First, this is a proposal in its comment window, not a settled outcome. Second, the plan is to eliminate the dedicated framework rather than replace it — reverting issuers to principles-based, materiality-focused disclosure under existing securities law. The Commission has pointed to compliance savings of roughly $4.9bn a year.

    Removing a prescriptive rulebook is not the same as removing the obligation to disclose. Material climate risks that affect a reasonable investor’s decision can still require disclosure under long-standing materiality principles. What changes is the how and the how much — not the underlying duty. And for most multinationals, the SEC was never the binding constraint anyway.

    Why “no SEC rule” doesn’t mean “no disclosure”

    Three other regimes keep mandatory climate and greenhouse-gas disclosure firmly alive for US companies of any size that trade across state or national borders. None of them depend on the SEC.

    California: the de facto US standard

    California’s climate-disclosure laws reach far beyond the state’s borders because they apply to companies “doing business in California,” regardless of where they are headquartered. Two statutes matter:

    • SB 253 (Climate Corporate Data Accountability Act) requires companies with total annual revenues above $1bn to report Scope 1, Scope 2 and, in a later phase, Scope 3 greenhouse-gas emissions.
    • SB 261 (Climate-Related Financial Risk Act) requires companies with revenues above $500m to publish a climate-related financial-risk report aligned with the TCFD recommendations.

    Because the revenue thresholds are low relative to the size of a typical multinational, the practical effect is that a large share of US companies that would have reported to the SEC are captured by California instead — and California explicitly requires Scope 3, which the federal approach was always more cautious about. For most large filers, the toughest disclosure bar in the US now sits in Sacramento, not at the SEC.

    The EU: CSRD reaches across the Atlantic

    The EU’s Corporate Sustainability Reporting Directive pulls in non-EU groups through their European operations. A US parent with substantial EU subsidiaries or branches can fall directly within scope, and even companies that sit outside mandatory scope routinely receive value-chain data requests from European customers who need the numbers for their own ESRS reports. The recent “Omnibus” simplification narrowed who must report at the top of the chain, but it did not switch off the demand for emissions and sustainability data flowing down global supply chains.

    In other words, even a US company with no EU listing can find itself assembling ESRS-grade data because a major European buyer asks for it. If you sell into Europe, CSRD is part of your reality whether or not your own name is on a filing.

    The UK: anti-greenwashing and SDR

    For US groups with UK-regulated financial arms, the FCA’s Sustainability Disclosure Requirements regime adds a third layer. Its anti-greenwashing rule applies to all FCA-authorised firms, and from 30 June 2026 the remaining in-scope asset managers above £5bn in assets must publish entity-level disclosures. The throughline is consistent: any claim you make about sustainability has to be substantiated, and the supporting data has to exist.

    Fragmentation, not freedom

    The real consequence of the SEC’s retreat is not less work — it is less harmonisation. A single US-federal climate rule would at least have given multinationals one reference point that broadly tracked the global ISSB and EU baselines. Without it, a company can find itself reconciling California’s emissions thresholds, the EU’s double-materiality model, and the UK’s disclosure expectations, each with its own scope, boundary and timing.

    That is an argument for building disclosure on a single, well-governed dataset rather than chasing each regime with a separate project. The metrics underneath — Scope 1, 2 and 3 emissions, climate risk, governance and targets — overlap heavily. The expensive mistake is collecting them three times.

    What reporting teams should do now

    • Map your real obligations, not the federal one. Test your revenue and operations against California’s SB 253 and SB 261 thresholds and against EU value-chain exposure before assuming the SEC change lets you scale back.
    • Keep your GHG inventory live. Scope 1, 2 and 3 data feeds California, CSRD and customer requests alike, so a robust carbon accounting foundation is the one investment that pays off under every regime.
    • Build once, report many times. Structure your data so a single source can be mapped to multiple frameworks rather than rebuilt for each.
    • Watch the comment window, but don’t wait on it. The SEC proposal closes for comment on 3 August 2026; nothing about that date pauses California or Europe.

    The companies that handle this period well will be the ones that treated the SEC rule as one input among several, not the keystone. The disclosure expectation has not gone away — it has simply spread out, and it now rewards teams with clean, reusable data more than ever.

    Reporting under more than one rulebook? Horizon ESG helps teams collect emissions and sustainability data once and map it to CSRD, California and other frameworks from a single source. See how it works.

  • ESRS 2.0: Should You Early-Adopt for FY2026?

    For two years, CSRD preparers have built data pipelines, mapped value chains, and wrestled with more than a thousand ESRS datapoints. That groundwork is about to shift. The European Commission is expected to adopt a simplified set of European Sustainability Reporting Standards — informally “ESRS 2.0” — by delegated act in late June or early July 2026, following a public consultation that closed on 3 June. EFRAG’s advice cuts mandatory datapoints by roughly 61% and removes voluntary datapoints altogether.

    Crucially, the revised standards allow voluntary early adoption from financial year 2026, becoming mandatory only for financial years beginning on or after 1 January 2027. That leaves teams with a genuine decision to make now: keep building to the old standard, or pivot to the lighter regime a year early? This guide walks through what is changing and how to weigh the choice with clarity rather than guesswork.

    What ESRS 2.0 actually changes

    The revision is a simplification exercise, not a rewrite of the directive. Three changes matter most for reporting teams:

    • A ~61% cut in mandatory datapoints, with all voluntary datapoints removed. The aim is to concentrate disclosure on what is decision-useful and drop the long tail of marginal metrics.
    • A “top-down” approach to materiality. Rather than testing each datapoint from the bottom up, teams start from the sustainability matters that are material to the business and work down to the disclosures that follow — reducing the assessment burden that has dominated first-cycle projects.
    • Fair presentation applied to the statement as a whole, rather than to each individual datapoint. This is a meaningful audit and governance shift: the question becomes whether the report as a whole gives a true and fair view, not whether every line item is independently perfect.

    The companion Voluntary SME standard (VSME) is on the same adoption track. It underpins the “value-chain cap,” which limits what CSRD reporters can demand from counterparties with 1,000 or fewer employees — directly relevant if your Scope 3 and supply-chain data depend on smaller suppliers.

    The timeline you are actually working against

    Two dates frame the decision. After the Commission adopts the delegated act, a scrutiny period of up to four months by the European Parliament and Council must conclude before the standards are published in the Official Journal. So while the substance is effectively settled, formal finality arrives later in 2026. Early adoption applies from FY2026; mandatory application begins for financial years starting on or after 1 January 2027.

    This sits on top of the February 2026 Omnibus changes, which narrowed mandatory scope to companies with more than 1,000 employees and more than €450m turnover. Many mid-caps that were preparing to report are now outside mandatory scope entirely — yet still face value-chain data requests from larger customers. If that is you, the early-adoption question is less “must we?” and more “what is the most efficient basis to respond on?” For the fuller picture, see our CSRD timeline for 2025–2028.

    The case for early-adopting ESRS 2.0 for FY2026

    • You report on the lighter regime sooner. If your first mandatory report is FY2027 anyway, early adoption lets your FY2026 disclosure — voluntary or value-chain-driven — use the reduced datapoint set rather than the legacy one.
    • You avoid building data flows you are about to retire. Continuing to engineer collection for datapoints that the revision deletes is sunk cost. Pausing those builds now protects budget and analyst time.
    • Top-down materiality is cheaper to run. Re-scoping your materiality assessment around the new model can shrink the single most expensive part of a first cycle.
    • You signal maturity. A clean, focused report aligned to the final standards reads better to investors and assurance providers than an over-stuffed one built to a superseded draft.

    The case for waiting

    • The act is not yet final. Until the scrutiny period concludes and the text is published in the Official Journal, detail can still move. Building to a near-final draft carries some rework risk.
    • Mid-cycle re-scoping has its own cost. If you are deep into an old-ESRS data build with assurance lined up, switching frameworks mid-stream can create more disruption than it saves.
    • Comparability gaps. Reporting on a different basis from peers for one year can complicate year-on-year and benchmark comparisons until everyone converges in FY2027.
    • Internal readiness. Top-down materiality is conceptually simpler but demands confident judgement about what is material. Teams that built bottom-up muscle memory may need time to adjust.

    How to decide: a practical filter

    Work through four questions in order:

    1. When is your first mandatory report? If FY2027, early adoption mainly affects voluntary or value-chain disclosure in FY2026 — lower stakes, easier to trial. If you are still in mandatory scope for FY2026, the calculus is sharper.
    2. How far is your data build? Early-stage projects can pivot to the reduced set cheaply. Near-complete builds with assurance booked may be better finished as planned.
    3. How exposed are you to value-chain requests? If larger customers are asking for data, aligning early to the final standards — and the VSME value-chain cap — can simplify what you owe them.
    4. Can your assurance provider support it? Confirm they are comfortable giving assurance on an early-adopted basis before you commit. The new statement-level fair-presentation model is worth discussing with them directly.

    Whichever way you lean, the foundational work does not change: a defensible double materiality assessment still anchors the report, and your underlying data still needs to be traceable and audit-ready. For a fuller walkthrough of the standards themselves, see our complete ESRS reporting guide.

    The bottom line

    ESRS 2.0 is the most consequential operational change for CSRD preparers since the directive itself. For most teams whose first mandatory report is FY2027 — and especially those early in their data build or responding to value-chain requests — early adoption is the more efficient path, provided your assurance provider is on board. Teams deep into a near-complete old-ESRS cycle have a stronger case to finish as planned and converge in FY2027. Either way, decide deliberately now rather than drifting into the deadline.

    Horizon ESG helps reporting teams navigate ESG complexity with clarity — including scoping and collecting against the right datapoint set the first time. If you are weighing your ESRS 2.0 options, see how our CSRD reporting software keeps your data audit-ready whichever basis you report on.

  • CSRD Assurance: What Limited Assurance Means and How to Prepare

    CSRD assurance is the independent verification of a company’s sustainability report by a qualified third party. Under the directive, all in-scope companies must obtain at least limited assurance on their ESRS disclosures, with the EU planning a transition to reasonable assurance by 2028. This requirement applies from your first CSRD reporting year.

    What is CSRD assurance?

    Assurance is not an audit in the traditional financial sense, but it serves a similar purpose: giving stakeholders confidence that the reported information is materially accurate and prepared in accordance with the applicable standards.

    CSRD introduces two levels of assurance. Limited assurance is required initially — this involves the assurance provider reviewing your data, processes, and disclosures to conclude whether anything has come to their attention that causes them to believe the report is materially misstated. It is less intensive than reasonable assurance but still demands structured evidence and documentation.

    Reasonable assurance — the standard applied to financial statements — is planned for introduction by 2028. This requires the assurance provider to obtain sufficient evidence to positively confirm that disclosures are free from material misstatement. The gap between limited and reasonable assurance is significant in terms of evidence requirements, so organisations building their reporting processes now should design for reasonable assurance from the start.

    What do assurance providers actually check?

    Understanding what assurance providers examine helps you build processes that pass scrutiny the first time. Their focus areas typically include:

    Data accuracy and traceability

    Every figure in your sustainability report must be traceable back to its source. The assurance provider will select a sample of disclosed data points and follow the trail from the published number through your calculation methodology to the underlying activity data. If that trail is broken — because data was manually transferred between systems, or because the calculation methodology is undocumented — the finding will be flagged.

    Methodology consistency

    Have you applied the same calculation methodologies consistently across reporting entities, time periods, and data categories? Changes in methodology between years must be disclosed and justified. The assurance provider will check that emission factors, conversion rates, and estimation approaches are applied uniformly and are appropriate for your sector and geography.

    Double materiality process documentation

    Your double materiality assessment determines which ESRS standards you report against. The assurance provider will examine how you identified material topics, what scoring methodology you used, how stakeholder input was incorporated, and whether exclusion decisions are justified. A materiality assessment without documented methodology and evidence will not survive assurance review.

    Governance and internal controls

    Who approved the data? Who reviewed the calculations? What internal controls prevent errors from propagating through the report? The assurance provider expects to see defined roles, approval workflows, and segregation of duties between data entry and data review. This is where governance alignment becomes critical.

    Completeness of ESRS disclosures

    Based on your materiality assessment, certain ESRS standards apply to your organisation. The assurance provider will verify that all required disclosure points under those standards are addressed — either with reported data or with a documented explanation of why a specific disclosure is not applicable. Missing disclosures without explanation will be flagged as findings.

    How to prepare your organisation for assurance

    Build audit trails from day one. Every data entry should be timestamped, attributed to a named user, and linked to source documentation. If you are using audit-ready ESG reporting software, this should be automatic. If you are using spreadsheets, you need a manual logging process — which is why most organisations undergoing CSRD assurance move to dedicated software before their first engagement.

    Document your methodology decisions. For every calculation approach, emission factor selection, and estimation technique, maintain a methodology note explaining what you chose, why you chose it, and what alternatives you considered. This documentation should be prepared as you build your reporting process, not retrospectively assembled before the assurance engagement.

    Maintain evidence for materiality conclusions. Your double materiality assessment should be supported by stakeholder engagement records, scoring matrices, threshold justifications, and minutes from governance meetings where material topics were approved. The assurance provider will ask for this documentation.

    Establish clear data ownership. Every data point in your CSRD report should have a named owner — the person responsible for its accuracy. When the assurance provider queries a figure, you need to know immediately who can provide the explanation and evidence.

    Run an internal dry run. Before engaging your external assurance provider, conduct an internal review that simulates the assurance process. Select a sample of data points, trace them back to source, check methodology consistency, and verify completeness against ESRS requirements. This identifies gaps you can fix before they become formal findings.

    Common assurance pitfalls

    Engaging the assurance provider too late. If your first conversation with the assurance provider is after your report is drafted, you have missed the window for them to review your methodology and data processes. Engage them during the preparation phase — most providers offer pre-assurance advisory services for first-time reporters.

    Assuming limited assurance is easy. Limited assurance is less intensive than reasonable assurance, but it is not a rubber stamp. Providers will still examine your data, test your calculations, and review your governance processes. Organisations that treat limited assurance casually often receive qualified opinions or management letter findings.

    Inconsistent methodology across entities. Multi-site or multi-entity organisations frequently apply different calculation approaches across locations, then struggle to reconcile them at group level. Standardise your methodology before data collection begins.

    Undocumented Scope 3 estimates. Most organisations use estimates for Scope 3 emissions, which is acceptable under both the GHG Protocol and ESRS E1. However, the estimation methodology, data sources, and assumptions must be clearly documented. An undocumented estimate is an unsupported figure.

    No separation between data entry and review. If the same person enters and approves data, you have a governance weakness. Assurance providers expect a review step between data entry and final disclosure, even in small teams.

    The timeline — when to engage your assurance provider

    For a company reporting on FY2025 with a filing date in 2026, a realistic assurance timeline looks like this:

    6-9 months before filing: Initial conversation with the assurance provider. Discuss scope, timeline, fee structure, and their expectations for documentation and access.

    4-6 months before filing: Pre-assurance advisory engagement. The provider reviews your methodology documents, data collection processes, and materiality assessment. You receive early feedback and can address gaps.

    2-3 months before filing: Data collection close. Final figures are calculated and internal review is completed.

    1-2 months before filing: Formal assurance engagement. The provider conducts their review, tests data samples, and issues their assurance opinion.

    How Horizon ESG supports assurance readiness

    Horizon ESG is designed with assurance in mind. Every data entry is automatically timestamped and attributed. Calculation methodologies are documented within the platform. Approval workflows enforce separation between data entry and review. And your assurance provider can be granted read-only access to trace any disclosed figure back to its source data without requiring your team to compile evidence packs manually.

    The result is a reporting process that is assurance-ready by design, not by afterthought. Learn more about how Horizon ESG can support your assurance readiness.

  • CSRD Readiness Checklist: 12 Steps Before Your First Report

    To prepare for CSRD, organisations should follow a structured readiness process: confirm whether they fall in scope, identify their reporting deadline, conduct a double materiality assessment, map their value chain, establish data collection workflows, and secure assurance early. This 12-step CSRD readiness checklist walks you through each stage so you can approach your first report with confidence rather than last-minute scrambling.

    What Is CSRD Readiness?

    CSRD readiness refers to the state of organisational preparedness required to produce a compliant sustainability report under the EU’s Corporate Sustainability Reporting Directive. Unlike previous non-financial reporting requirements, the CSRD demands structured, auditable disclosures aligned with the European Sustainability Reporting Standards (ESRS). That means readiness is not simply about writing a report — it is about building the internal systems, governance structures, and data pipelines that make accurate, verifiable reporting possible.

    A CSRD readiness assessment evaluates where your organisation currently stands against these requirements and identifies the gaps you need to close before your first filing deadline. The earlier you begin this process, the less disruptive it becomes. Companies that treat CSRD preparation as a phased project — rather than a year-end compliance exercise — consistently report smoother outcomes and fewer audit issues.

    The 12-Step CSRD Readiness Checklist

    1. Determine If You Are in Scope

    The CSRD is rolling out in waves. Large public-interest entities (over 500 employees) began reporting in 2025 on FY2024 data. The second wave, covering large companies meeting two of three thresholds — over 250 employees, EUR 50 million turnover, or EUR 25 million in assets — reports in 2026 on FY2025 data. Listed SMEs follow in 2027, with a possible opt-out until 2028. Non-EU companies generating over EUR 150 million in the EU enter scope from 2029. Check the thresholds carefully. Many mid-sized businesses are surprised to find they qualify earlier than expected, particularly subsidiaries of larger groups.

    2. Identify Your Reporting Year and First Filing Deadline

    Once you have confirmed you are in scope, pin down the exact financial year you need to report on and the corresponding filing date. Your CSRD report will be included within your management report, which means the deadline aligns with your annual financial reporting cycle. If you are in the second wave, your first report covers FY2025 data and must be filed in 2026. This distinction matters because data collection needs to begin at the start of the reporting year — not when the report is due. Work backwards from the filing date to build a realistic preparation timeline.

    3. Conduct a Gap Analysis Against ESRS Requirements

    The European Sustainability Reporting Standards comprise 12 standards spanning environmental, social, and governance topics. Each standard contains specific disclosure requirements and data points. A gap analysis maps your current ESG reporting practices against these requirements to identify what you already collect, what you partially cover, and what is entirely missing. Focus on the mandatory cross-cutting standards (ESRS 1 and ESRS 2) first, then move to the topical standards that your double materiality assessment identifies as relevant. This exercise gives you a clear remediation roadmap and helps you prioritise resource allocation.

    4. Complete Your Double Materiality Assessment

    Double materiality is the foundation of your CSRD report. It requires you to assess sustainability topics from two perspectives: financial materiality (how sustainability issues affect your business) and impact materiality (how your business affects people and the environment). This assessment determines which ESRS topical standards you must report on and which you can legitimately exclude. It also shapes your stakeholder engagement strategy. For a detailed walkthrough of the methodology, see our complete guide to double materiality under CSRD. Do not underestimate the time this step requires — most organisations need 8 to 12 weeks to complete it properly.

    5. Map Your Value Chain for Scope 3 Reporting

    ESRS E1 (Climate Change) requires disclosure of Scope 1, 2, and 3 greenhouse gas emissions. Scope 3 — covering indirect emissions across your upstream and downstream value chain — is typically the largest category and the hardest to measure. Begin by mapping your key suppliers, distributors, and end-of-life product impacts. Identify which Scope 3 categories are most material to your business. You will likely need to rely on spend-based estimates initially before transitioning to activity-based data over time. Engaging key suppliers early and establishing data-sharing agreements will improve data quality in subsequent reporting cycles.

    6. Establish Data Collection Processes Across Departments

    CSRD reporting pulls data from across the entire organisation — HR for workforce metrics, procurement for supply chain data, facilities for energy consumption, finance for climate-related financial risks. Identify every data owner and establish clear collection processes, frequencies, and quality standards. Spreadsheets may work for a first cycle, but they introduce error risk and make audit trails difficult. Investing in purpose-built ESG reporting software early reduces manual effort and improves consistency. Define data definitions clearly so that every department reports metrics in the same way.

    7. Assign Internal Ownership and Governance Structure

    CSRD compliance cannot sit with a single sustainability officer. It requires a governance structure with clear accountability at the board level, an executive sponsor, and designated owners for each ESRS topic. Consider establishing a cross-functional CSRD steering committee that includes representatives from finance, legal, operations, HR, and sustainability. Define who signs off on the final report, who is responsible for data quality, and how disputes over materiality or disclosure are resolved. Our guide on CSRD governance alignment provides a practical framework for structuring this effectively.

    8. Select Your Reporting Software Platform

    The complexity and volume of ESRS data points make manual reporting impractical at scale. Evaluate ESG reporting software platforms based on their ESRS alignment, data integration capabilities, audit trail functionality, and XBRL tagging support — since CSRD reports must be digitally tagged in European Single Electronic Format (ESEF). Consider whether the platform supports double materiality workflows, automated data validation, and multi-entity consolidation if you operate across subsidiaries. Select your platform early enough to allow for implementation, data migration, and user training before the reporting year begins.

    9. Build Your Audit Trail from Day One

    CSRD reports are subject to mandatory assurance — initially limited assurance, moving to reasonable assurance over time. Your assurance provider will need to trace every disclosed figure back to its source. This means maintaining documentation of data origins, calculation methodologies, assumptions, estimation techniques, and any manual adjustments. Build this audit trail from the very start of your data collection process, not retrospectively when the auditor arrives. Version control for documents, approval workflows for data submissions, and timestamped records of changes all contribute to a robust audit trail that will make assurance smoother and less costly.

    10. Engage Your Assurance Provider Early

    Do not wait until your report is drafted to approach an assurance provider. Engage them during the preparation phase so they can review your methodology, flag potential issues with data quality or materiality conclusions, and confirm that your processes meet assurance standards. Many audit firms are experiencing significant demand as thousands of companies enter CSRD scope simultaneously, so early engagement also secures capacity. If your financial auditor offers sustainability assurance, there may be efficiencies in using the same firm, but evaluate independence and expertise carefully. A pre-assurance readiness review can save considerable time and cost later.

    11. Train Your Team on ESRS Disclosure Requirements

    CSRD reporting is not just a sustainability team exercise. Finance teams need to understand climate-related financial disclosures. HR must know what workforce data is required and how to report it consistently. Board members need sufficient literacy to oversee and approve the report. Invest in targeted training that is role-specific rather than generic. Focus on the practical mechanics: what data each team needs to provide, in what format, by what deadline, and to what quality standard. Regular briefings throughout the reporting cycle keep teams aligned and reduce the risk of last-minute data gaps or inconsistencies.

    12. Create a Reporting Timeline with Internal Milestones

    Your CSRD preparation needs a detailed project plan with clear milestones, not just a filing deadline. Work backwards from your submission date and build in time for data collection close, internal review cycles, management sign-off, assurance fieldwork, and XBRL tagging. Allow buffer time — first-year reporting always takes longer than expected. Key milestones should include: completion of the double materiality assessment, data collection cut-off dates for each quarter, first draft review, assurance readiness review, board approval, and final submission. Assign owners to each milestone and track progress through regular steering committee meetings.

    Common CSRD Readiness Mistakes

    Even well-resourced organisations stumble during CSRD preparation. These are the mistakes we see most frequently:

    1. Starting too late. Companies that begin their readiness assessment less than 12 months before their filing deadline consistently struggle with data gaps and rushed disclosures. CSRD preparation is a multi-year journey, not a quarter-end sprint.
    2. Treating it as a sustainability-only project. Without buy-in and active participation from finance, legal, HR, and operations, data collection stalls and governance gaps appear during assurance.
    3. Underestimating double materiality. A superficial materiality assessment leads to either over-reporting (wasting resources on immaterial topics) or under-reporting (creating compliance risk). Invest the time to do it properly.
    4. Ignoring the audit trail. Collecting data without documenting sources, methodologies, and assumptions creates enormous problems when assurance providers request evidence. Retrofitting audit trails is far more expensive than building them from the start.
    5. Choosing software too late. Implementing a reporting platform mid-cycle forces dual processes and increases error risk. Select and configure your platform before the reporting year begins.
    6. Neglecting value chain data. Scope 3 and supply chain disclosures require supplier engagement that takes months to establish. Start building those relationships and data-sharing agreements early.

    How Horizon ESG Supports CSRD Preparation

    Horizon ESG provides a structured platform designed to guide organisations through each stage of CSRD compliance. From automated double materiality workflows to ESRS-aligned data collection templates, the platform helps teams move from readiness assessment to published report without relying on disconnected spreadsheets or manual processes.

    Key capabilities include built-in audit trail functionality, cross-departmental data collection with automated validation, Scope 1-3 emissions calculation, and XBRL-ready output. For organisations in the second and third CSRD waves, Horizon ESG offers a phased onboarding approach that aligns platform implementation with your reporting timeline — so you are collecting data in the right format from day one.

    Learn more about how the platform supports your reporting obligations on our CSRD solutions page, or explore our guide to selecting best-practice ESG reporting software.

  • CSRD Timeline 2025-2028: Who Reports When and What You Need to Know

    CSRD reporting began in financial year 2024, with the first sustainability reports due in 2025 from large public-interest entities. The directive then rolls out in four waves through to 2029, progressively bringing large companies, listed SMEs, and non-EU businesses into scope. This guide sets out the exact deadlines, who falls into each wave, and what the EU Omnibus proposal means for your timeline.

    CSRD Implementation Timeline at a Glance

    The table below summarises all four CSRD reporting waves. If you are unsure which wave applies to your organisation, see the decision tree further down this page.

    Wave Who Is in Scope Financial Years Covered First Report Due Key Details
    Wave 1 Large public-interest entities already subject to the NFRD (>500 employees) FY 2024 2025 Approx. 11,700 companies across the EU. Reports must follow the full European Sustainability Reporting Standards (ESRS).
    Wave 2 Other large undertakings meeting at least 2 of 3 criteria: >250 employees, >€50m turnover, >€25m balance sheet total FY 2025 2026 The largest new cohort – an estimated 35,000+ companies. Includes private companies meeting the size thresholds. First time many mid-market businesses face mandatory sustainability reporting.
    Wave 3 Listed SMEs, small and non-complex credit institutions, and captive insurance undertakings FY 2026 2027 Listed SMEs may opt out until FY 2028 (reporting in 2029). Simplified ESRS standards (LSME ESRS) will apply. Subject to potential delay under the Omnibus proposal – see below.
    Wave 4 Non-EU (third-country) companies with >€150m net turnover in the EU and at least one EU subsidiary or branch FY 2028 2029 Reports prepared by the EU subsidiary or branch on behalf of the third-country parent. A dedicated third-country ESRS is expected.

    For a deeper look at how Wave 2 affects mid-sized businesses specifically, read our CSRD guide for medium-sized businesses.

    What Changed in 2025-2026?

    In February 2025 the European Commission published the Omnibus Simplification Package, a sweeping proposal to reduce regulatory burden across several EU sustainability directives, including the CSRD. The key proposed changes are as follows:

    • Wave 2 two-year delay: The Commission proposed postponing the first reporting deadline for Wave 2 companies by two years – from FY 2025 (report in 2026) to FY 2027 (report in 2028). As of early 2026, this delay has not been formally adopted into law, but the European Parliament and Council are actively negotiating it.
    • Wave 3 may be removed entirely: Under certain versions of the Omnibus text, listed SMEs could be taken out of mandatory CSRD scope altogether. This remains under discussion.
    • Scope thresholds raised: The proposal would increase the size thresholds for “large undertaking” status, potentially excluding a significant number of companies currently assumed to be in Wave 2.
    • Simplified value chain reporting: Companies may no longer be required to collect detailed sustainability data from SME suppliers, which would ease the indirect burden on smaller businesses in the supply chain.
    • Voluntary reporting encouraged: Companies falling below the revised thresholds would still be able to report voluntarily using simplified standards.

    What this means in practice: If your company sits in Wave 2 or Wave 3, you should continue preparing as though the original deadlines stand. Legislative delays are possible but not guaranteed, and companies that wait risk falling behind if the Omnibus amendments are diluted or rejected. Investors and customers will still expect sustainability data regardless of regulatory shifts. If you are evaluating tooling to meet these deadlines, see our comparison of the best ESG reporting software for 2026.

    For guidance on how governance structures should evolve alongside reporting obligations, see our article on CSRD governance alignment and reporting.

    UK Companies – Does CSRD Apply to You?

    Post-Brexit, the CSRD is not directly transposed into UK law. However, UK businesses can still fall within its reach in three ways:

    1. Direct scope through EU presence

    If your UK-headquartered group has a subsidiary incorporated in an EU member state that meets the relevant size thresholds, that subsidiary must report under the CSRD according to its wave. Alternatively, if you are listed on an EU-regulated market, you are directly in scope.

    2. Wave 4 – third-country reporting

    UK companies generating more than €150 million in net turnover within the EU will fall into Wave 4 (FY 2028, reporting in 2029), provided they have at least one EU branch or subsidiary above the applicable thresholds.

    3. Indirect scope – value chain data requests

    Even if your company is not directly captured, EU customers reporting under the CSRD will need sustainability data from their value chain. If you supply goods or services to companies in Waves 1 or 2, expect to receive data requests covering environmental metrics, human rights due diligence, and governance practices. Being unable to respond may put commercial relationships at risk.

    UK Sustainability Disclosure Standards (UK SDS)

    The UK Government has confirmed it will introduce its own sustainability reporting regime based on the ISSB standards (IFRS S1 and S2). The current expectation is that mandatory UK SDS reporting will begin from 2027 for the largest UK-listed companies and financial institutions, with potential phased extension to large private companies thereafter. While UK SDS differs from the ESRS in structure, there is significant overlap in the underlying data requirements. Companies preparing for CSRD will find much of that work transferable to UK SDS compliance.

    UK-based teams preparing for both regimes can see how we support them on our ESG reporting software for UK companies page.

    How to Determine Your CSRD Reporting Wave

    Use the following decision tree to identify which wave – if any – applies to your organisation:

    1. Are you an EU public-interest entity with more than 500 employees, already subject to the Non-Financial Reporting Directive (NFRD)?
      Yes → Wave 1. You should already be reporting on FY 2024.
      No → Continue.
    2. Are you an EU-incorporated company (or EU subsidiary of a non-EU group) meeting at least two of the following: >250 employees, >€50m turnover, >€25m balance sheet total?
      Yes → Wave 2. Your first reporting year is FY 2025, with the report due in 2026 (subject to potential Omnibus delay).
      No → Continue.
    3. Are you a listed SME on an EU-regulated market, a small and non-complex credit institution, or a captive insurance undertaking?
      Yes → Wave 3. First reporting year is FY 2026 (report in 2027), with an opt-out available until FY 2028. Subject to Omnibus changes.
      No → Continue.
    4. Are you a non-EU company with more than €150m net turnover generated in the EU, with at least one EU subsidiary or branch?
      Yes → Wave 4. First reporting year is FY 2028, with the report due in 2029.
      No → Continue.
    5. None of the above apply.
      You are not currently in direct scope of the CSRD. However, you may face indirect obligations through value chain data requests from EU customers or through forthcoming UK SDS requirements. Voluntary reporting using the ESRS is an option worth considering.

    If you are uncertain about your classification, particularly around consolidated vs. individual reporting, consult the full CSRD overview on our dedicated page.

    What to Do Now Based on Your Wave

    Wave 1 – Already Reporting (FY 2024)

    Your first CSRD-aligned report should already be published or in final review. Focus now on:

    • Reviewing assurance findings from your limited assurance engagement and addressing any gaps.
    • Strengthening data collection processes for your second reporting cycle, especially around Scope 3 emissions and value chain metrics.
    • Starting to embed ESRS datapoints into internal management reporting, not just annual disclosure.

    Wave 2 – Preparing Now (FY 2025, Report in 2026)

    This is the critical preparation window. You should have already completed or be actively working on:

    • Double materiality assessment: This is the foundation of your entire CSRD report. If you have not completed this, it should be your immediate priority.
    • Gap analysis against the ESRS: Map your current sustainability data collection against the required disclosure requirements and datapoints.
    • Selecting reporting software: Manual spreadsheet-based approaches will not scale. Evaluate CSRD reporting software that can handle ESRS taxonomy tagging, data aggregation, and audit trails.
    • Governance alignment: Ensure your board and management body have defined roles and responsibilities for sustainability oversight, as required by ESRS 2.
    • Engaging your value chain: Begin requesting environmental and social data from key suppliers and customers now – do not wait until the reporting deadline is upon you.

    Wave 3 – Listed SMEs (FY 2026, Report in 2027)

    Although the Omnibus proposal may delay or remove your obligations, waiting carries risk. Practical steps for now:

    • Monitor the legislative progress of the Omnibus Simplification Package closely.
    • Conduct a preliminary materiality assessment, even if simplified.
    • Begin collecting baseline environmental data (energy consumption, emissions, waste) so you are not starting from scratch if and when reporting becomes mandatory.
    • Consider voluntary reporting as a competitive differentiator with investors.

    Wave 4 – Non-EU Companies (FY 2028, Report in 2029)

    You have more lead time, but the preparation effort is substantial:

    • Confirm whether your EU revenue exceeds the €150m threshold and identify which EU subsidiaries or branches will carry the reporting obligation.
    • Start aligning group-level sustainability data collection with ESRS requirements, even if your home jurisdiction uses a different framework.
    • Use the intervening years to run a pilot CSRD report – the complexity of consolidating cross-border data should not be underestimated.

    Whichever wave you fall into, choosing the right ESG reporting software early will significantly reduce the workload and risk of non-compliance.

    How Horizon ESG Helps You Meet Your CSRD Deadline

    At Horizon ESG, we work with sustainability teams, CFOs, and compliance officers to turn CSRD obligations into a structured, manageable process. Our platform is designed specifically for companies navigating the ESRS for the first time.

    • Double materiality assessment tooling that guides you through stakeholder engagement, impact identification, and financial risk scoring.
    • ESRS-aligned data collection with built-in disclosure requirement mapping, so you know exactly which datapoints you need and where the gaps are.
    • Automated XBRL/iXBRL tagging for digital submission in line with the ESEF regulation.
    • Audit-ready outputs with full data provenance and version control, ready for your limited assurance provider.

    Whether you are in Wave 1 refining your second report or in Wave 2 preparing your first, we can help you get there. Learn more about our CSRD solution or explore our reporting software.

  • ESRS Reporting: Complete Guide for 2026

    ESRS Reporting: Complete Guide for 2026

    What Are the European Sustainability Reporting Standards?

    The European Sustainability Reporting Standards, known as ESRS, are the mandatory disclosure standards that underpin the Corporate Sustainability Reporting Directive. Developed by EFRAG and adopted by the European Commission, these standards define exactly what information companies must disclose about their environmental, social, and governance performance. Understanding ESRS is essential for any organisation that falls within CSRD scope — and increasingly relevant for companies in global supply chains that need to provide data to their European partners.

    ESRS Structure: The Complete Framework

    The ESRS framework consists of twelve standards organised into three groups, plus two cross-cutting standards that apply to every reporting organisation.

    Cross-Cutting Standards

    ESRS 1 — General Requirements. Defines the architecture of the standards, including the concepts of double materiality, due diligence, and the reporting boundary. Every organisation subject to CSRD must understand and apply ESRS 1.

    ESRS 2 — General Disclosures. Requires all in-scope companies to disclose information about governance, strategy, impact and risk management, and metrics and targets. ESRS 2 disclosures are mandatory for every reporting entity regardless of materiality assessment results.

    Environmental Standards (E1 through E5)

    • E1 — Climate Change. Covers greenhouse gas emissions (Scope 1, 2, and 3), transition plans, climate-related risks and opportunities, and energy consumption. For most organisations, this is the most data-intensive standard.
    • E2 — Pollution. Addresses air, water, and soil pollution, including substances of concern and microplastics.
    • E3 — Water and Marine Resources. Covers water consumption, withdrawal, discharge, and impacts on marine ecosystems.
    • E4 — Biodiversity and Ecosystems. Addresses impacts on biodiversity, land use change, and ecosystem services.
    • E5 — Resource Use and Circular Economy. Covers material flows, waste management, and circular economy practices.

    Social Standards (S1 through S4)

    • S1 — Own Workforce. Covers employment practices, working conditions, diversity, health and safety, and labour rights for direct employees.
    • S2 — Workers in the Value Chain. Extends workforce disclosures to workers in the supply chain and downstream value chain.
    • S3 — Affected Communities. Addresses impacts on communities where the company operates or sources materials.
    • S4 — Consumers and End-Users. Covers product safety, data privacy, and responsible marketing practices.

    Governance Standard

    • G1 — Business Conduct. Covers corporate culture, anti-corruption, whistleblowing, political engagement, and payment practices.

    How Double Materiality Determines Your Scope

    Not every topical standard applies to every organisation. The ESRS framework uses double materiality to determine which standards and data points are material to your business. You must assess both impact materiality — your organisation’s actual or potential impacts on people and the environment — and financial materiality — how sustainability matters create risks or opportunities that affect your financial position.

    Standards and data points deemed non-material through a rigorous, documented assessment can be excluded from your report. However, ESRS 2 general disclosures and E1 climate change disclosures carry a rebuttable presumption of materiality, meaning you must provide a detailed explanation if you exclude them.

    Phased Adoption Timeline

    CSRD and ESRS are being implemented in waves:

    • 2025 reporting (FY 2024): Large public-interest entities already subject to the Non-Financial Reporting Directive.
    • 2026 reporting (FY 2025): Other large undertakings meeting two of three criteria — more than 250 employees, more than EUR 50 million turnover, or more than EUR 25 million total assets.
    • 2027 reporting (FY 2026): Listed SMEs, with an option to opt out for up to two additional years.
    • 2029 reporting (FY 2028): Non-EU companies with significant EU operations meeting specified thresholds.

    What Data Do You Need?

    The data requirements for ESRS reporting are extensive. At a minimum, organisations need to prepare the following:

    • Greenhouse gas emissions data across all three scopes with supporting activity data and emission factors.
    • Energy consumption broken down by renewable and non-renewable sources.
    • Workforce metrics including headcount, diversity breakdowns, training hours, and health and safety statistics.
    • Governance data covering board composition, sustainability oversight structures, and business conduct policies.
    • Policies, targets, and action plans for each material topic.
    • Financial effects of sustainability risks and opportunities.

    How Software Helps with ESRS Compliance

    Managing over one thousand data points across twelve standards in spreadsheets is a recipe for errors, missed deadlines, and audit failures. Dedicated ESRS compliance software addresses these challenges by providing structured data collection workflows mapped to each ESRS standard, automated emission calculations with up-to-date factor databases, materiality assessment tools that determine your reporting scope, progress dashboards that show completion status across all standards, assurance-ready audit trails for every data point, and report generation in the required European Single Electronic Format.

    The right ESG reporting software does not just make compliance possible — it makes it efficient, reducing the cost and effort of annual reporting while improving data quality and stakeholder confidence.

    Preparing Your Organisation

    Start with these practical steps:

    1. Determine your reporting timeline. Identify which wave of CSRD applies to your organisation and work backwards to set internal milestones.
    2. Conduct a gap analysis. Compare your current data collection and reporting processes against ESRS requirements to identify what you already have and what you need.
    3. Complete your double materiality assessment. This determines the scope of your report and should involve internal and external stakeholders.
    4. Select your technology platform. Choose software that covers all applicable ESRS standards and integrates with your data sources.
    5. Build your data collection network. Identify data owners across the organisation and establish collection workflows and timelines.
    6. Engage your auditor early. Discuss your reporting approach and data management processes with your assurance provider before the reporting deadline.

    Related reading: CSRD Software Comparison and Automated ESG Reporting with AI.

    Start Your ESRS Reporting Journey

    ESRS reporting is a significant undertaking, but with the right preparation and tools, it is entirely manageable. Horizon ESG provides purpose-built software for ESRS compliance, covering every standard from E1 through G1 with structured workflows, automated calculations, and assurance-ready documentation. Book a demo to see how we can help your organisation meet its CSRD obligations with confidence.

  • Automated ESG Reporting: How AI Cuts Effort 70%

    Automated ESG Reporting: How AI Cuts Effort 70%

    The Manual Reporting Problem

    ESG reporting has traditionally been a manual, resource-intensive process. Sustainability teams spend weeks collecting data from dozens of sources, matching activities to emission factors, chasing missing information, reconciling inconsistencies, and drafting narrative disclosures. For organisations reporting under CSRD, GRI, CDP, and other frameworks simultaneously, the workload multiplies with every standard.

    Artificial intelligence is changing this equation fundamentally. Organisations that deploy AI-powered ESG automation are reducing manual reporting effort by up to seventy percent — not by cutting corners, but by automating the repetitive tasks that consume the most time while maintaining the accuracy and rigour that regulators and auditors demand.

    What AI Actually Does in ESG Reporting

    Automated Data Collection

    AI-powered platforms connect to your existing business systems — ERP, HR, energy management, procurement, travel booking — and extract ESG-relevant data automatically. Instead of sending spreadsheet templates to facility managers and waiting weeks for responses, the system pulls utility consumption, headcount data, travel records, and procurement spend on a scheduled basis. Learn more about how AI automation works in practice.

    Intelligent Emission Factor Matching

    One of the most time-consuming tasks in carbon reporting is matching activity data to the correct emission factors. AI analyses your activity descriptions, units, geographies, and source categories to suggest the most appropriate emission factors from databases like DEFRA, EPA, ecoinvent, and IPCC. The system learns from your corrections, improving accuracy over time. This capability alone can save dozens of hours per reporting cycle, particularly for complex carbon accounting across Scope 1, 2, and 3.

    Gap Detection and Anomaly Flagging

    AI continuously monitors your data for completeness and consistency. It identifies missing data points before they become audit findings, flags statistical anomalies that may indicate errors — such as a facility reporting ten times its typical energy consumption — and highlights year-over-year changes that require explanation. This proactive approach means your team catches problems early rather than discovering them during assurance review.

    Narrative Drafting

    CSRD and other frameworks require extensive narrative disclosures alongside quantitative data. AI assists by generating first drafts of narrative sections based on your data, policies, and previous reports. These drafts are starting points, not final outputs — your sustainability experts review, refine, and approve every disclosure. But starting from a structured draft rather than a blank page saves significant time and ensures consistent quality.

    Predictive Analytics

    Beyond reporting, AI helps organisations forecast emissions trajectories, model the impact of reduction initiatives, and identify the highest-impact areas for improvement. This transforms ESG reporting from a backward-looking compliance exercise into a forward-looking strategic tool.

    The ROI of ESG Automation

    The return on investment from AI-powered ESG automation comes from several sources:

    • Time savings. Teams that previously spent twelve to sixteen weeks on an annual report cycle can complete the same work in four to six weeks, freeing capacity for strategic sustainability work.
    • Error reduction. Automated validation and emission factor matching eliminate the most common sources of data errors, reducing restatement risk and audit findings.
    • Faster audit cycles. Complete audit trails and automated documentation reduce the time and cost of external assurance by up to forty percent.
    • Staff efficiency. Rather than hiring additional reporting analysts, organisations can handle growing reporting requirements with their existing team.
    • Better decisions. Real-time dashboards and predictive analytics enable faster, more informed sustainability decisions.

    The Human-in-the-Loop Approach

    Effective AI in ESG reporting is not about replacing human judgement. It is about augmenting it. The best platforms follow a human-in-the-loop model where AI handles data processing, pattern recognition, and draft generation, while human experts retain control over materiality decisions, narrative tone, strategic priorities, and final approval of every disclosure.

    This approach delivers the speed and efficiency of automation without sacrificing the contextual understanding and professional judgement that sustainability reporting demands. Your team remains accountable — the AI simply removes the drudge work that prevents them from focusing on what matters.

    Security and Privacy Considerations

    ESG data often includes sensitive information — employee demographics, supply-chain relationships, energy contracts, and financial data. When evaluating AI-powered platforms, ensure the vendor addresses these critical questions:

    • Where is data processed and stored? Look for platforms with data residency options aligned to your jurisdiction.
    • Is your data used to train AI models? Reputable vendors isolate customer data and do not use it for model training.
    • What encryption standards are in place for data at rest and in transit?
    • Does the platform comply with GDPR and other applicable data protection regulations?
    • What access controls and authentication mechanisms are available?

    Getting Started with AI-Powered ESG Reporting

    You do not need to automate everything at once. Start with the areas that consume the most manual effort — typically data collection and emission factor matching — and expand automation as your team gains confidence. The best platforms are designed for incremental adoption, allowing you to enable AI capabilities progressively.

    Related reading: ESRS Reporting Guide, ESG Data Management: Beyond Spreadsheets, and How to Choose ESG Reporting Software.

    Experience AI-Powered ESG Reporting

    Horizon ESG combines intelligent automation with robust data management to deliver faster, more accurate sustainability reporting. Book a demo to see how AI-powered data collection, emission factor matching, gap detection, and narrative assistance can transform your ESG reporting programme — reducing effort while improving quality.

Book Your Free Demo