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Tag: CSRD

  • ESRS-40a: CSRD Is Back for Non-EU Parent Companies

    For eighteen months, the message reaching boardrooms in New York, London, Zurich and Singapore has been reassuringly simple: the Omnibus package gutted CSRD, our European subsidiaries fell out of scope, file closed. For the EU entities, broadly true. What it missed is that the obligation did not disappear — it moved up the corporate structure, to the non-EU parent.

    On 23 July 2026, EFRAG published the Exposure Draft of ESRS-40a — the sustainability reporting standard for certain non-EU undertakings — and opened a 100-day consultation running to 31 October 2026. It implements Article 40a of the Accounting Directive, and applies a test with nothing to do with how many people you employ in Europe. If your group sells enough into the EU, you report.

    What ESRS-40a actually is

    Articles 19a and 29a of the Accounting Directive catch EU companies and EU-parented groups. Article 40a is the extraterritorial arm: it catches groups headquartered outside the EU that do significant business inside it. ESRS-40a is the standard telling them what to disclose, and the logic is a level playing field — a US or Japanese group booking hundreds of millions in EU revenue competes with EU companies carrying a full ESRS burden.

    The scope test: run it before you do anything else

    The threshold is two-part, and both parts must be met. A third-country undertaking not listed on an EU regulated market is in scope if it meets:

    • Turnover test. Net turnover in the Union above €450 million in each of the last two consecutive financial years; and
    • Presence test. Either an EU branch with net turnover above €200 million in the preceding financial year, or it is the ultimate parent of EU subsidiaries with net turnover above €200 million in the preceding financial year.

    These behave differently from the tests your European finance team has been applying: no employee headcount criterion, no balance-sheet criterion. It is a revenue test measured at group level on turnover booked in the Union — so a group with modest European operations and a lean legal footprint can still clear the bar on distribution revenue alone.

    Who actually publishes the report

    The parent is the reporting undertaking, but it does not file. The report is published on the parent’s behalf by an EU subsidiary that would itself fall within CSRD scope, or by a large EU branch. That puts a European entity — often one with no sustainability function of its own — on the hook for making a group-level disclosure public. Flag it early to your European legal and finance leads: the people who sign and file are rarely the people who produce the data.

    What you report — and, importantly, what you don’t

    ESRS-40a is deliberately lighter than a full ESRS sustainability statement. The Article 40a report focuses on impacts — the effects of the group’s activities on people and the environment. It generally excludes the risk-and-opportunity architecture Articles 19a and 29a demand: resilience analysis, dependencies, and the financial-materiality half of double materiality sit outside its content.

    For teams that have watched EU peers build scenario analysis and transition plans, that is good news. But narrower is not easier — the hard part of ESRS-40a is not the disclosure list. It is the boundary.

    The “mixed approach” is the fight that decides your cost

    This is the detail that deserves attention during the consultation window. The draft requires a blend of EU-scoped and global-scoped information — some disclosures drawn from the group’s European activities, others from the group as a whole.

    EFRAG’s own Sustainability Reporting Board did not approve this comfortably. It released the Exposure Draft while recording reservations about the mixed approach, and Chair Kerstin Lopatta published a letter setting out those concerns before launch, noting the approach reflects a request from the European Commission. The objection is practical as much as legal: separating EU-related impacts from global ones is difficult, and in places arbitrary.

    For a reporting team, that is not standard-setting politics — it is the single biggest driver of your data-collection cost. A global-scope disclosure can usually be sourced from systems you already run. An EU-scope disclosure means carving European activity out of consolidated data — by site, by entity, by supplier — for metrics your systems were never designed to slice that way. Every requirement landing on the EU-scoped side adds a pipeline you do not have.

    Which is why the consultation matters. Feedback closes 31 October 2026 and EFRAG’s technical advice goes to the Commission in January 2027. After that, the boundary question is settled and you are implementing someone else’s answer.

    The timeline looks distant. It isn’t.

    Reporting becomes mandatory for financial years beginning on or after 1 January 2028, with first reports published in 2029. Three years is comfortable — right up until you work backwards.

    • 2029 — first report published.
    • FY2028 — the reporting year. Data must be complete, consistent and evidenced across twelve months, from day one.
    • FY2027 — the dry run: find the gaps in EU-scoped data and fix them. Anyone through a first ESRS cycle knows this year is not optional.
    • 2026–2027 — scoping, system selection, and getting European entities collecting data in a form that consolidates.

    That leaves roughly eighteen months of genuine slack, not three years — landing on organisations that spent the last year actively de-resourcing European sustainability compliance.

    Why the scope cut makes this more exposing, not less

    EFRAG has estimated that the Omnibus changes cut the number of non-EU companies in scope from roughly 10,000 to around 1,200 — a 90% reduction, reported as relief. Consider it from the other direction: the remaining population is small, large and identifiable. Any regulator, NGO or journalist can assemble a credible list of who should be reporting and check whether they did. In a group of 10,000, a thin disclosure is noise. In a group of 1,200, it is a story.

    This is the same pattern we described when the SEC’s climate rollback failed to free US multinationals: deregulation in one jurisdiction rarely reduces total disclosure obligation for a global group. It relocates it.

    What to do before 31 October

    • Run the test properly. Get an accurate group-level figure for net turnover in the Union for the last two financial years. Not EU-entity revenue — turnover generated in the Union, which can include sales routed through non-EU entities.
    • Identify the filer. Determine which EU subsidiary or branch would carry the publication obligation, and tell them now.
    • Respond to the consultation. If you are in scope, the mixed approach will shape your cost base for a decade. This is the last practical window to influence it.
    • Map EU-scoped data. Take a first pass at which impact metrics you could already report at EU boundary and which need new collection. That gap list is your 2027 project plan.
    • Do not rebuild in a silo. Much of what ESRS-40a asks for overlaps with what you already produce for CDP, ISSB-aligned reporting, or an EU subsidiary’s own CSRD timeline. One data layer with multiple outputs beats a separate European reporting exercise.

    One honest caveat: ESRS-40a is a draft, its content will change before the Commission’s delegated act, and the mixed approach may not survive in its current form. What will not change is the scope test and the FY2028 start date — those sit in the Directive, not the standard. You can wait on the detail. You cannot wait on knowing whether you are in.

    If your group clears the €450 million test, the work starts with knowing what you can already produce at EU boundary. Horizon ESG helps multinational teams collect sustainability data once and report it against multiple frameworks — so a new obligation becomes a mapping exercise, not a new programme. Book a free demo.

  • CSRD Value-Chain Cap: What You Can Still Ask Suppliers

    Most of the coverage of the European Commission’s 3 July package led with the same number: a 60% cut in mandatory ESRS datapoints. That is the headline, and it is real. But buried in the second delegated act is a change that will reshape more programmes than the datapoint cut ever will — and almost nobody is briefing their procurement team on it.

    It is called the value-chain cap. In short: from financial year 2027, a CSRD-scope company will no longer be able to require its smaller suppliers to hand over sustainability data beyond a defined ceiling. If your supplier-engagement programme is built on a 200-question ESG questionnaire pushed down the chain, that programme now has a legal boundary running through the middle of it.

    What the Commission adopted on 3 July 2026

    The Commission adopted two delegated acts. The first is the revised set of European Sustainability Reporting Standards — the concrete landing of the Omnibus I simplification agenda. It cuts mandatory datapoints by over 60%, total datapoints by over 70%, and is expected to reduce reporting costs by more than 30% per company.

    The second is the one to read carefully: a Voluntary Sustainability Reporting Standard, built on the VSME, giving companies outside CSRD scope a single proportionate framework to report against. It is voluntary in the sense that no smaller company is obliged to use it. It is emphatically not voluntary in its effect on the companies above them in the chain — because it sets the ceiling.

    Both acts are now in a two-month scrutiny period before the European Parliament and Council, extendable by a further two months. If neither institution objects, they are published in the Official Journal and enter into force. That caveat matters, and we return to it at the end.

    The value-chain cap, precisely

    The cap protects companies with 1,000 employees or fewer that sit in the value chain of a CSRD reporter. Under the Omnibus I Directive, those companies are entitled to decline requests for sustainability information that go beyond what the Voluntary Standard covers. Micro-enterprises of ten employees or fewer get further relief on top. For CSRD-scope companies, the cap bites from financial year 2027.

    Read plainly, that inverts a decade of supplier-engagement practice. The implicit deal until now was that a large buyer could ask its suppliers for whatever its own reporting obligations demanded, and commercial leverage did the rest. From FY2027, the supplier has a statutory answer: no, and here is the standard that says so.

    Three things the cap does not do

    This is where the early commentary is getting it wrong, so it is worth being exact.

    • It caps what you can require, not what you can ask. The Commission has confirmed that a CSRD reporter may still request information beyond the cap — provided it clearly identifies which parts of the request exceed the cap and informs the supplier of their right to refuse. The cap creates a duty of transparency in the ask, not a prohibition on asking.
    • It applies only to CSRD reporting. The cap operates when fulfilling CSRD reporting obligations. It does not govern information you request for other purposes — commercial qualification, contractual assurance, product compliance, or your own risk management.
    • It does not stop a supplier volunteering more. Plenty of smaller suppliers will keep sharing data, because being easy to buy from is a competitive advantage. The cap removes the obligation, not the incentive.

    Together those three points reframe the cap. It is not a wall. It is a consent boundary — and crossing it now requires you to say out loud that you are crossing it.

    Where the cap collides with CSDDD

    Here is the tension nobody has resolved. The Corporate Sustainability Due Diligence Directive still requires in-scope companies to conduct risk-based human rights and environmental due diligence across their chain of activities — an approach Omnibus I preserved rather than narrowing to tier one. You cannot discharge a risk-based due-diligence obligation without information from the chain. Yet the ESRS package has just capped what you may require from a large part of that same chain.

    The reconciliation is in the scoping: the cap is tied to CSRD reporting obligations, and CSDDD due diligence is a separate legal duty. In principle, a due-diligence request is not a CSRD reporting request, and the cap does not extinguish it.

    In practice, that distinction is going to be tested hard — because it is usually the same supplier, receiving the same questionnaire, from the same buyer, in a single email. If your data requests do not distinguish their legal basis, you invite a supplier to refuse the whole thing on cap grounds, including the parts you are entitled to insist on. The operational bar for all of this is still being written: the Commission’s consultation on CSDDD implementation guidelines closes on 24 July 2026, with the guidelines expected in principle by July 2027. If your supplier programme is material to your business, that consultation is a genuine, closing opportunity to shape it.

    What to do in the next 90 days

    FY2027 sounds distant. It is not — supplier programmes have long lead times, and the contracts you sign this year will still be running when the cap bites.

    1. Re-baseline your supplier questionnaire against the Voluntary Standard. Every question you currently push down the chain now sorts into one of two buckets: inside the cap, or outside it. You cannot manage the boundary until you can see it.
    2. Get headcount into your supplier master data. The 1,000-employee line is now a legal boundary, and most procurement systems do not hold supplier headcount at all. This is the least glamorous item on the list and probably the one with the longest lead time.
    3. Redesign the ask, not just the question set. Beyond-cap requests need to be explicitly flagged as such, with the right to refuse stated. Build that into the template now rather than retrofitting it under deadline.
    4. Separate your legal bases. Split CSRD-reporting requests from due-diligence and commercial requests, and label them. This is the single change that most protects your CSDDD position.
    5. Plan for refusal. Assume a meaningful share of smaller suppliers will exercise the cap. That means leaning harder on estimation, sector averages and spend-based proxies for value-chain data — and being able to document why an estimate was used and how it was derived.

    Prepare — but do not decommission

    One final discipline. Both delegated acts are still in scrutiny, and the revised ESRS are set to apply to financial years beginning on or after 1 January 2027, with early application permitted. Nothing is in the Official Journal yet.

    So the correct posture is prepare, don’t freeze — and above all, don’t switch anything off. The most expensive mistake available right now is to read “60% fewer datapoints” as permission to dismantle data pipelines that a scrutiny objection, an early-adoption decision, or an investor’s own SFDR-driven data request could make you rebuild in eighteen months. Simplification is not the same as less work. A 70% datapoint cut creates a migration project before it creates a saving.

    The companies that will handle this well are the ones that can see, in one place, which datapoints they collect, which regime each one serves, and where in the value chain it came from. That is a data-architecture question long before it is a compliance one — and it is exactly what our CSRD readiness checklist is built to help you work through. If you would like to see how Horizon ESG maps a single data foundation across CSRD, CSDDD and the voluntary standard, book a short demo — we will walk your own supplier data through it.

  • 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.

  • 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.

  • CSRD Software Comparison: What to Look For

    CSRD Software Comparison: What to Look For

    Why CSRD Software Selection Matters Now

    The Corporate Sustainability Reporting Directive is reshaping how European and international companies disclose sustainability information. With the first wave of reporting obligations already underway and subsequent waves bringing thousands more companies into scope, choosing the right CSRD software is one of the most consequential technology decisions your organisation will make in 2026.

    This guide provides a structured framework for comparing CSRD software options based on the capabilities that genuinely matter for compliance, efficiency, and long-term value.

    Core Capabilities Every CSRD Platform Needs

    Full ESRS Coverage

    The European Sustainability Reporting Standards are the backbone of CSRD compliance. Your software must cover all twelve standards — the cross-cutting standards (ESRS 1 and ESRS 2) as well as the topical standards spanning environmental (E1 through E5), social (S1 through S4), and governance (G1). Partial coverage creates gaps that auditors will flag. Review our detailed breakdown of CSRD requirements to understand the full scope of what your software must address.

    Double Materiality Assessment Support

    CSRD requires organisations to conduct a double materiality assessment — evaluating both financial materiality (how sustainability issues affect the business) and impact materiality (how the business affects people and the environment). The best platforms provide structured workflows for stakeholder engagement, materiality mapping, and threshold setting, rather than leaving you to manage this critical process in standalone documents.

    Data Point Management

    CSRD reporting involves over one thousand individual data points. Your software should map each data point to the relevant ESRS standard, track completion status, assign ownership to data contributors across the organisation, and flag mandatory versus voluntary disclosures based on your materiality results. Without this granular management layer, teams lose track of requirements and deadlines.

    Feature Comparison Framework

    When evaluating multiple platforms, use this framework to score each option consistently:

    1. Regulatory Intelligence

    How quickly does the platform incorporate regulatory updates? ESRS standards are still evolving, with sector-specific standards and SME standards in development. Platforms that maintain a dedicated regulatory team and push updates automatically score highest in this category.

    2. Workflow and Collaboration

    CSRD reporting involves dozens of contributors across departments. Evaluate task assignment, approval workflows, role-based access controls, and notification systems. The platform should make it easy for non-sustainability staff to contribute data without extensive training.

    3. Assurance Readiness

    Limited assurance is already required, with reasonable assurance on the horizon. Your software must maintain a complete audit trail — every data entry, edit, approval, and source document should be logged with timestamps and user attribution. Some platforms offer auditor portals that give external assurance providers direct read-only access, significantly reducing audit preparation time.

    4. Integration Capabilities

    CSRD data comes from ERP systems, HR platforms, energy management tools, procurement databases, and more. Evaluate the breadth and depth of available integrations, API flexibility, and whether the vendor supports custom connectors for proprietary systems.

    5. Reporting Output

    The platform should generate XHTML-tagged reports compatible with the European Single Electronic Format. Evaluate the quality of narrative templates, data visualisations, and the ability to export reports in multiple formats for different audiences — regulators, investors, and internal stakeholders.

    What Separates Good CSRD Software from Great

    Good software checks the compliance boxes. Great software accelerates your entire sustainability programme. Look for platforms that connect CSRD reporting to operational improvement — using the data you collect not just for disclosure but for identifying reduction opportunities, benchmarking performance, and supporting strategic decisions.

    Dedicated CSRD reporting software should also handle the transition from voluntary to mandatory reporting gracefully, allowing organisations that previously reported under GRI or TCFD to map existing data to ESRS requirements without starting from scratch.

    Evaluation Process Best Practices

    • Define your scope first. Know which ESRS standards apply based on your materiality assessment before evaluating software.
    • Involve IT early. Integration requirements and security reviews take time — start these conversations during the evaluation, not after selection.
    • Request a proof of concept. Load real data into the platform and test end-to-end workflows for at least one reporting topic.
    • Check the vendor roadmap. Ask about plans for sector-specific ESRS standards, AI capabilities, and assurance features.
    • Talk to existing customers. References from organisations with similar complexity and reporting obligations are invaluable.

    Timeline Considerations

    Implementation timelines for CSRD software typically range from six to sixteen weeks depending on organisational complexity, data source integration, and internal readiness. Start your evaluation at least six months before your first reporting deadline to allow for selection, implementation, data migration, and team training.

    Related reading: How to Choose ESG Reporting Software, Best ESG Reporting Software 2026: Buyer’s Guide, ESRS Reporting Guide, and Automated ESG Reporting with AI.

    Take the Next Step

    Choosing CSRD software is a decision that will shape your compliance programme for years. Make it with clarity. Book a demo of Horizon ESG to see how our platform delivers full ESRS coverage, double materiality support, assurance-ready audit trails, and seamless integration — purpose-built for CSRD compliance.

  • CSRD for Medium-Sized Businesses: 2026 Guide

    CSRD for Medium-Sized Businesses: 2026 Guide

    If you are running or advising a medium-sized business based in the UK or EU, you may be asking: Are we affected by CSRD? When do we need to start preparing? What if we are not directly reporting, but our clients are?

    As of 2026, the Corporate Sustainability Reporting Directive (CSRD) is reshaping how sustainability data flows through the entire European business ecosystem. Even with shifting deadlines and ongoing exemptions, medium-sized businesses are already feeling the impact.

    This guide is for business owners, CFOs, operations leads and sustainability managers who want clear answers and practical next steps — without getting lost in regulatory language.

    Who Needs to Report Under CSRD — and When?

    Here is a simple breakdown of the current timeline:

    • Large EU companies and those listed on EU-regulated markets began reporting in 2025.
    • Listed medium-sized companies (SMEs) were originally required to start reporting in 2027 (based on FY2026), though recent EU proposals may exempt many entirely or push obligations to 2029.
    • Non-listed medium-sized companies are not directly in scope, but many are indirectly affected through their roles in the supply chains of larger reporting entities.

    Bottom line: Even if you are not mandated to publish a CSRD report yet, your customers or investors might already be asking you for sustainability data.

    And if you are UK-based? You are not subject to CSRD directly, but if you have EU subsidiaries, clients or investment relationships, expect similar expectations and data requests.

    Why Medium-Sized Businesses Cannot Afford to Wait

    You may not have to publish a report in 2026, but that does not mean you are off the hook. CSRD requires large companies to report ESG data across their entire value chain — and that includes you.

    If your business provides products or services to CSRD-regulated companies, they will need data from you to meet their obligations. Already in 2025:

    • Over 60% of mid-size EU suppliers were asked to provide ESG metrics aligned with CSRD.
    • Sustainability questionnaires are now being embedded into procurement and vendor onboarding processes.

    Whether you are in manufacturing, logistics, B2B services or technology — if you are in the value chain, you are in the frame.

    What You Should Be Doing in 2026

    The biggest risk for medium-sized businesses is waiting too long to prepare. Here is how to start:

    1. Assess Your Status

    • Are you listed in the EU?
    • Do you operate in EU countries or serve EU-headquartered clients?
    • Are you receiving ESG data requests from customers or investors?

    2. Evaluate Your Current Data

    • Do you know your Scope 1 and 2 emissions?
    • Do you have any supplier data for Scope 3?
    • Are you tracking employee data such as diversity, turnover and training?
    • Do you have policies in place on governance, anti-bribery and sustainability?

    3. Talk to Key Stakeholders

    • What are your top customers or investors asking for?
    • Are banks or lenders requesting ESG disclosures?

    4. Outline a Simple CSRD Roadmap

    • Begin with a materiality assessment.
    • Identify your key data gaps.
    • Assign responsibility internally — even if it is just one person coordinating efforts.

    This Is Not Just About Regulation — It Is Strategy

    Many companies start CSRD preparation because they feel they have to. But the businesses that benefit the most see it as an opportunity:

    • Stronger customer relationships: Show key clients that you are reliable and future-ready.
    • Competitive advantage: Meet ESG expectations ahead of competitors.
    • Operational clarity: Build a clearer view of your business’s risks and impacts.
    • Future-proofing: Position your company to respond to future UK or EU regulatory shifts.

    By investing early — even with simple steps — you reduce risk, avoid late-stage panic and gain control over your sustainability narrative.

    Where to Start Today

    If you have read this far, you are likely looking for practical guidance. We recommend starting with:

    • A 60-minute materiality workshop to define what matters most for your business.
    • A data gap assessment — what you already track, what you will need and what can wait.
    • A client-focused strategy — identifying who will be asking you for data and when.

    The rules may still evolve, but the direction of travel is clear. Whether you are in scope today or not until 2028, your customers and partners will expect CSRD-aligned data soon.

    Final Takeaway

    Sustainability reporting is not just for the big players anymore. If you are a medium-sized company in Europe or the UK, now is the time to take small, smart steps. Do not wait for a formal obligation to start preparing. Start with what you can control — clarity, data and planning.

    Get Your Free CSRD Readiness Check

    Horizon ESG helps medium-sized businesses build tailored, low-friction sustainability reporting strategies aligned with CSRD and other frameworks. Book a free CSRD readiness check — no fluff, just clear next steps.

  • Double Materiality Under CSRD: What Teams Get Wrong

    Double Materiality Under CSRD: What Teams Get Wrong

    When most teams reach the double materiality stage, there is often a sense of relief. “Good. We’ll run a workshop, score the topics, build the matrix and move on.” On paper, it sounds manageable — and technically, it is. That is, until you start asking one or two slightly deeper questions. That is usually where the pause happens.

    What Double Materiality Actually Asks

    Stripped back, double materiality asks two questions:

    1. Financial materiality: Which sustainability issues could affect your financial performance?
    2. Impact materiality: Which environmental or social impacts from your business are significant enough to matter externally?

    Those questions sound simple. However, answering them properly is not, because you are no longer just discussing themes — you are making governance decisions about:

    • Risk exposure
    • Time horizons
    • Financial resilience
    • Operational impact
    • Stakeholder expectations

    And once something is declared “material,” it drives disclosure, KPIs, targets and reporting effort — and becomes embedded in your governance.

    Where It Starts to Feel Less Straightforward

    Here is what we commonly see. A workshop is held. A long list of topics is brainstormed. Participants score them. A matrix is produced.

    Then someone asks:

    “How did we define the scoring scale? Why was that threshold chosen? Did finance validate the financial risk dimension? How are stakeholder views evidenced?”

    Silence at this stage is normal — not because the team did not think carefully, but because the structure was not designed with scrutiny in mind. Double materiality is not just about reaching a conclusion; it is about being able to calmly explain how you reached it.

    What Assurance Providers Typically Look For

    This is where organisations often underestimate the rigour required. Assurance providers will not just look at the matrix. They will typically examine:

    • The methodology behind the scoring
    • How financial materiality links to enterprise risk
    • Whether thresholds were predefined or adjusted afterwards
    • How stakeholder input was captured and weighted
    • Why certain topics were excluded

    They are testing consistency, not perfection. If your methodology is clearly documented and traceable, conversations are straightforward. If documentation is fragmented, the process becomes uncomfortable.

    Weaker vs. Stronger Approaches: A Practical Comparison

    A weaker approach often looks like:

    • Scoring criteria defined during the workshop
    • Financial risk discussed but not clearly linked to financial planning
    • Stakeholder engagement informal or undocumented
    • Rationale captured in slide notes
    • Version history unclear

    A stronger approach looks like:

    • Predefined and documented scoring scales
    • Clear separation of impact and financial risk dimensions
    • Financial risk aligned with existing risk registers
    • Stakeholder groups formally identified and input recorded
    • Thresholds agreed before scoring
    • Decisions and exclusions documented in a central system
    • Version control and audit trail maintained

    Notice: the difference is not complexity — it is structure.

    Why Finance Must Be Involved Early

    Double materiality directly influences:

    • What risks are disclosed
    • What metrics are tracked
    • What investments are prioritised
    • How transition risks are communicated

    If financial materiality is scored without finance input, alignment gaps can appear later. For example: if climate transition risk is declared material, but financial planning does not reflect that exposure, leadership conversations become misaligned.

    When finance is involved early, double materiality becomes integrated rather than layered on top. That is when it feels strategic instead of procedural.

    Real-World Example: From Clear Matrix to Defensible Process

    One organisation we worked with had already completed their double materiality assessment internally. The matrix looked clear, but when they began preparing their CSRD disclosures, several issues emerged:

    • Financial risk scores were not explicitly linked to the company’s risk register.
    • Stakeholder engagement had taken place, but there was no formal record of weighting decisions.
    • Threshold levels had been adjusted after scoring discussions, but that change was not documented.

    Nothing was fundamentally wrong, but it was not defensible enough. Rather than redo the entire process, they focused on strengthening structure:

    • Clarifying and documenting scoring methodology
    • Linking financial risks directly to enterprise risk documentation
    • Recording stakeholder categories and input formally
    • Storing decisions and rationales in a single central environment

    The outcome was not a different matrix — it was greater confidence in explaining it.

    How Horizon ESG Makes Double Materiality Easier

    Double materiality becomes difficult not because leaders lack judgement — it becomes difficult because coordination and documentation are fragmented. Horizon ESG’s platform is designed to bring structure to this process, enabling organisations to:

    • Define and standardise scoring criteria before assessment begins
    • Separate financial and impact dimensions clearly
    • Capture stakeholder input within a structured framework
    • Link financial materiality directly to risk registers and reporting workflows
    • Document assumptions and threshold decisions
    • Maintain version control and a clear audit trail
    • Align material topics directly to CSRD and ESRS disclosures

    Instead of relying on slide decks and shared folders, decisions are captured in one secure, structured environment — so leadership can focus on conversations and documentation becomes robust.

    The Strategic Value of Getting It Right

    When double materiality is done well, it does more than satisfy regulation. It can:

    • Highlight emerging supply chain vulnerabilities
    • Reveal transition risks earlier
    • Clarify where capital allocation needs to adapt
    • Improve investor discussions
    • Align sustainability and finance in practical terms

    It becomes a lens for risk and resilience, not just compliance.

    Double materiality is not meant to complicate things. It is meant to create clarity about what truly matters. The key is not rushing to produce a matrix — it is designing the structure behind it.

    With a clear methodology and the right systems in place, double materiality becomes a calm governance exercise rather than a stressful reporting milestone.

    Bring Structure to Your Double Materiality Process

    If you want to bring structure and clarity to your double materiality process before reporting pressure builds, explore how Horizon ESG’s platform can help your team move forward with confidence. Book a free demo today.

  • CSRD Governance: Why Alignment Matters More Than Reporting

    CSRD Governance: Why Alignment Matters More Than Reporting

    When leadership teams first hear about CSRD, the natural question is usually very practical: “What exactly do we need to report?” It is a completely reasonable place to start.

    However, after a few internal discussions, something else often becomes apparent. The challenge is rarely the reporting template itself. Instead, it is about how connected the organisation truly is beneath the surface.

    CSRD does not simply require more disclosure. It asks organisations to demonstrate clarity around ownership, process and reasoning. It prompts questions such as:

    • Who owns this data?
    • How is it reviewed?
    • How do we know it is accurate?
    • Why have we decided that this issue is material?
    • Could we confidently explain and evidence that decision if challenged?

    This is the point where the conversation shifts. What initially appeared to be a reporting exercise becomes something broader — a question of governance and alignment.

    Why CSRD Often Feels More Complex Than Expected

    Many organisations initially assume that CSRD will sit neatly within the sustainability function. In reality, it touches multiple areas of the business. Finance, risk, operations, procurement, HR and strategy all become involved — not because the regulation explicitly assigns responsibility to each function, but because the data and decisions it relies on already sit across those teams.

    • Carbon data may sit within operations.
    • Supplier risk may sit within procurement.
    • Policies often sit within HR.
    • Financial exposure and risk assessment naturally sit within finance.

    When those areas already work closely together, CSRD feels structured and manageable. When they operate in silos, the process can quickly feel fragmented.

    “We have the data, we just need to bring it together.”

    “We can tidy this up before submission.”

    We hear these comments frequently. However, once teams begin mapping how information flows between departments, additional questions tend to arise:

    • Is this data consistently reviewed?
    • Is there a defined approval process?
    • Are we relying on spreadsheets being shared between teams?
    • If we were asked to show the audit trail, could we do so easily?

    None of this suggests that something is wrong. It simply highlights how connected — or disconnected — governance processes may be in practice.

    Double Materiality, Explained Clearly

    Double materiality can sound technical, but the core questions are straightforward:

    1. Financial materiality: Where could sustainability issues affect the organisation’s financial performance?
    2. Impact materiality: Where could the organisation’s activities create environmental or social impacts that carry regulatory, reputational or strategic risk?

    Answering these questions requires more than discussion. It requires structure:

    • A clear methodology must be defined.
    • Scoring criteria should be agreed in advance.
    • Stakeholder input should be captured and recorded.
    • The rationale behind decisions should be documented.

    When these elements are scattered across workshop slides, emails and notes, leadership confidence can weaken. When they are centralised and structured, the process becomes far more controlled and transparent.

    What We Are Hearing From Businesses

    Across many mid-sized organisations, we are hearing similar themes. Teams have already invested time in running materiality workshops. Thoughtful discussions have taken place. Matrices have been created. The work itself is often strong.

    However, as reporting deadlines approach, the tone of conversation shifts:

    “Did we define our scoring criteria clearly enough?”

    “How did we link this financial risk to our enterprise risk register?”

    “If we were challenged on why we excluded this topic, could we explain it confidently?”

    These concerns are not about knowledge or capability. They are about coordination and documentation. The underlying analysis is often sound. What is missing is a structured, traceable framework that brings it all together.

    How Horizon ESG Brings Clarity and Structure

    At Horizon ESG, we focus on bringing clarity and structure to processes that often feel scattered. Our platform is designed to support organisations in:

    • Centralising ESG and carbon data within a secure environment
    • Automating data collection and validation through AI-driven processes, reducing manual effort and inconsistency
    • Creating a clear audit trail behind each data point and decision
    • Applying consistent scoring criteria across materiality assessments
    • Recording stakeholder input formally
    • Linking financial materiality directly to existing risk registers and governance workflows

    Instead of relying on separate files and memory, organisations work within one structured system. Instead of revisiting workshop notes to reconstruct decisions, leadership teams can access documented rationale and version history in real time.

    The effect is not just operational efficiency. It is increased confidence. Teams move from asking, “Are we sure?” to being able to say, “Yes, we can show how we reached that conclusion.”

    This Is Not Just Relevant to Large Corporations

    CSRD is often associated with large multinational organisations, but its impact is not limited by size. If your organisation operates across multiple departments, reports externally, supplies into larger EU businesses, tracks sustainability metrics or expects some level of assurance — governance clarity becomes important.

    CSRD simply accelerates that requirement. The encouraging reality is that this does not require building entirely new structures from scratch. In most cases, the information already exists. What is needed is structure, coordination and visibility.

    CSRD can be approached as another compliance obligation. Alternatively, it can be used as an opportunity to:

    • Strengthen internal alignment
    • Improve risk visibility
    • Increase Board confidence
    • Enhance investor credibility

    Most organisations do not struggle with sustainability ambition. They struggle with coordination. CSRD does not test values. It tests how clearly data, decisions and governance connect across the organisation.

    With the right structure in place, that connection becomes manageable. With the right tools, it becomes sustainable.

    Ready to Strengthen Your CSRD Governance?

    If you want to move from scattered processes to structured, auditable ESG governance, Horizon ESG can help. Book a free demo and see how our platform brings clarity to CSRD reporting, materiality assessments and stakeholder alignment.

Book Your Free Demo