Update on the Corporate Sustainability Reporting Directive (CSRD): Implications for Large EU Undertakings in Financial Year 2027

As the European Union continues to refine its regulatory framework for corporate sustainability, the Corporate Sustainability Reporting Directive (CSRD) remains a pivotal instrument in promoting transparency and accountability in environmental, social, and governance (ESG) matters. Enacted to supersede the Non-Financial Reporting Directive (NFRD), the CSRD mandates comprehensive sustainability disclosures for a broad array of undertakings, aligning with the broader objectives of the European Green Deal. This article provides an updated analysis of the CSRD's scope and obligations for financial year (FY) 2027, incorporating the latest developments in the ongoing simplification reforms as of 2 December 2025. Drawing on current legislation and the status of trilogue negotiations, we delineate the extant legal requirements, prospective amendments, and pragmatic considerations for affected entities.

Current Legal Framework for FY 2027 Reporting

Under the prevailing provisions of the CSRD (Directive (EU) 2022/2464) and the amending "Stop-the-Clock" Directive (EU) 2025/794, mandatory reporting obligations for FY 2027 are delineated as follows.

Entities Subject to Reporting

The CSRD categorizes undertakings into sequential "waves" based on their characteristics and size:

1. Wave 1 Undertakings: These encompass large listed companies, credit institutions, insurance undertakings, and other public-interest entities (PIEs) designated by Member States that satisfy the "large" thresholds. Such entities have been obliged to report under the CSRD since FY 2024, with initial sustainability statements published in 2025. They will continue these obligations unabated in FY 2027.

2. Wave 2 Undertakings: Comprising all other large EU undertakings and parent undertakings of large groups—irrespective of listing status—this cohort is newly incorporated into the CSRD ambit for financial years commencing on or after 1 January 2027. Originally slated for FY 2025, this implementation was deferred by two years via Directive 2025/794. Consequently, the inaugural sustainability reports for these entities are due in 2028, pertaining to FY 2027 data.

   
   

In essence, for FY 2027, the novel inclusions under current law are large undertakings not previously captured in Wave 1.

Thresholds for "Large" Undertakings

The classification of a "large" undertaking is governed by the Accounting Directive (2013/34/EU), as amended for inflation by Directive (EU) 2023/2775. An entity qualifies as large if it surpasses at least two of the following criteria over two consecutive balance sheet dates:

• Balance sheet total exceeding €25 million;

• Net turnover exceeding €50 million;

• Average number of employees exceeding 250.

This definition is consistently applied in EU and national guidance on CSRD scoping.

Temporal Application

For undertakings with calendar-year financial periods, CSRD coverage commences from 1 January to 31 December 2027, with reports integrated into the 2027 annual financial statements published in 2028. Non-calendar-year entities are subject to the directive for the first financial year initiating on or after 1 January 2027.

Evolving Political Landscape: The Simplification Reforms

Notwithstanding the established framework, the CSRD is undergoing substantial revision through the "Simplification Omnibus" package, aimed at alleviating administrative burdens while preserving the directive's core efficacy. These reforms, not yet enshrined in law, have advanced rapidly in 2025, with trilogue negotiations between the European Commission, Council, and Parliament commencing on 18 November 2025. The objective is to finalize a compromise by early December 2025, potentially by 8 December.

Key Proposals and Positions

• European Commission Proposal (February 2025): The Omnibus I package advocates elevating the scoping thresholds to undertakings with over 1,000 employees, coupled with either net turnover exceeding €50 million or balance sheet total exceeding €25 million. Additional measures include deferring sector-specific European Sustainability Reporting Standards (ESRS), rendering SME standards voluntary, and mitigating obligations for third-country undertakings and value-chain data collection. This could reduce the number of in-scope entities from approximately 45,000 to 10,000.

• Council Position (June–July 2025): Endorsing the Commission's narrowing, the Council augments it with a €450 million net turnover threshold, thereby exempting undertakings with 1,000 or fewer employees.

• European Parliament Position (13 November 2025): Advocating a more restrictive scope, Parliament proposes thresholds of over 1,750 employees and net turnover of at least €450 million, alongside further delays for subsequent waves to reports from 2028.

  
  

As of 2 December 2025, trilogue discussions remain in progress, with a revised ESRS Exposure Draft anticipated on 4 December 2025. These negotiations may yield a hybrid threshold, potentially harmonizing the employee and turnover criteria across the institutions.

Pragmatic Implications for Large EU Undertakings

In light of the regulatory flux, undertakings must adopt a risk-averse approach to compliance planning for FY 2027.

Very Large Undertakings (e.g., >1,750 Employees and >€450 Million Turnover)

Entities surpassing the most stringent proposed thresholds remain unequivocally within the CSRD's purview across all institutional positions. Wave 1 entities persist with ongoing reporting, while Wave 2 counterparts should prepare for inaugural disclosures in FY 2027. Prudent counsel dictates proceeding with full ESRS implementation, undeterred by potential alleviations.

Mid-Sized Large Undertakings (e.g., 250–1,000 Employees, €50–€450 Million Turnover)

Although presently classified as large under extant law and thus in scope for FY 2027, these entities stand to be exempted under all simplification proposals due to sub-threshold employee counts. Nonetheless, until the final directive is adopted and transposed—expected in early 2026—compliance preparations should continue. Indirect pressures may arise from value-chain obligations imposed by larger in-scope clients

.

Transitional Band (1,000–1,750 Employees, >€50 Million Turnover)

This cohort faces the greatest uncertainty: inclusion under Commission and Council stances but potential exclusion per Parliament's position. Undertakings are advised to assume applicability, instituting requisite data governance and ESRS frameworks, while vigilantly monitoring trilogue outcomes.

Core Obligations for In-Scope Entities

Should an undertaking remain subject to the CSRD in FY 2027, compliance entails:

• Adherence to ESRS, encompassing double materiality assessments (impact and financial materiality) across general and topical standards. Sector-specific and third-country ESRS are postponed, potentially excised via the Omnibus.

• Integration of sustainability information within the management report, formatted for digital readability (e.g., XHTML/ESEF tagging).

• Procurement of limited assurance from statutory auditors, with reasonable assurance timelines deferred.

• Comprehensive coverage of governance, strategy, risk management, targets, metrics, and material value-chain elements, subject to possible scaling in the final reforms.

  
  

Concluding Observations

The CSRD exemplifies the EU's commitment to sustainable corporate governance, yet the impending simplifications underscore a balancing act between ambition and feasibility. As trilogue negotiations approach culmination, undertakings are encouraged to maintain agile compliance strategies, leveraging tools such as our firm's online product platform for ESG risk management. For tailored scoping assessments—considering employee counts, turnover, listing status, and parental structure—please contact DH Legal at our Amsterdam offices. We remain committed to guiding clients through these evolving regulatory landscapes.

This article reflects the legal position as of 2 December 2025 and is provided for informational purposes only. It does not constitute legal advice.den verstrekt. Het vormt geen juridisch advies.