Customers: In particular, companies that remain subject to the CSRD (keyword: trickle-down effect) are sending comprehensive questionnaires to their suppliers. Even though companies not subject to the CSRD are supposed to be protected by the so-called value chain cap, it is questionable how much customer requirements will actually be limited in practice.
CSRD-Drop-out 2026: Paths of sustainability after the legislative change
Content:
The Corporate Sustainability Reporting Directive (CSRD) has caused significant regulatory uncertainty in recent years. With the EU’s Omnibus Initiative (Directive (EU) 2026/470), a significant reduction in bureaucratic reporting obligations for companies has now been approved.
But what does this mean specifically for your company? And why should you still not put sustainability on the back burner?
Background: How has the scope of the CSRD changed?
Under the original CSRD, all companies meeting at least two of the following three criteria were to be required to report on sustainability:
- Employees: > 250
- Total assets: > €25 million (prior to the 2023 revision of the thresholds for determining size categories: €20 million)
- Revenue: > €50 million (prior to the 2023 revision of the thresholds for determining size categories: €40 million)
In addition, capital market-oriented SMEs fell within the scope of the directive. Regarding implementation obligations, a distinction was made over time between companies in the first wave (already previously required to report under NFRD), the second wave (large companies under CSRD), and the third wave (capital market-oriented SMEs).
The EU’s Omnibus Initiative was intended to reduce the bureaucratic reporting burden on companies. This included, among other things, the postponement of deadlines, the simplification and reduction of data points, and the adjustment of the thresholds at which companies are subject to the CSRD.
On February 26, 2026, Directive (EU) 2026/470 was published in the Official Journal of the EU, introducing changes to the regulations on sustainability reporting and corporate due diligence obligations. The directive entered into force on March 18, 2026.
Under this amendment, only companies that meet the following criteria are subject to reporting requirements under the CSRD:
- Employees: > 1,000
- Revenue: > €450 million
As a result, an estimated 80 percent of the companies originally affected are no longer subject to the CSRD. Even though national implementation into German law is still pending, companies now know with a high degree of certainty whether they are among those directly required to report.
In the accompanying guide, we show you how to implement the requirements in a structured manner.
Does no longer being subject to CSRD obligations mean “putting sustainability on hold”?
After a long period of regulatory uncertainty, companies now have clarity on whether or not they are subject to the reporting requirements. Does this mean that companies no longer required to disclose sustainability information under the CSRD can abandon all sustainability-related activities?
The answer to this question is a resounding no! Information will continue to be requested by various stakeholders:
Banks and investors: ESG data is increasingly being requested for credit risk analyses, their own regulatory disclosure obligations, and investment decisions.
Employees: There are transparency requirements from employees and job applicants, for whom sustainability is an important criterion when choosing an employer.
But even without this external pressure to disclose data, it is worth strategically incorporating sustainability – because those who integrate ESG issues early on ensure the long-term viability of their company.
After the CSRD drop-out: What’s next for sustainability reporting?
The elimination of the reporting requirement does not mean freedom from sustainability, but rather freedom to choose the path. Companies that wish to continue communicating ESG information now face a concrete question: Which standard is right for us? The answer depends on stakeholder expectations, internal goals, and the regulatory outlook.
What reporting options are available after opting out of the CSRD?
Reporting in accordance with the European Sustainability Reporting Standards (ESRS) is no longer mandatory for opt-out companies. Instead, various options from common frameworks are available:
- ESRS: Even though it is no longer mandatory, this standard can be applied voluntarily. The final adoption of the “simplified” ESRS is currently still pending.
- ESRS-based: If the full scope of the ESRS is too challenging, the ESRS can be used as a basis for preparing a report aligned with this standard.
- GRI: The Global Reporting Initiative standard is recognized worldwide and has been established in the world of sustainability reporting for many years.
- VSME: The Voluntary Standard for Small and Medium Enterprises was developed for SMEs and micro-enterprises not subject to the CSRD requirement. It is intended to provide them with a framework for the practical preparation of standardized and simple sustainability reports. By 2026, the EU is expected to issue a voluntary standard as a delegated act based on the VSME. According to the drafts published by the European Commission in May 2026, the VSME is to be converted into the “Sustainability Reporting Standard for Voluntary Use” (VS).
- VSME with ESRS content added: The VSME was originally developed for companies not subject to the CSRD. Accordingly, this included SMEs and micro-enterprises, but not large companies, which are now excluded from the scope of application due to the Omnibus Initiative. For this reason, it makes sense to use the VSME as a standard and supplement it with additional key data points from the ESRS.
- ISSB: The standard from the International Sustainability Standards Board is strongly oriented toward the needs of investors and financial markets.
Choosing the standard is only part of the task. What is crucial is establishing a holistic sustainability management system with a robust data foundation, integrating sustainability into corporate strategy, and taking concrete actions that are actually implemented. But how does one find the right path in practice?
Finding the Right Sustainability Standard: How companies reach a decision after the CSRD Drop-out
The selection of frameworks is vast, yet the decision must be made in a structured manner.
- The path to the right solution begins with a clear understanding of your own requirements: Which stakeholders have what requirements for ESG data? Which regulatory requirements apply today, and which might become relevant in the future? Internal goals and expectations are equally crucial.
- The next step is to gain an overview of existing standards: Which frameworks are available, and what are their respective advantages and disadvantages?
- Building on this, the strategic selection follows: Which standard best fits your individual requirements and goals?
- Once the decision has been made, it’s time for implementation: establishing efficient reporting structures, embedding them in existing processes, and creating a robust foundation for transparency and governance.
It should not be forgotten that the majority of companies have long since embarked on this path. In particular, most have already conducted materiality analyses. It is now rarely a matter of starting from scratch, but rather of leveraging what already exists and consistently building upon it.
Sustainability reporting in practice: typical challenges and how companies solve them
The right standard has been chosen, but implementation reveals where the real challenges lie. Regardless of the framework, there are topics where almost every company eventually needs support. Two of these come up particularly often: emissions accounting and climate risk analysis.
To create a comprehensive emissions inventory for sustainability reporting, it is essential to determine which activities and consumption patterns need to be considered, which raw data is usable, how to obtain all necessary data from all locations or departments, how this data can be processed and converted into emissions values, and where conversion factors can be researched. We demonstrate how this works in practice in our blog post. If additional requirements, such as those from the SBTi (Science Based Targets initiative), are added to the mix, even more aspects must be considered from the very beginning.
A climate risk analysis is a direct and practical method for specifically preparing companies for the concrete consequences of climate change. It enables the early identification of risks posed by heavy rain, heat, storms, or other climatic changes and the development of well-founded measures, thereby potentially avoiding significant costs. At the same time, it supports preparation for regulatory and market-driven changes – such as CO₂e pricing, new requirements, or altered supply chains – and thus helps proactively prevent revenue losses. It is not a complex specialized topic, but rather follows a structured approach that, for example, pools internal company knowledge in workshops, identifies relevant risks, and defines concrete, actionable measures.
These challenges are solvable, but they demonstrate that sustainability management is more than just filling out reporting templates. Those who approach it in a structured manner not only achieve compliance but also create genuine added value for the company. The decisive factor here is a reliable data foundation and the right tools.
Conclusion: Sustainability reporting with ID-Report
Regardless of which path you choose following the CSRD drop-out, our ID-Report software supports you in capturing your ESG data in a structured manner and analyzing it for your sustainability management and reporting.
Whether you’re deciding which path is right for your company or navigating the implementation and associated challenges – we’re here to support you!
Contact our experts and let’s work together to optimize your sustainability strategy.
FAQs:
1. Am I still required to report on sustainability after the CSRD opt-out?
That depends on the size of the company. According to Directive (EU) 2026/470, only companies with more than 1,000 employees and more than €450 million in revenue are directly required to report. Those that do not meet these thresholds fall outside the direct scope of application.
2. Do drop-out companies still have to provide ESG data?
3. Which sustainability standard is suitable for companies not subject to CSRD requirements?
4. Do we have to start from scratch with sustainability reporting?
5. What is the difference between a GHG inventory and a climate risk analysis?
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