CSRD

What it is

The Corporate Sustainability Reporting Directive (CSRD) entered into force in January 2023 as the successor to the Non-Financial Reporting Directive (NFRD). It requires in-scope companies to disclose detailed environmental, social, and governance (ESG) information in their annual management reports, following mandatory European Sustainability Reporting Standards (ESRS). The directive establishes a double materiality requirement, obliging companies to report both on how sustainability issues affect the business financially and on the company's own impacts on people and the planet.

Omnibus I (Directive (EU) 2026/470, in force 18 March 2026) significantly restructured the CSRD's scope. Omnibus I replaced the original phased architecture with a dual threshold: both more than 1,000 employees AND more than €450 million net turnover must be met simultaneously. A company satisfying only one threshold is now out of scope. Member states have until 19 March 2027 to transpose the amended directive, with first mandatory reports covering financial year 2027 due in 2028.

Who it affects

The amended scope targets companies exceeding both thresholds: more than 1,000 employees and more than €450 million net turnover, both conditions required. This means a fashion conglomerate with 2,000 employees but €300 million turnover is now exempt, as is a high-revenue brand that relies on a small direct workforce through outsourced manufacturing. Importantly, the employee count refers to the company itself, not its supply chain workforce. EU-listed SMEs are no longer subject to proportionate CSRD standards under the revised framework.

The directive also applies to non-EU companies with more than €450 million net turnover generated in the EU and at least one EU subsidiary or branch meeting size criteria. Fashion brands headquartered outside the EU, including major US and Asian groups, may still fall within scope if their EU operations are sufficiently large. Most mid-size and independent fashion brands are now exempt from CSRD reporting obligations under the Omnibus revision.

Key economic implications

For the large fashion groups that remain in scope, CSRD compliance represents a significant operational investment. Producing ESRS-aligned reports requires systematic data collection across owned operations and, depending on materiality assessments, extending data requests to supply chain partners. Consulting, auditing, and software costs for first-cycle reporting have been estimated in the €1 to 5 million range for complex multi-brand groups, with ongoing annual costs lower. The shift to a simplified ESRS standard (due September 2026) will reduce the number of required datapoints by approximately 61%, which narrows costs but does not eliminate the infrastructure investment required.

Beyond direct compliance costs, CSRD shapes financial market dynamics. Major institutional investors and lenders increasingly require ESG data for portfolio assessment and lending decisions. Companies outside the CSRD threshold will face informal pressure to produce equivalent disclosures if they access capital markets, seek acquisition financing, or supply to in-scope retailers who pass data requests down their supply chains. The Omnibus revision narrows mandatory coverage but does not eliminate this commercial transmission effect.

A secondary effect of the Omnibus narrowing is reduced supply chain visibility for the fashion sector overall. Under the original CSRD architecture, value chain reporting obligations would have generated ESG data on mid-tier and smaller suppliers. Under the revised regime, those data flows are substantially curtailed. Regulators and analysts have flagged this as a risk to the EU's broader sustainability transition objectives, particularly for biodiversity, water, and labour rights in fashion supply chains where impact is concentrated upstream.

Where things stand

The Omnibus I amendment is in force as of 18 March 2026. Member states have until 19 March 2027 to transpose the revised thresholds into national law. Companies that had already begun CSRD compliance preparations under the original scope should audit their revised position against the dual threshold before committing further investment. The simplified ESRS delegated act, due by 18 September 2026, will determine the precise content requirements for in-scope reports and is the next key inflection point for corporate sustainability reporting.

Official sources

• Directive (EU) 2026/470, Official Journal 26 February 2026 — https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202600470