CSRD, EU Taxonomy, CSDDD & financial regulation: How they connect

As the European Union intensifies its efforts toward sustainable development, the Corporate Sustainability Reporting Directive (CSRD) has become a cornerstone for integrating sustainability reporting across sectors. This article explains how the CSRD connects with other major EU laws and directives that govern environmental sustainability and corporate accountability.

On February 24, 2026, the Council of the European Union gave final approval to the Omnibus I package (in force since March 18, 2026). The CSRD now applies only to companies with more than 1,000 employees and over €450 million in turnover, while the CSDDD applies only to companies with more than 5,000 employees and over €1.5 billion in net turnover. EU Taxonomy reporting requirements were also significantly simplified. This article was published before the final decision, so the sections below do not fully reflect the current legal status in every detail. Read more in our Omnibus update.

CSRD and the EU Taxonomy: How the two frameworks work together

The EU Taxonomy Regulation acts as a classification system that defines which economic activities qualify as environmentally sustainable. It plays a key role in helping companies determine which activities can be labeled sustainable under the CSRD. Companies must include relevant EU Taxonomy information in specific sections of their annual reports.

The Omnibus I package also significantly simplified the Taxonomy reporting templates: the number of mandatory data points drops from 78 to 27 (a 66% reduction), disclosures on DNSH criteria and minimum safeguards are no longer required, and taxonomy-eligible activities only need to be reported above a 10% materiality threshold. Companies that fall outside the scope under the new CSRD thresholds can be explicitly exempted by member states from the Taxonomy reporting obligation for financial years 2025 and 2026.

European Climate Law and CSRD: Climate transition plans under ESRS E1

This law requires companies to develop and disclose climate transition plans that support the global goal of limiting warming to 1.5°C and achieving climate neutrality by 2050. Under the CSRD, companies must include these climate transition plans in their European Sustainability Reporting Standards (ESRS) E1 disclosures. A separate, standalone climate transition plan obligation under the Corporate Sustainability Due Diligence Directive (CSDDD) no longer exists since Omnibus I (see below).

CSRD and CSDDD: What changed after Omnibus I

The CSDDD requires companies to actively manage and report on the negative impacts of their business activities on the environment and society. Unlike the CSRD, which focuses on disclosing due diligence processes, the CSDDD obligates companies to take corrective action within their value chains.

The Omnibus I package significantly narrowed the scope of the CSDDD: instead of staggered thresholds, a single threshold has applied since March 18, 2026, covering companies with more than 5,000 employees and over €1.5 billion in net turnover. EU-wide harmonized civil liability was removed; sanctions are now governed by national law, capped at a maximum of 3% of worldwide net turnover. The obligation to implement a standalone climate transition plan under the CSDDD was also eliminated. Affected companies must transpose the directive into national law by July 26, 2028; the obligations apply from July 26, 2029.

CSRD and EU climate benchmarks (CTB/PAB)

The EU Climate Transition Benchmark (CTB) and the Paris-Aligned Benchmark (PAB) set minimum standards for activities considered sustainable and guide companies in aligning their operations with the goals of the Paris Agreement. These benchmarks are essential for companies reporting on climate-related activities under the guidelines of the European Financial Reporting Advisory Group (EFRAG).

CSRD and SFDR

The Sustainable Finance Disclosure Regulation (SFDR) requires financial institutions to disclose how they integrate sustainability factors into their investment decisions. The data behind these disclosures often relies on information provided under the CSRD, which makes accurate and comprehensive reporting essential.

CSRD and ESEF

With planned rollout by 2028, ESEF will centralize access to a broad range of financial and sustainability data, improving the visibility and accessibility of information. This includes the integration of the European Single Electronic Format (ESEF) and XBRL, which are essential for standardizing reporting formats under the CSRD.

Legal changes introduced by the CSRD

The introduction of the CSRD has driven far-reaching changes to existing EU directives and regulations. These changes are essential for implementing stricter sustainability reporting standards and ensuring their credibility. Since Omnibus I, these changes apply only to companies that meet the current CSRD thresholds (more than 1,000 employees and over €450 million in turnover).

Accounting Directive

The Accounting Directive was expanded to include sustainability-related disclosures. This change ensures that companies present not only their financial performance but also their environmental and social responsibility transparently. Such disclosures are increasingly important to investors, customers, and the public, as they enable a more holistic assessment of company activities.

Transparency Directive

The update established clear, standardized requirements for sustainability reporting. These standards promote consistency and comparability of reported information across industries and countries, which is essential for strengthening trust in the reported data.

Audit Directive and Regulation

This requires sustainability information to be verified by independent third parties. The measure aims to strengthen the integrity and objectivity of sustainability reports. The Omnibus I package scrapped the originally planned transition to reasonable assurance, so limited assurance remains the permanent standard. EU-wide harmonized assurance standards for this are expected by July 1, 2027, at the latest. In addition, a ban remains in place preventing audit firms from offering certain non-audit services, such as consulting, to the same clients for whom they provide audit services. This is intended to prevent conflicts of interest and safeguard auditor independence.

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