Sustainability reporting 2026: Obligations, deadlines and recommendations for all company sizes

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Current developments at EU level

As early as April 2025 – about two months after the presentation of the Omnibus-I package – Directive 2025/794 to postpone the initial application dates for sustainability reporting (“Stop-the-Clock” Directive) was adopted and published in the Official Journal of the EU. For companies in the current wave 2 (large companies that were not previously obliged to prepare a non-financial statement) and wave 3 (capital market-oriented SMEs), the CSRD reporting obligation was thus postponed by two years each to financial years beginning on or after January 1, 2027 and financial years beginning on or after January 1, 2028, respectively. The national implementation of the “Stop-the-Clock” Directive by the member states must take place by December 31, 2025. In Germany, the implementation of the CSRD itself is still pending, so that the “Stop-the-Clock” Directive is also very likely not to be implemented on time.

Until recently, it was unclear which size criteria would apply in the future to the CSRD reporting obligation and to reporting on the EU Taxonomy Regulation, as this was a separate legislative process. After the Council of the EU had already published its position on the EU Commission’s proposal in June 2025, the EU Parliament only voted on its final position on November 13, 2025. This was preceded by intensive discussions and strong controversies between the parliamentary groups and within the JURI Committee.

The trialogue procedure initiated on November 18, 2025 was finally concluded on December 16, 2025 with a final agreement between the Council and Parliament: In the future, only companies with more than 1,000 employees and more than €450 million in annual net sales revenue will have to submit a CSRD-compliant sustainability report including reporting in accordance with Art. 8 EU Taxonomy Regulation. The previous business conduct is hereby reduced by approximately 90%. The final text of the directive must still be published in the Official Journal of the EU and will then enter into force. Implementation by the member states is also required here. Further information on the future reporting obligations adopted can be found in this article.

Parallel to these developments, the revision of the European Sustainability Reporting Standards (ESRS) is taking place at EU level. The final drafts (Draft Simplified ESRS) were handed over to the EU Commission by the European Financial Reporting Advisory Group (EFRAG), which was commissioned with the revision, on November 30, 2025 and published on December 3, 2025. This was preceded by the publication of the initial drafts on July 31, 2025, a public consultation on them and the subsequent further revision of the standards. Overall, the drafts submitted provide for a reduction of the mandatory data points by 61% compared to the current Set 1 of the ESRS. The EU Commission plans to conduct another public consultation and publish the final revised standards as a delegated act by mid-2026. The new ESRS for CSRD-reporting companies is scheduled to start on January 1, 2027, possibly with an option for early application for financial years beginning on or after January 1, 2026. Detailed background information on the developments, the overarching changes and the contents of the new ESRS can be found in our series of articles.

In order to provide short-term relief to wave 1 companies with regard to the currently valid version of the ESRS, the EU Commission also published Delegated Regulation 2025/1416/EU on the extension or expansion of the ESRS transitional provisions, the so-called “Quick Fix”, in the Official Journal of the EU on November 10, 2025. Among other things, this allows companies to omit the information required under ESRS E4 (Biodiversity and ecosystems), ESRS S2 (workers in the value chain), ESRS S3 (affected communities) and ESRS S4 (consumers and end users) in the first three years of mandatory preparation of the sustainability report, even if this information is material. The regulation is directly valid for financial years beginning on or after January 1, 2025 and does not require implementation in national law.

The year 2025 has also brought some changes with regard to reporting in accordance with Art. 8 of the EU Taxonomy Regulation: On July 4, 2025, the delegated regulation on the adaptation of the previously applicable regulations was issued. The scrutiny period in which the Council of the EU and the EU Parliament can object to the regulation was extended at the request of the Parliament until January 5, 2026. If no objections are raised by then, the regulation will be published in the Official Journal of the EU. From this point on, the regulation would be directly valid in the member states and applicable to reporting for financial years beginning on or after January 1, 2025. However, the delegated regulation provides for an option to fall back on the old regulations in the first year of application.

Current developments at national level

Since the CSRD has not yet been transposed into German law, the NFRD still applies in Germany. Although a new draft bill was published in July 2025 in view of the infringement proceedings already pending against the Federal Government since September 2024, and the government draft for the implementation of the CSRD into German law in September 2025. However, it is currently foreseeable that the German law will no longer be adopted before December 31, 2025. This is mainly due to the fact that the German legislator wanted to await the conclusion of the EU negotiations on the Omnibus-I package, as otherwise a renewed adaptation of the implementation law would have been necessary. The implementation of the CSRD will now probably take place in the new year on the basis of the amended CSRD directive text published in the Official Journal of the EU.

Business conduct and recommendations for 2026

Group 1: Companies that fall under the NFRD

Since the implementation of the CSRD into German law is very likely not to take place before December 31, 2025, companies in Group 1 are still only obliged to submit a non-financial statement in accordance with §289c HGB. However, already for the reporting for the 2024 financial year, many companies voluntarily prepared a sustainability report with full or partial consideration of the ESRS. In any case, reporting in accordance with Art. 8 EU Taxonomy Regulation must also be integrated. Companies should include the expectations of stakeholders and in particular the capital market in their decision as to the form or framework in which the non-financial reporting for the 2025 financial year should take place.

For reporting on the EU Taxonomy Regulation, it is recommended to apply the simplifications associated with the new delegated regulation where it seems useful (unless the option to apply the previous regulations is to be exercised anyway). However, due to the remaining residual uncertainty, the process should be designed in such a way that it is possible to return to the previously applicable regulations at short notice.

In the 2026 financial year, it is also important to closely monitor the development of the ESRS. At the latest when the revised standards are published as a delegated act, it can be analyzed what effects will result for the own reporting. Based on this, already established or developing reporting processes must be adapted if necessary. In this process, the exchange with the auditor should be sought at an early stage. Overall, however, it can be assumed that the revision of the ESRS will bring noticeable relief for current ESRS reporters.

Group 2: Companies not previously subject to reporting with > 1,000 employees and > €450 million in annual net sales revenue

Companies that were not previously obliged to prepare a non-financial statement and employ more than 1,000 employees and have more than €450 million in annual net sales revenue should use the time gained by the “Stop-the-Clock” Directive in the 2026 financial year to build robust reporting structures for the CSRD reporting, which will be mandatory from the 2027 financial year. An early examination of the future reporting obligations not only ensures compliance with regulatory requirements. The sustainability strategy can also be credibly sharpened through the targeted definition of concepts, measures and goals – a contribution to the long-term safeguarding of competitiveness.

It is recommended to analyze the revised ESRS in detail, to carry out or update the double materiality assessment, to define processes and responsibilities and to carry out a test run for data collection. In this process, the auditor should be involved from the outset, as he can provide audit feedback on the essential milestones. Significant efficiency gains can be realized from this for the later mandatory audit, as the clarification of necessary process adjustments, unclear definitions or the expectations for documentation already takes place upstream. Likewise, the quality and informative value of the reporting increases through the consideration of the audit feedback.

Group 3: Companies with < 1,000 employees or < €450 million in annual net sales revenue

Companies that do not meet the new CSRD thresholds (> 1,000 employees and > €450 million in annual net sales revenue) are not expected to fall directly under the CSRD reporting obligation in the coming years. Nevertheless, the topic of sustainability reporting will not lose importance in the future – both in matters of financing and through indirect effects, for example via supply chain relationships with companies subject to reporting.

In the 2026 financial year, it is therefore recommended to address the question of whether voluntary sustainability reporting should take place in the future. When assessing this, companies should pay particular attention to the requirements of customers, suppliers and banks and at the same time take a long-term perspective. An early and voluntary examination of sustainability issues not only strengthens internal control capabilities and risk transparency, but also increases attractiveness to stakeholders such as investors, business partners and skilled workers. This makes sustainability reporting an important competitive factor – regardless of a legal obligation.

For voluntary reporting, it is recommended to use the Voluntary SME Standard (VSME), which was developed by EFRAG and published by the EU Commission as a recommendation in July 2025. Compared to the ESRS, the VSME standard is leaner and more practice-oriented, so that even smaller companies with few resources can build robust reporting structures – a pragmatic way to strengthen transparency and data quality, even without a legal reporting obligation.

Conclusion

The year 2026 will be a transition year in sustainability reporting for companies of all sizes. While larger companies should specifically align their processes with the future CSRD requirements, smaller companies have the opportunity to establish voluntary structures in order to be prepared for future requirements in a forward-looking manner and to signal transparency. It is also crucial to closely monitor developments at EU and national level in order to be able to react to new requirements in good time. Despite the regulatory uncertainties, it is becoming apparent that sustainability and transparency will remain important in corporate reporting – those who act now will secure long-term security and credibility.