The European Union's Climate Disclosure Rules: What You Need to Know

European Union climate disclosure at a glance

¹ Neither the Omnibus I Directive nor the Commission has published the number of companies in scope under the final thresholds.

The European Union rewrote the scope of its Corporate Sustainability Reporting Directive (CSRD) on 24 February 2026 through the Omnibus I Directive, which limits mandatory sustainability reporting to companies with more than 1,000 employees and net turnover above EUR 450 million, applying from financial years starting on or after 1 January 2027.

Companies in scope report against the ESRS, which the European Commission revised in a delegated act published on 21 September 2026, including gross Scope 1, Scope 2, and Scope 3 greenhouse gas emissions measured on GHG Protocol foundations. The EU regime is the widest climate disclosure mandate in force and the one most non-EU suppliers will meet through customer data requests.

Below: how the EU got here, what the rules require, who is in scope, and how to prepare.

How the EU got here: from NFRD to CSRD to Omnibus

The EU built its regime in four steps, and the 2026 rewrite changes who reports and how much, with the climate metrics left intact.

• 2014, the Non-Financial Reporting Directive. Large public-interest companies with more than 500 employees have disclosed environmental and social information since financial year 2017.

• 2022, the CSRD. Directive (EU) 2022/2464 replaced that regime with mandatory ESRS reporting, limited assurance, and a phased scope reaching listed SMEs. Wave one reported on financial year 2024.

• 2025, stop the clock. Directive (EU) 2025/794 of 14 April 2025 postponed the second and third waves by two years, to financial years 2027 and 2028.

• 2026, Omnibus I. Directive (EU) 2026/470, published 26 February 2026 and in force from 18 March 2026, raised the thresholds to 1,000 employees and EUR 450 million turnover, removed listed SMEs, deleted the third wave, capped what reporters can ask of suppliers with up to 1,000 employees, and kept limited assurance as the only assurance level. Member States transpose it by 19 March 2027.

What the EU's climate disclosure rules require

Companies in scope publish a sustainability statement in the management report, prepared under ESRS, digitally tagged, and covered by a limited assurance opinion.

• ESRS 1 and ESRS 2 (general requirements and general disclosures): the architecture. Companies run a double materiality assessment covering impacts on people and the environment and financial risks and opportunities, and report only material information. A company that concludes climate change is immaterial states the basis for that conclusion in its sustainability statement.

• ESRS E1 (climate change). Eleven disclosure requirements covering the transition plan for climate change mitigation, climate risk identification and scenario analysis, resilience, policies, actions and resources, targets, energy consumption and mix, gross Scope 1, 2, and 3 emissions, removals and carbon credits, internal carbon pricing, and anticipated financial effects.

• ESRS E1-8, the emissions requirement. Absolute gross emissions in tonnes of CO₂ equivalent, split into Scope 1 (with the share covered by the EU Emissions Trading System), Scope 2 on both location-based and market-based methods, and Scope 3 as a total and per significant category. Biogenic CO₂ is disclosed separately.

• The GHG Protocol as the measurement foundation. ESRS E1 application requirement 19 sets the reporting boundary at financial control as defined in the GHG Protocol Corporate Accounting and Reporting Standard (2004), with equity share or operational control as alternatives. Application requirement 20 directs companies to consider the GHG Protocol Corporate Standard when preparing emissions, with EN ISO 14064-1:2018 as an accepted alternative, and states that ESRS requirements take precedence where the two differ.

The revised standards, adopted on 3 July 2026 and published as Delegated Regulation (EU) 2026/1563 on 21 September 2026, cut mandatory datapoints by more than 60 percent and total datapoints by more than 70 percent, according to the Commission. The regulation enters into force on 10 November 2026 and applies to financial years beginning on or after 1 January 2027. Companies can apply the revised standards early for financial year 2026 and state in their sustainability statement which version they use.

The EU Taxonomy sits alongside

Companies subject to CSRD reporting also disclose under Article 8 of the Taxonomy Regulation (EU) 2020/852 the share of their turnover, capital expenditure, and operating expenditure that is taxonomy-eligible and taxonomy-aligned. Commission Delegated Regulation (EU) 2026/73, applying from 1 January 2026, lets companies leave activities out of the assessment where their combined turnover is below 10 percent of the turnover denominator, and allowed companies to keep the previous rules for financial year 2025. Taxonomy disclosures are tagged in the same digital format as the ESRS statement.

Who is in scope

The Omnibus I Directive sets one size test for EU companies, one for non-EU parents, and a transition rule for companies already reporting.

EU companies and groups

• Individual companies: net turnover above EUR 450 million and an average of more than 1,000 employees during the financial year, on the balance sheet date. Both conditions apply.

• Parent companies of groups: the same two thresholds on a consolidated basis. A financial holding company whose subsidiaries run independent business models can choose to omit consolidated sustainability information.

• Listed SMEs: removed from scope entirely.

Wave one companies during the transition

Large public-interest companies with more than 500 employees keep reporting for financial years 2024 to 2026 under the original scope. Those below the new thresholds fall out of scope from financial year 2027, and Member States can exempt them from reporting for financial years 2025 and 2026 when transposing the directive.

Non-EU parent companies

A company incorporated outside the EU reports at group level from financial year 2028 when its EU net turnover exceeds EUR 450 million and it has an EU subsidiary with net turnover above EUR 200 million, or, with no such subsidiary, an EU branch with net turnover above EUR 200 million. The EU subsidiary or branch publishes the parent's sustainability report.

Member State transposition

Every Member State was due to transpose the CSRD by 6 July 2024. On 26 September 2024 the Commission sent letters of formal notice to 17 Member States for failing to notify transposition measures. As at 17 September 2026, the EUR-Lex national transposition register shows measures communicated by 22 Member States and none from Germany, Spain, Luxembourg, the Netherlands, and Portugal. The Omnibus I amendments carry their own transposition deadline of 19 March 2027.

Supply-chain reach (Terrascope analysis, not a regulatory requirement). ESRS E1-8 asks reporters for Scope 3 by significant category, so every material supplier of a company in scope becomes a data source: food and agriculture producers supplying EU retailers and consumer goods groups, packaging and ingredient manufacturers in Southeast Asia, and logistics providers. The value chain cap, set by Delegated Regulation (EU) 2026/1560, limits what reporters can require from suppliers with up to 1,000 employees to the content of the voluntary standard, and suppliers of any size can still share more voluntarily.

Suppliers of cattle, cocoa, coffee, oil palm, rubber, soya and wood face a second EU data request from 30 December 2026: the EU Deforestation Regulation requires the geolocation of every plot those commodities came from, and the same plot data feeds the land-use-change emissions in a company's Scope 3 inventory.

Key dates and milestones

Comparative information is waived in the first year a company applies the revised standards where the metric changed, and waived entirely in the first year for companies reporting for the first time. For the first three financial years of reporting, a company that cannot obtain all value chain information explains the efforts made, the reasons, and its plans to close the gap.

Why this matters beyond the EU

1. Supply-chain ripple across Asia, Africa, and the Americas. EU consumer goods groups, retailers, and manufacturers source globally, so ESRS E1-8 turns into supplier data requests in Malaysia, Indonesia, Vietnam, West Africa, Brazil, and Mexico, whatever those suppliers' home regulators require. The revised ESRS 1 allows partial reporting scope for most metrics and specifically excludes gross Scope 1, 2, and 3 emissions from that relief.

2. Interoperability with the ISSB baseline. ESRS E1 and IFRS S2 share the GHG Protocol foundation, the four-pillar structure, and Scope 1, 2, and 3 metrics. A group reporting in Australia, Singapore, Japan, Hong Kong, or Mexico under IFRS S2 can reuse the inventory; the additional ESRS work is double materiality, the impact side of the assessment, and the transition plan disclosure.

3. The non-EU parent rule. From financial year 2028 the EU reaches parent companies in the United States, Switzerland, the United Kingdom, and Asia through their EU subsidiaries. A group with EUR 450 million of EU sales prepares one group-level sustainability report for publication by its EU entity.

How companies should prepare

Companies entering scope in financial year 2027 start measuring on 1 January 2027, and the greenhouse gas inventory is the slowest part to build.

• Establish your greenhouse gas inventory on the GHG Protocol. ESRS E1-8 wants Scope 1, dual-method Scope 2, and Scope 3 by significant category from year one. Companies reporting to CDP or under IFRS S2 have most of it; the gap is category-level Scope 3 with supplier data behind it.

• Map your value-chain exposure to EU reporters. If your customers exceed 1,000 employees and EUR 450 million turnover, their Scope 3 numbers include you. Suppliers with up to 1,000 employees can plan against the voluntary standard, which sets the ceiling on what customers can require.

• Build assurance-ready processes early. Limited assurance applies from the first report, and the EU assurance standards arrive by 1 July 2027. Methodology documentation, source-data traceability, and review controls belong in the measurement process so that the assurance provider's questions have answers.

• Build on the frameworks you already use. Task Force on Climate-related Financial Disclosures reports, CDP responses, and IFRS S2 disclosures map directly onto ESRS E1. Run the double materiality assessment first, because it decides which disclosure requirements apply.

How Terrascope can help

Terrascope's AI-powered platform helps companies operating in Europe move from baseline emissions data to audit-ready disclosures, including BBR VT, the Swiss-headquartered engineering group that screened 100 percent of its suppliers and obtained primary data from half of them to meet EU carbon border reporting requirements.

• Scope 1, 2, and 3 emissions measurement. Corporate carbon footprinting pulls emissions data from your source systems monthly, so your inventory stays current across every entity in the consolidation and every Scope 3 category ESRS E1-8 asks for.

• Audit-ready reporting. Audit Trail makes every figure traceable from data entry to disclosure, with assurance-provider access built in, so the limited assurance engagement starts from evidence that already exists.

• Supply-chain intelligence. Supplier engagement shows where your Scope 3 hotspots sit before the materiality assessment, so supplier engagement targets the categories that carry the emissions.

• Multi-framework alignment. Climate reporting drafts your climate disclosures from your measured data, reviewed by your team, with ESRS E1 and IFRS S2 built from the same inventory.

Frequently asked questions

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Are you ready to get ahead of the EU's ESRS requirements? Speak to a Terrascope expert and see how we help companies move from baseline emissions data to audit-ready disclosures.