Quick Answer ā European Sustainability Reporting Standards and UK Impact
What are European Sustainability Reporting Standards?
ESRS Set 1 comprises 12 standards developed by EFRAG and adopted by the European Commission3 on 31 July 20231:
Cross-cutting standards
- ESRS 1: General requirements for disclosure of sustainability-related financial information
- ESRS 2: General disclosures (mandatory for all companies)
Environmental standards (E1-E5)
- ESRS E1: Climate change
- ESRS E2: Pollution
- ESRS E3: Water and marine resources
- ESRS E4: Biodiversity and ecosystems
- ESRS E5: Resource use and circular economy
Social standards (S1-S4)
- ESRS S1: Own workforce
- ESRS S2: Workers in the value chain
- ESRS S3: Affected communities
- ESRS S4: Consumers and end-users
Governance standard
- ESRS G1: Business conduct
All standards except ESRS 2 are subject to materiality assessment3.
ESRS is built on double materiality principle ā considering both financial materiality and impact materiality.
CSRD Timeline Post-Omnibus I
Original CSRD adopted: December 2022
ESRS Set 1 adopted: 31 July 20231
FY2024 first reporting: Large public-interest entities (>500 employees) under original thresholds
Wave 1 continues: NFRD entities (>500 employees) continue through FY2025/2026 reports unless Member State exempts3
Omnibus I enters into force: 18 March 20262
Wave 2 postponed: Originally FY2025, now FY2027 ā first reports 20282
Wave 3 removed: Listed SMEs no longer in mandatory scope, encouraged to use voluntary VSME-based standard2
Wave 4 delayed: Non-EU groups (>ā¬450m EU turnover) ā FY2028 becomes FY20292
What Omnibus I Changed
Directive (EU) 2026/470 ("Omnibus I") represents the most significant change to EU sustainability reporting since CSRD adoption2.
The headline change: scope collapsed from approximately 50,000 companies to approximately 5,000 ā roughly 90% (ā42,000) fall out of mandatory scope2.
Revised thresholds
EU entities in scope if BOTH criteria met:
- >ā¬450 million net turnover (was >ā¬40 million)
- >1,000 employees (was >250)
- Both thresholds must be exceeded (was either/or)
Non-EU groups:
- Parent company: >ā¬450 million EU-generated turnover
- Consolidated EU operations threshold raised significantly
Waves reshaped
- Wave 1 (NFRD, >500 employees): continues through FY2025/2026 reports
- Wave 2: postponed two years ā first reports 2028 (was 2026)
- Wave 3 (listed SMEs): removed from mandatory scope ā voluntary VSME standard encouraged
- Wave 4 (non-EU >ā¬450m EU turnover): FY2028ā2029
What did NOT change
- Double materiality principle maintained
- Consistency and comparability requirements preserved
- Assurance principles unchanged
- ESRS framework architecture retained
Additional developments
- ESRS being simplified via Delegated Act expected summer/Q3 2026 (apply FY2027 onward)
- CSDDD also revised (5,000 employees AND >ā¬1.5bn thresholds)
- Risk-based approach adopted across multiple frameworks
European Sustainability Reporting Standards vs UK SRS Comparison
| Aspect | ESRS / CSRD | UK SRS |
|---|---|---|
| Authority | European Commission / EFRAG | DBT (UK) / FCA |
| Standards count | 12 (Set 1) | 2 (S1, S2) |
| Scope basis | Size + EU presence | UK listing status |
| Companies affected | ~5,000 EU (post-Omnibus I) | approximately 500 UK |
| Materiality | Double (financial + impact) | Single (enterprise value) |
| Baseline | Independent ESRS framework | IFRS S1/S2 with 6 UK amendments |
| Key difference | Double materiality retained | Single/financial materiality |
| Assurance | Limited assurance (mandatory) | ISSA (UK) 5000 (proposed) |
| Status | In force (phased FY2024+) | UK SRS S2 proposed 2027 |
| UK applicability | EU operations only | UK listed companies |
| Scope reduction | 90% reduction via Omnibus I | No threshold changes |
Do UK Companies Need to Comply with ESRS?
Direct scope: Only via EU operations meeting post-Omnibus I CSRD thresholds (BOTH 1,000+ employees AND ā¬450 million+ turnover)2.
Indirect scope: Large UK groups with substantial EU subsidiaries meeting the revised thresholds may need CSRD reporting at EU subsidiary level.
Voluntary adoption: Any UK company can adopt ESRS voluntarily, though UK SRS Thresholds apply for UK-listed companies under FCA regulation4.
Dual-listed considerations: UK companies with US/EU dual listings may face multiple frameworks depending on jurisdiction-specific requirements.
UK SRS vs ESRS for Global Groups
Large UK groups operating across multiple jurisdictions face complex reporting boundary decisions:
UK parent company: Subject to UK SRS Thresholds (approximately 500 companies from 20274)
EU subsidiaries: Subject to CSRD if meeting post-Omnibus I thresholds (BOTH 1,000+ employees AND ā¬450 million+ turnover2)
Disclosure equivalence: No automatic mutual recognition between UK SRS and ESRS frameworks ā separate compliance required for each jurisdiction
Practical guidance: Groups often adopt common methodology and data systems while preparing jurisdiction-specific disclosures to meet both UK SRS and ESRS requirements
What are European Sustainability Reporting Standards?
ESRS are 12 disclosure standards adopted by the European Commission on 31 July 2023 under the Corporate Sustainability Reporting Directive (CSRD). They cover environmental (E1-E5), social (S1-S4), and governance (G1) topics, plus cross-cutting requirements (ESRS 1 and 2).
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is EU legislation requiring large companies to report sustainability information using ESRS standards. Post-Omnibus (2026), scope is reduced to companies with 1,000+ employees and ā¬450 million+ turnover.
Do UK companies need to comply with CSRD?
Not directly post-Brexit. UK companies are only subject to CSRD if they have EU operations (subsidiaries or branches) meeting the post-Omnibus thresholds. UK-listed companies follow UK SRS under FCA CP26/5 instead.
How is CSRD different from UK SRS?
CSRD uses double materiality and applies to EU companies above size thresholds. UK SRS uses single materiality (enterprise value) and applies to UK premium-listed companies (~500) regardless of size. Different authorities: European Commission vs UK DBT/FCA.
What did Omnibus I change to CSRD?
Directive (EU) 2026/470 ("Omnibus I") entered into force 18 March 2026 and reduced scope from ~50,000 to ~5,000 companies (~90% reduction). Revised thresholds require BOTH >ā¬450m turnover AND >1,000 employees. Wave 2 postponed two years, Wave 3 removed from mandatory scope.
When does ESRS apply from?
ESRS applies from FY2024 for large public-interest entities under original thresholds. Post-Omnibus I: Wave 1 continues, Wave 2 (revised thresholds) from FY2027, Wave 3 removed from mandatory scope, Wave 4 (non-EU groups) from FY2029.
