The past months’ news over CSRD’s journey has quite a few times underlined Europe’s gloomy positioning on its sustainability ambitions. Too many questions, even more undefined answers, and a story that has presented Europe as preferring to conveniently avoid taking a responsible stand on how sustainability should be treated.
In reality, this extensive CSRD revision and Green Claims Directive silencing are grounded in something that might make more sense, revealing that it aims to become more focused, not less.
In light of the latest announcements on CSRD and greenwashing enforcement, we explain why these rules continue to play an important role for businesses and how it is much harder to ignore now.
The Omnibus saga inaccurately led many companies to believe that the directive’s streamlining due to complexity would create opportunities for evasion, whereas the rules are now, in fact, harder to avoid than before. Moreover, the simplification and extension of the deadlines might have slowed the urgency, but they can’t eliminate the underlying demand.
Following its original adoption in 2022, the revised CSRD entered into force on March 18th, 2026, with its final text. According to the headline, which is rather major considering the size of the reduction, the number of companies that now fall under CSRD is approximately 10,000. The original thresholds (€50 million in net turnover, a €25 million balance sheet, and 250 employees) are no longer applicable, excluding obligations for a rough 80% of companies. Now only companies with over 1,000 employees and more than €450 million in net annual turnover must prove compliance. Additionally, listed SMEs, which were supposed to start their report from 2026, are entirely out of scope.
Accordingly, changes also affected the waves of reporting companies:
Wave 1: Large public interest entities with 500+ employees that already reported for FY2024; apart from some time flexibility, they remain in scope.
Wave 2: Large unlisted companies had received extensions in deadlines, and their first reports should begin in fy2027 and be published in 2028.
Wave 3 listed SMEs: They are no longer included in the mandatory report.
The revised ESRS Standards, which will be finalized in September 2026, also face a significant reduction in the mandatory data points—more than 50%—as they are now roughly 430, while 70% of the data points will be removed from EU Taxonomy reporting templates.
The first Omnibus announcement in February 2025 reverberated across the business world, especially in the ESG field, leading to polarized views over the timing and aim of the proposal. The European Commission deemed the proposal necessary, and its supporters viewed it as a relief from burdens, yet many critics framed it as a repeal of Europe’s flagship reporting framework.
Despite the numerous doubts, debates, and public conversations over the revision, it is worth highlighting the points that remain and are of particular importance to companies undergoing the corporate reporting process.
The original points were around 1100 but after the sweeping reduction, they are now 430. Although the cut seems extreme and at first sight more convenient, there is much more nuance to this. These remaining points are solid, better chosen, and more materially relevant. They signal that companies have tighter margins for hiding nonessential information compared to the previous maximalistic, more noisy framework, with no voluntary lining.
The principle stays intact and more centralized under the revised ESRS. Companies that must comply with CSRD must still assess both how sustainability risks affect their business and how it affects society and the environment, and this is a critical requirement that hasn’t loosened. Its importance lies in the fact that now assessments are more carefully examined, revealing the companies’ most weighty data points and how aware they are of their risk exposure.
External Assurance
The more qualitative the materiality assessment, the better it is accountable to third-party assurance. This requirement has not changed for sustainability disclosures that are subject to independent verifications, a significant bar during the whole process and newly introduced for most global peers. Scrutiny over fewer, well-chosen data points results in less uneven results compared to disclosures that would otherwise risk being weakened due to unverified volume.
Before the Omnibus, the companies in the CSRD scope could ask their smaller suppliers to provide sustainability data and comply with them. Nonetheless, even if suppliers (with fewer than 1000 employees) are not legally compelled to provide on demand, they risk damaging their competitive and commercial profile in the market.
For example, if a food supplier or a smaller manufacturer cannot have structured sustainability information in place when their largest customers must be credible with their Scope 3 emissions and supply chain human rights risks, they should expect to be excluded as a non-trusted data source. This situation directly affects larger companies, which will strategically start seeking more engaged suppliers to avoid gaps in their sustainability transparency.
At this stage, smaller suppliers may face deprioritization and eventual commercial exposure and lack of margin protection, regardless of changes in the legal framework.
Although European news implies the opposite, in the rest of the globe, with the exception of the US SEC that is stepping away from the mandatory climate disclosure rule, the ISSB’s standard is getting support quickly. Singapore, Australia, Hong Kong, Mexico, and others are rolling out mandatory ISSB-aligned disclosures. Brazil and South Africa are following. California’s SB 253 obligations remain in force and require Scope 1 and 2 emissions reporting for companies with over $1 billion in California revenues, with Scope 3 starting in 2027.
The result is that large multinationals still face a complex, multi-jurisdictional reporting environment. The EU simplifying its framework doesn’t simplify that reality. If anything, it adds interoperability challenges: companies now need to navigate CSRD’s double materiality framework alongside ISSB’s single materiality approach, with the two not always translating neatly.
Another debate that took place throughout much of 2025 centered on the EU Green Claims Directive, which ultimately never became law. However, greenwashing is not set to disappear from the sustainability landscape, as another law has been quietly taking shape and will be formally implemented on September 27, 2026.
According to the Empowering Consumers for the Green Transition Directive (ECGT, Directive 2024/825), after the proposed date, businesses will no longer be able to evade responsibility for their environmental claims and sustainability labels. This binding law protects consumers, while national authorities even have the power to impose penalties where violations are found, with fines that can reach up to 4% of annual turnover. Misleading practices will no longer be an option, and bans and prohibitions will be directly tied to how companies structure their sustainability communications and environmental performance.
As enforcement takes shape and legal consequences for green claims become documented, a paradoxical trend is gaining ground. Many companies strategically choose to keep quiet on their sustainability programs. The reason for this silence is not a lack of confidence in their sustainability programs, but rather a desire to avoid including imprecise information in their communications that could cost them more than the effort they invested.
More specifically, “greenhushing” has implications for the market that are potentially worse than greenwashing, which represents the opposite extreme. The companies that disclose their ESG performance send a strong signal to investors, buyers, and policymakers. But when they choose to conceal any significant investments in emissions reductions, supply chain due diligence, and biodiversity programs, they risk losing their competitive edge.
The best practice for the companies is not to avoid communication but to position themselves in the new enforcement environment with sustainability claims that are built on measurable and clear data with independent verifications. Only vague claims, such as “our packaging is sustainable” or “our products are green,” pose risks.
CSRD and greenwashing enforcement are arriving simultaneously, and they reinforce each other in a specific way.
The CSRD changes concentrate formal reporting obligations on the largest companies. The greenwashing rules apply to everyone making environmental claims, regardless of size, sector, or whether you’re in CSRD scope. The effect is that mid-sized companies that believe they are immune from mandatory ESG reporting may find themselves facing significant enforcement exposure if their marketing or procurement communications include unsubstantiated green claims.
Whatever the company’s size, there are a few things that should be considered.
Audit claims. Companies should go through their website, product packaging, investor materials, and supplier communications. Flag every environmental claim and ask if the data are backed up, if they are specific, and if they have verifications. There is no room for dubious answers. Otherwise, they should make the necessary changes before September.
Review offset-based positioning. The sustainability narrative that leans heavily on carbon offsets to support a neutrality or net-zero claim must be repositioned and legally reviewed.
Don’t assume the value chain cap protects them commercially. The CSRD cap protects smaller companies from exceeding VSME standards in formal reporting requests. It doesn’t protect them from a large customer walking away because they can’t provide the emissions data they need to meet their reporting obligations.
Do not go quiet without careful thought. Greenhushing creates its own risks, such as commercial, reputational, and, in some cases, legal (silence about known material ESG risks can itself create liability). Communicating less isn’t the same as being safer.
The EU has not abandoned its sustainability ambitions. What it has done is accept that the original scope of the CSRD was too broad to be practically enforceable at scale and that flooding markets with unverified claims was undermining the very consumer trust that a functioning sustainable economy depends on.
The regulatory logic now is fewer companies reporting but reporting better, and everyone making green claims, doing so honestly or not at all.
For businesses navigating this landscape, the challenge isn’t that the rules are retreating. It’s that they’re consolidating, sharpening, and, from September 2026, actively enforcing it. The window for getting this right is open, and it won’t stay open forever.
