While 85% of companies have recently been let off the hook by the EU, the remaining giants in agribusiness now face harder reporting rules with less supplier cooperation than ever before. In this article we investigate EU’s sustainability reporting regulation and the impacts on the companies affected by it.
The Context
The EU’s sustainability reporting regulations build on the Accounting Directive of 2013 (2013/34/EU). The first such regulation, the Non-Financial Reporting Directive (NFRD) (amendment 2014/95/EU) added a small section to the Accounting Directive requiring “non-financial statements.” Under this regulation, affected companies had to track their sustainability data from 1 January 2017 and report annually in subsequent years.
The NFRD was the European Union’s first major attempt at making sustainability reporting mandatory. It laid the groundwork, but it was often criticised for being too vague and having too many loopholes:
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Companies could choose how they reported. They could use a PDF, a separate report, or a few pages in their annual report. This led in some cases to “greenwashing” rather than presentation of meaningful data.
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There was no mandatory audit. Unlike associated financial reports, NFRD reports didn’t require a third-party auditor to sign off on the data.
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It covered roughly 11,700 “Public Interest Entities” across the EU (listed companies, banks, and insurance firms) with more than 500 employees; but it ignored thousands of large private companies and smaller listed firms that had large climate impacts.
The Corporate Sustainability Reporting Directive (CSRD, amendment 2022/2464) replaced the NFRD sections with much longer, more detailed requirements for sustainability reporting. Under this regulation, affected companies had to track their data from 1 January 2024 and report from 2025.
The company thresholds in the CSRD changed. Companies with two out of three of the following attributes were now caught by the regulation: more than 250 employees, a much-reduced net turnover of over €50 m and/ or a balance sheet total of more than €25 million. As a result, the number of companies reporting increased to over 50,000. Auditing became mandatory. The reporting framework changed from being flexible (companies could pick from various reporting standards) to mandated: now, all companies had to use the European Sustainability Reporting Standard (ESRS).
Very recently (March 19, 2026), a new Directive (EU 2026/470) officially entered into force. It significantly changed who has to report under the CSRD. The new thresholds capture companies with more than 1,000 employees AND a turnover of more than €450 m. There is no balance sheet threshold. The hike in thresholds means that about 85%–90% of the companies that were going to be in scope for 2026 have now been removed from mandatory reporting. This is part of the “Omnibus I Simplification Package” (Omnibus I Directive (EU) 2026/470) to reduce the administrative burden on business.
European Sustainability Reporting Standard
The ESRS is effectively the technical manual for the CSRD. It describes what should be done and how it should be done in order to comply with the regulation. The first version of the ESRS (known as Set 1) was finalised and adopted as a Delegated Regulation in July 2023 (here: https://xbrl.efrag.org/e-esrs/esrs-set1-2023.html). Large companies affected by the regulation have been using these standards for the 2024 financial year and have already filed their reports in 2025.
ESRS Set 1 includes the core set of 12 standards, relating to general information, environmental information (climate change, pollution, water and marine resources, biodiversity and ecosystems, resource use and circular economy), social information and governance information. The aim of the ESRS is to ensure the reporting company discloses material impacts, risks and opportunities in relation to the environmental, social and governance sustainability matters. A sustainability matter is “material” when it meets the criteria defined for impact materiality or financial materiality, or both (referred to as “double materiality”).
In late 2025, the EU Commission ordered EFRAG to simplify the standards. EFRAG published its revised version in November 2025 (the revisions for E1 Climate Change can be found here: https://www.efrag.org/sites/default/files/media/document/2025-12/November_2025_ESRS_E1.pdf). The technical advice produced by EFRAG in these documents has been passed to the EU Commission. The current status (at the end of March 2026) is that the EU Commission is turning the draft into a Delegated Act, which is expected to be finalised and published in the Official Journal by mid-2026. These simplified reporting standards (amended Set 1) are expected to be required for financial years beginning on or after January 1, 2027, though companies may be given the option to use them voluntarily for their 2026 reports.
In 2026, the reporting requirements move to a two-tier system. Large companies exceeding the higher thresholds mentioned above must follow the amended Set 1 (the simplified universal baseline) alongside a newly adopted, sector-specific Set 2. While the reporting burden has been simplified for the companies (the number of mandatory data points has been cut by around 60%), a new value chain cap prevents them from demanding these data from their smaller suppliers, now referred to as ‘Protected Undertakings.’ This creates a data gap that third-party primary data providers will need to fill.
Disclosure requirements under the new ESRS E1 Climate Change and their implications
The disclosure requirements (DRs) in ESRS E1 relate to a) strategy, b) impact, risk and opportunity management and c) metrics and targets, for both climate change mitigation and adaptation. In ESRS E1, mitigation is essentially an accounting exercise, while adaptation is more of a forecasting exercise. Mitigation reporting is about gathering data from receipts and meters and applying them in an established methodology (the GHG Protocol); adaptation reporting better resembles looking into a crystal ball. As of early 2026, with the amended ESRS E1 now in full swing, the gap between the two has become even more apparent.
Adaptation is about how the climate affects a business and how it builds its resilience. This requires the reporting company to work with uncertainty. Key requirements involve identifying physical risks (such as floods, heatwaves) across at least two climate scenarios and then anticipating their financial effects. Quantifying the potential financial hit (or boost) to assets and revenues before and after adaptation actions is a particular challenge. The calculations are non-linear and probabilistic, nothing like counting carbon.
For an agribusiness, it involves modelling a physical hazard (e.g. a drought), an asset’s sensitivity to that hazard (e.g. a specific crop from a particular source used in a company’s supply chain) and the asset’s adaptive capacity (e.g. access of the producer of that crop to irrigation). This modelling exercise is practically impossible to do without access to primary data.
In ESRS E1, the burden of proof is high. Even under the simplified rules, if a company claims climate change is not material, it has to provide a detailed explanation for this conclusion, which may still require primary data.
Auditors of companies affected by the regulation are now moving from a check-box approach to “limited assurance.” This means they need to see the primary data from which conclusions are drawn. Without these data, or an acceptable rating known to be based on primary data, a company’s auditor may “qualify” (i.e. red flag) the report.
It is worth noting that the CSRD requires reports to be digitally tagged. This means that a company’s resilience rating or score will be machine-readable by AI and investor or hedge fund algorithms. It adds a significant reputational risk element and underlines the importance of companies using good primary data.
How Resilience Constellation can help
Resilience Constellation’s specialises in measuring the resilience of farmers and agribusinesses to climate change and in identifying adaptation solutions. We can help companies access the primary data required for disclosures. We are particularly well placed to assist with the following:
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DR E1-2 (new version) Climate Risks and Scenario Analysis: We can measure climate physical risks, their intensity and frequency for multiple locations in multiple countries,
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DR E1-3 (new version) Climate Resilience: We can use our Climate Resilience Rating methodology to assess the resilience of crops in different supply chains.
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DR E1-5 (new version, ex E1-3) Actions and Resources: We can analyse the problems, identify and, most importantly, price the adaptation actions that can be used to reduce supply and supply chain risks.
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DR E1-11 (new version, ex E1-9) Anticipated Financial Effects: We can do the maths behind the cost of climate hazards on the supply chain with and without adaptation measures to determine the effects on balance sheet and income statements.
John Mayhew
COO Resilience Constellation