The European Union has emerged over the past decade as a global regulatory leader in sustainability governance, particularly through the development of mandatory corporate disclosure frameworks. At the centre of this architecture lies the Corporate Sustainability Reporting Directive (CSRD) — one of the most ambitious regulatory initiatives worldwide aimed at integrating environmental, social, and governance (ESG) transparency into corporate accountability and financial decision-making.
Yet by 2025–2026, the CSRD is no longer simply a technical reporting framework. It has become a contested political and economic instrument, situated at the intersection of climate ambition, regulatory competitiveness, and financial system transformation.
The CSRD (Directive (EU) 2022/2464) represents a structural reform of corporate disclosure obligations in Europe. It replaces and significantly expands the earlier Non-Financial Reporting Directive (NFRD), aiming to improve the quality, comparability, and reliability of sustainability information provided by companies.
Its regulatory logic is clear: financial markets cannot efficiently allocate capital to sustainable activities without standardized, decision-useful data. Accordingly, the directive introduces:
- standardized reporting requirements (via European Sustainability Reporting Standards — ESRS),
- mandatory external verification,
- expanded coverage across sectors and jurisdictions, and
- detailed disclosure of environmental, social, and governance impacts, risks, and dependencies.
The directive also embeds the principle of double materiality, requiring firms to report both how sustainability issues affect financial performance and how corporate activity affects society and ecosystems — a major conceptual shift in corporate accountability.
More broadly, the CSRD forms part of the EU’s sustainable finance strategy and complements instruments such as the EU Taxonomy and corporate due diligence initiatives.
Implementation has not been uniform across Member States. For example, legal professionals have noted delays or uncertainties in national transposition, including in Spain, generating operational ambiguity for companies and auditors.
Since 2024, the European Commission and Parliament have increasingly framed sustainability regulation within a broader competitiveness agenda. This has resulted in proposals to simplify or recalibrate several Green Deal-related regulatory instruments, including the CSRD.
A central element of this shift is the so-called Omnibus reform packages, which aim to reduce administrative burdens and streamline sustainability rules. These reforms may include:
- raising reporting thresholds,
- postponing implementation deadlines,
- narrowing the scope of firms subject to disclosure obligations, and
- simplifying reporting requirements for SMEs.
In some policy revisions, reporting obligations are increasingly concentrated among very large companies — for example, those exceeding thresholds such as 1,000 employees and €450 million turnover in certain proposals.
Moreover, some implementation phases have been delayed in practice or by legislative adjustments, pushing reporting obligations for certain company categories further into the late 2020s.
- Competing Political and Economic Narratives
The evolving trajectory of the CSRD reflects a broader ideological divide over sustainability regulation in Europe.
The competitiveness and simplification perspective
Many policymakers and business stakeholders argue that sustainability reporting has become overly complex and administratively burdensome. Within this view:
- regulatory simplification is necessary to preserve European industrial competitiveness,
- excessive reporting costs may disadvantage EU firms globally, and
- proportionality should guide the extension of ESG obligations.
Some political actors also frame regulatory adjustment as necessary to respond to macroeconomic pressures, including energy prices and geopolitical competition.
The environmental and governance perspective
Conversely, environmental organizations, civil society groups, and many sustainability scholars warn that regulatory rollback risks undermining Europe’s climate leadership.
Critics argue that weakening disclosure obligations could:
- reduce transparency in capital markets,
- enable greenwashing,
- weaken accountability for environmental impacts, and
- slow the reallocation of capital toward sustainable activities.
From this standpoint, disclosure is not merely bureaucratic compliance but a systemic governance tool essential to climate transition and financial stability.
These opposing positions reflect a deeper tension within EU governance: the need to reconcile ecological transformation with economic competitiveness. The CSRD has therefore become emblematic of the broader evolution — and possible recalibration — of the European Green Deal.
The EU’s Position in the Global Sustainability Governance Landscape
Even amid regulatory recalibration, the EU remains the most advanced jurisdiction in mandatory corporate sustainability reporting. The CSRD continues to influence global standards, including interoperability debates with IFRS sustainability disclosures and international ESG frameworks.
However, the direction of European policy now appears less linear than during the initial Green Deal period. Instead of continuous regulatory expansion, the EU is entering a phase of institutional consolidation and political renegotiation.
As of 2026, the Corporate Sustainability Reporting Directive stands at a critical juncture. It has already transformed the architecture of corporate disclosure in Europe, embedding sustainability within financial governance and regulatory oversight. Yet its future trajectory is shaped by competing priorities: climate ambition, economic competitiveness, administrative feasibility, and political consensus.
Rather than signaling retreat or triumph, the current phase reflects regulatory maturation. The CSRD is evolving from a visionary policy instrument into a negotiated institutional framework — one that will define how European finance mediates the relationship between economic activity and ecological systems for decades to come.
Sources
- European Union Directive (EU) 2022/2464 on sustainability reporting.
- UN Global Compact Spain – CSRD regulatory overview.
- ICAC (Spain) sustainability reporting guidance.