Sustainability strategy and reporting: what still applies and where it pays off

Answer customer and bank questions once, from one data set, and invest only where sustainability lowers cost or risk or wins customers.

In this topic: Strategic themes 6

Fewer firms must report, yet the questions keep coming

What reporting rules still ask after the EU simplification, what customers and banks want from smaller suppliers, and where sustainability earns its keep.

The email comes from a large customer's procurement team: please complete our supplier sustainability questionnaire before the contract renewal. A month later your bank wants your energy use and emissions for its own reporting, and a public tender asks for your environmental policy. No law obliges you to publish a sustainability report. You still have to answer.

That is where most small and mid-sized firms stand now that the EU has cut back its reporting rules: fewer companies must report, but the information still travels down the value chain. A workable sustainability strategy has two parts. Answer the questions once, from one reliable data set, and pick the few measures that lower your costs or risks, or win you customers.

What the EU Omnibus changed in CSRD and CSDDD

In February 2026 the EU adopted the Omnibus I directive. It amends the Corporate Sustainability Reporting Directive (CSRD), which decides who must publish a sustainability report, and the Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to tackle human rights and environmental harm in their chains. In July 2026 the Commission added revised reporting standards and a voluntary standard for smaller companies.

Topic	The position after the Omnibus, in principle
Who reports under the CSRD	Only the largest companies, measured on both headcount and turnover. Listed small and medium-sized companies are out.
Groups from outside the EU	Still covered when they have a large EU business, through their EU subsidiaries or branches.
What they report	Revised European Sustainability Reporting Standards (ESRS) with far fewer datapoints, for financial years starting from January 2027.
Value-chain cap	Reporting companies may not require smaller companies in their value chain to provide more than the voluntary standard covers. The smaller company may decline extra requests, and contract terms that conflict with the cap are not binding.
Voluntary standard	A Commission standard for companies outside the CSRD, built on the VSME of the European Financial Reporting Advisory Group (EFRAG), with a basic and a comprehensive module.
CSDDD due diligence	Only very large companies, from July 2029. The duty to adopt a climate transition plan and the EU-wide civil liability regime are removed.

Based on the Omnibus I directive (source: EUR-Lex, February 2026) and the Commission's delegated acts (source: European Commission, July 2026).

A directive still needs national law

Each member state writes the EU text into its own law, sometimes with its own timing and options. Check the implementing law where you operate and ask your accountant whether your group is in scope. This page explains principles, not legal advice.

Beyond the EU: ISSB standards and national rules

Outside the EU the reference point is the International Sustainability Standards Board (ISSB) of the IFRS Foundation. Its two standards, on general sustainability disclosures and on climate, are written for investors. They are known as IFRS S1 and IFRS S2, and more than 40 jurisdictions have decided to use them or are taking steps to introduce them (source: IFRS Foundation, April 2026).

Market	Status in principle
European Union	CSRD with ESRS for the largest companies; the voluntary standard for everyone else.
United Kingdom	UK versions of the ISSB standards (UK SRS S1 and S2) are final and open for voluntary use; the government and the Financial Conduct Authority are considering requirements (source: GOV.UK, February 2026).
United States	No federal climate disclosure rule in force: the Securities and Exchange Commission voted to stop defending its rules (source: US SEC, March 2025). State rules can still apply, so check the states where you do business.
Canada	Canadian standards aligned with the ISSB exist; when they become mandatory is still to be determined (source: IFRS Foundation, April 2026).
Australia	Entities above the legal size thresholds must prepare a sustainability report with climate disclosures under AASB S2 (source: ASIC, July 2026).
Singapore, Japan, Brazil and others	ISSB-based rules adopted or being introduced, with effective dates that differ per country (source: IFRS Foundation, April 2026).

Check your country: which law sets reporting duties, for which companies and from which financial year.
Check your customers' countries: you are asked for data because of the customer's rules, not your own.
Check again each year: these rules change often, so treat any overview, this one included, as a starting point.

What large customers and banks ask of smaller suppliers

The law reaches the large companies, and they pass the questions down the chain. The Commission presents its voluntary standard as the way for smaller companies to answer information requests from large financial institutions and companies (source: European Commission, July 2026). The questions look alike everywhere:

Energy and emissions: energy use per source, emissions from your own fuel and purchased electricity and heat, sometimes an estimate for the wider chain. The Greenhouse Gas Protocol calls these scope 1, scope 2 and scope 3 emissions (source: GHG Protocol, March 2004).
Targets: reduction targets and the measures behind them.
Materials and waste: recycled content, packaging and waste streams.
People and conduct: safety incidents, training, a code of conduct and how you check your own suppliers.

Banks ask for their own risk management and reporting: does the borrower's business model still work when energy and carbon get more expensive? A loan for an oven, a building or a fleet comes with questions about energy use and alternatives.

Build one data set and answer every questionnaire from it

01
Collect the basics
Energy and fuel bills, waste invoices, staff and safety records, mostly already in your books.
02
Use the basic module as your structure
The voluntary standard's basic module gives the order and definitions, and EU customers in scope may not demand more.
03
Calculate your own emissions
Convert fuel and electricity use with published emission factors, and have an adviser check the method once.
04
Write a short policy with targets
One page: what you measure, what you aim for and who is responsible.
05
Update yearly and keep the evidence
Refresh the figures after the annual accounts and file the invoices and calculations behind each answer.

Where a sustainability strategy pays off

Reporting is the cost; the strategy is in what you do with the data. A PESTLE analysis shows which environmental and regulatory forces really touch your business. Invest where at least one of these returns is clear:

Energy and materials: less energy and less scrap lower costs and exposure to price spikes. Energy is the clearest case; see energy costs and grid capacity.
Customers and tenders: large buyers and public tenders score suppliers on sustainability. A complete, verifiable answer keeps you on the approved list.
Financing: lenders with clear energy and emissions data can assess a loan faster, and some link loan terms to sustainability goals.
Risk: sites exposed to flooding or heat and inputs that may be restricted are business risks before they are reporting topics; supply chain risk shows how to map them.

Worked example: a powder-coating firm makes its choices

Lindqvist Coatings has 65 staff and coats steel parts for a truck maker, a furniture brand and machine builders. In one quarter three requests arrive: the truck maker's supplier questionnaire, the furniture brand's request for carbon data per product, and the bank's energy questions on a loan for a new curing oven. Management lists four measures.

Measure	Investment	Saving per year	Payback	Customer value	Decision
Data set on the basic module	€8,000	None directly	-	Answers all three requests	Now
Heat recovery and insulation on the ovens	€150,000	€37,500 gas	4.0 years	Lower emissions per part	Include in the new oven project
Low-temperature curing powders	€20,000 trials	€12,000 gas	1.7 years	Asked for by the furniture brand	Pilot on one production line
Rooftop solar panels	€220,000	€33,000 electricity	6.7 years	Limited	Wait for the grid operator's answer on export capacity

Fictitious Firmfocus example. Payback = investment / saving per year; €150,000 / €37,500 = 4.0 years, €20,000 / €12,000 = 1.7 years, €220,000 / €33,000 = 6.7 years. The logic works in any currency.

The order matters. The data set comes first because it is cheap and the questions are already on the table. Heat recovery rides on the oven the bank is financing anyway, and with the new powders it saves €49,500 a year. Solar waits for the grid operator. Each investment is tested under a high and a low gas price, as in scenario planning.

Small business or larger organisation

Small business

You are almost certainly outside the legal duty, but inside the reach of customers and lenders. Prepare the basic module once, choose two or three measures that save money or keep a key customer, and review the figures yearly. Decline requests beyond the cap politely, with your data set attached.

Larger organisation

Check whether the group is in scope in each country, including the EU business of a non-EU parent. If you report, keep supplier requests within the cap. If you fall out of scope, decide deliberately whether to keep reporting voluntarily rather than stopping by default.

Pitfalls

Starting from scratch each time: questionnaires answered separately multiply the work and give slightly different answers.
Giving more than asked: a smaller supplier may decline EU customers' requests that exceed the voluntary standard.
Claims without data: a vague "eco-friendly" invites questions from customers, competitors and regulators; a measured figure answers them.
Measures for the report: projects chosen because they look good in a questionnaire, not because they save money or reduce risk.
Assuming small means exempt: the duty sits with your customer, but the questions land on your desk.

Sustainability is one of six strategic themes that press on strategy. For the full method of analysing, choosing and executing, start at Strategy.

Does the CSRD still apply to my company?

After the Omnibus I directive only the largest companies, measured on headcount and turnover, must report under the CSRD. Listed small and medium-sized companies are out. Check your national implementing law, because member states transpose the rules themselves.

Can a customer still send me a sustainability questionnaire?

Yes, but an EU company that reports under the CSRD may not require smaller companies in its value chain to provide more than the voluntary standard covers. Answer from one data set built on that standard and decline extra questions if you wish.

What is the VSME standard?

The VSME is a voluntary sustainability reporting standard for unlisted companies, developed by EFRAG. The Commission has made it the basis of the voluntary standard under the CSRD, with a basic module and a comprehensive module.

Are the ISSB standards mandatory?

Not by themselves. Each country decides whether, for whom and from when they apply; some already require them, others allow voluntary use only. Smaller suppliers usually meet them indirectly, through questions from customers and lenders.

Sources

EUR-Lex: Omnibus I directive on sustainability reporting and due diligence (February 2026)
European Commission: revised sustainability reporting standards and voluntary standard (July 2026)
IFRS Foundation: Update on the ISSB's activities (April 2026)
GOV.UK: UK Sustainability Reporting Standards (February 2026)
US SEC: SEC votes to end defense of climate disclosure rules (March 2025)
ASIC: Sustainability reporting (July 2026)
WRI and WBCSD: GHG Protocol Corporate Standard, revised edition (March 2004)

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