If your company has European operations, exports to the EU, or serves European investors, you need to understand the European Sustainability Reporting Standards (ESRS). Whether you're a US-headquartered multinational with EU subsidiaries, a private equity firm with European portfolio companies, or a tech startup planning EU expansion, ESRS compliance is increasingly unavoidable—and 2025's regulatory shifts fundamentally change the landscape.

This guide targets US-based CFOs, compliance officers, and sustainability managers who need practical strategies for navigating ESRS requirements alongside existing SEC, TCFD, and ISSB frameworks. We cut through the complexity to focus on what global companies actually need to know.

Executive Summary: What US Companies Need to Know About ESRS

Who Needs to Comply with ESRS?

The Corporate Sustainability Reporting Directive (CSRD)—the legislation mandating ESRS—applies to:

• US subsidiaries in the EU: European entities of US parent companies exceeding size thresholds (employee count, revenue, balance sheet)
• US companies listed on EU exchanges: Any company with securities traded in European markets
• Non-EU companies with significant EU revenue: Businesses generating €150M+ annually in the EU with at least one EU subsidiary or branch
• Supply chain exposure: US companies selling to large EU corporations increasingly face indirect ESRS data requirements through customer sustainability questionnaires

Critical 2025 update: The EU Omnibus Package is raising thresholds significantly—from 250 to potentially 1,000+ employees and €50M to €450M revenue. This exempts roughly 80% of previously covered companies but creates strategic uncertainty for organizations near these boundaries. Wave 2 implementation (originally 2026) has been delayed to 2028, providing breathing room for mid-sized entities.

ESRS vs US Reporting: Quick Comparison

Strategic Implications for US Companies

Rather than viewing ESRS as a separate EU compliance burden, sophisticated organizations treat it as an overlay to global sustainability infrastructure. Most US multinationals already implementing TCFD or ISSB frameworks find substantial alignment with ESRS E1 (Climate), allowing unified data collection sliced for different reporting regimes.

The key challenge isn't duplicated work—it's ensuring one consistent global dataset that can be adapted to ESRS, SEC, and voluntary reports. Companies excelling at ESRS compliance typically:

• Build global ESG data platforms (not EU-specific silos)
• Use ISSB S1/S2 as the backbone, layering ESRS-specific datapoints for EU perimeter
• Leverage US software vendors (Workiva, Persefoni, Watershed) that now support ESRS mapping
• Align governance structures—avoiding separate US vs EU sustainability teams

Understanding ESRS: Core Concepts for US Readers

What Are European Sustainability Reporting Standards?

ESRS represents the EU's comprehensive sustainability disclosure framework—think of it as Europe's answer to evolving global sustainability standards, but with mandatory compliance for in-scope companies. Developed by the European Financial Reporting Advisory Group (EFRAG), ESRS establishes detailed disclosure requirements across environmental, social, and governance dimensions.

For US companies accustomed to voluntary ESG frameworks, the shift is significant: ESRS disclosures are mandatory, audited, and carry legal consequences for non-compliance or material misstatement. The sustainability statement becomes part of the annual report with the same director liability as financial statements.

The Double Materiality Distinction

ESRS's most distinctive feature—and biggest departure from US frameworks—is double materiality:

Financial materiality (familiar to US companies): How sustainability issues affect the company's financial performance, position, and cash flows. This aligns with SEC thinking and TCFD's approach.

Impact materiality (unique emphasis): How the company's activities affect people and the environment—the "inside-out" perspective. Even if biodiversity loss doesn't materially impact your P&L, if your operations significantly harm ecosystems, it's reportable under ESRS.

A topic qualifies as material under ESRS if it meets either threshold—not both. This expands reporting scope compared to pure financial materiality frameworks, requiring US companies to think beyond investor-centric disclosures toward broader stakeholder accountability.

ESRS Architecture: Structure and Standards

ESRS employs modular architecture comprising:

Cross-cutting standards (mandatory for all):

• ESRS 1: General requirements—conceptual framework, double materiality principles, value chain boundaries
• ESRS 2: General disclosures—governance, strategy, risk management baseline (applies regardless of materiality assessment)

Topical standards (apply based on materiality):

• Environment: E1 (Climate), E2 (Pollution), E3 (Water), E4 (Biodiversity), E5 (Circular Economy)
• Social: S1 (Own Workforce), S2 (Value Chain Workers), S3 (Affected Communities), S4 (Consumers)
• Governance: G1 (Business Conduct)

Companies conduct materiality assessments determining which topical standards apply to their specific context—avoiding boilerplate reporting on non-material topics whilst ensuring comprehensive disclosure on material issues.

2025 Regulatory Shifts: Omnibus Package and Quick Fix

The Omnibus Revolution: Threshold Changes

European competitiveness concerns have driven the most significant ESRS recalibration since adoption. The Omnibus Package, under trilogue negotiation through December 2025, proposes raising reporting thresholds dramatically:

Original thresholds (pre-Omnibus):

• 250+ employees
• €50M+ revenue OR €25M+ balance sheet

Proposed new thresholds:

• 1,000+ employees (Council) OR 1,750+ employees (Parliament)
• €450M+ revenue

This change would exempt approximately 80% of previously covered companies from direct CSRD obligations—including many US subsidiaries currently preparing for compliance. However, companies near these thresholds face strategic uncertainty pending final trilogue outcomes expected in early 2026.

Wave 2 Delay: Breathing Room for Mid-Market

Implementation timelines have shifted significantly:

• Wave 1 (large public-interest entities >500 employees): Reporting commenced in 2024 for FY2023
• Wave 2 (all other in-scope companies): Originally scheduled for 2026, now delayed to 2028

For US companies with EU subsidiaries in the 250-1,000 employee range, this two-year postponement provides crucial preparation time—but also extends compliance uncertainty regarding final requirements.

Quick Fix Provisions: Immediate Relief for Wave 1

Companies already reporting under CSRD ("Wave 1" organizations) received immediate relief through the July 2025 "Quick Fix" delegated act, which extends phase-in provisions for complex topics:

• ESRS E4 (Biodiversity): Deferred for 2025-2026 reporting years
• ESRS S2 (Value Chain Workers): Postponed recognition of supply chain data challenges
• ESRS S3 (Affected Communities): Delayed while companies build stakeholder engagement infrastructure
• ESRS S4 (Consumers): Extended implementation timeline

This enables organizations to concentrate on climate (E1) and own workforce (S1)—the topics receiving greatest investor and auditor scrutiny—whilst building capacity for deferred areas.

ESRS Standards in Detail: What US Companies Must Report

ESRS E1: Climate Change (Most Critical for US Companies)

Climate reporting represents the most mature area of ESRS, building extensively on TCFD recommendations familiar to US companies. If you've implemented TCFD, you've completed roughly 70% of ESRS E1 requirements.

Core disclosure requirements:

• Transition plans: Strategies for achieving climate neutrality, Paris Agreement alignment, decarbonization pathways with interim targets
• GHG emissions: Scope 1, 2, and 3 per GHG Protocol, including comprehensive value chain emissions (often the biggest data challenge for US companies)
• Climate risk assessment: Physical and transition risks, scenario analysis (typically 1.5°C, 2°C, and >2°C scenarios), financial impact quantification
• Energy metrics: Total consumption disaggregated by source, renewable percentage, energy intensity indicators
• Targets and performance: Science-based targets (SBTi alignment encouraged), reduction achievements against baseline, forward-looking commitments

US company considerations: Most sophisticated organizations build a global GHG inventory meeting both SEC proposals (currently stayed) and ESRS E1, avoiding duplicate data collection. The primary ESRS add-on for US companies typically involves expanding Scope 3 coverage and enhancing scenario analysis granularity.

For detailed Scope 3 implementation strategies aligned with both SEC and ESRS frameworks, see our comprehensive guide to value chain emissions accounting.

Social Standards: Beyond Climate

While US companies often prioritize climate reporting, ESRS social standards (S1-S4) represent a significant expansion beyond typical US ESG disclosures:

ESRS S1 (Own Workforce): Working conditions, diversity metrics, pay equity, health and safety, collective bargaining coverage. This aligns reasonably well with voluntary US reporting (EEO-1, OSHA) but requires more granular disclosure.

ESRS S2 (Value Chain Workers): Supply chain labor practices, forced labor risks, living wage assessments. For US companies with Asian manufacturing, this demands robust due diligence demonstrating awareness of supplier working conditions.

ESRS S3 (Affected Communities): Impact on indigenous peoples, local communities, land rights. Particularly relevant for extractives, infrastructure, and agriculture sectors.

ESRS S4 (Consumers): Product safety, data privacy, responsible marketing. US companies already managing CCPA/CPRA compliance find some overlap, but ESRS demands explicit consumer welfare assessments.

Governance: ESRS G1

Business conduct disclosures cover anti-corruption measures, political engagement, whistleblower protections, and payment practices. For US companies subject to FCPA and Sarbanes-Oxley, much infrastructure already exists—ESRS primarily requires explicit sustainability context and stakeholder-oriented framing.

Implementing ESRS: Practical Strategies for US Companies

Step 1: Determine Applicability and Scope

US companies should assess ESRS applicability across three dimensions:

Direct compliance (EU entity threshold):

1. Inventory all EU subsidiaries, branches, and legal entities
2. Calculate consolidated EU employee count, revenue, and balance sheet
3. Determine if EU operations exceed thresholds (monitoring Omnibus negotiations for final levels)
4. Identify which wave (1 or 2) applies based on entity size and public-interest status

Indirect exposure (supply chain requirements):

1. Identify major EU customers subject to CSRD
2. Assess their likely value chain data requests (increasingly standardized around VSME framework for SME suppliers)
3. Evaluate strategic response—full ESRS, VSME standard, or customer-specific data provision

Voluntary strategic adoption:

1. Consider ESRS alignment even without formal obligations to demonstrate EU market readiness
2. Evaluate competitive positioning implications in sustainability-conscious European markets
3. Assess investor expectations, particularly European institutional investors and Article 8/9 funds under SFDR

Step 2: Conduct Double Materiality Assessment

The materiality assessment determines reporting scope, making it the most strategically significant implementation step. US companies should approach this as integrated with existing enterprise risk management rather than a compliance checkbox:

Establish cross-functional governance: Unlike voluntary ESG assessments often owned solely by sustainability teams, ESRS materiality demands input from finance (financial materiality), operations (impact materiality), legal (compliance), and business units (value chain boundaries).

Map value chain comprehensively: Document upstream suppliers and downstream customers/distributors. For US companies, this often reveals surprising complexity—e.g., semiconductor firms discovering Scope 3 emissions extend beyond immediate suppliers to raw material extraction globally.

Engage stakeholders meaningfully: European regulators expect genuine stakeholder consultation—not pro forma surveys. This means engaging employees, affected communities, suppliers, and civil society representatives, particularly for social and biodiversity topics where impact materiality dominates.

Assess both perspectives rigorously:

• Impact materiality: Evaluate positive and negative effects on people and environment across the value chain. Consider severity, scope, and irremediability for negative impacts.
• Financial materiality: Analyze sustainability risks and opportunities affecting financial performance, considering both transition risks (regulatory changes, market shifts, technology disruption) and physical risks (climate impacts, resource scarcity).

Document defensibly: Limited assurance requirements mean auditors will scrutinize materiality conclusions. Maintain clear documentation of stakeholder inputs, data sources, assessment criteria, and decision rationale.

Our strategic double materiality guide provides detailed methodologies aligned with EFRAG's 2025 implementation guidance.

Step 3: Build Integrated Data Infrastructure

The most successful US companies avoid building separate "ESRS systems" and instead create global ESG data platforms serving multiple reporting regimes:

Technology architecture considerations:

• Vendor landscape: Major US sustainability software vendors (Workiva, Persefoni, Watershed, Sphera) now support ESRS data mapping. Evaluate whether existing tools can be configured for ESRS or require replacement/supplementation.
• Integration strategy: Connect sustainability data platforms with ERP (SAP, Oracle), HRIS (Workday), and operational systems rather than relying on manual data collection. This supports both data quality and auditability.
• XBRL capability: ESRS requires machine-readable XBRL tagging for all disclosures. Ensure selected technology supports European ESRS XBRL taxonomy (distinct from US XBRL for financial reporting).
• Global consistency: Design data models accommodating both US reporting (SEC, voluntary frameworks) and EU requirements (ESRS) from a single source of truth.

Data governance essentials:

• Clear ownership: Assign data stewards for each ESRS topic across different functions—HR owns S1 workforce data, operations owns E1 energy data, supply chain owns value chain metrics.
• Control frameworks: Implement controls similar to financial reporting—reconciliations, validation rules, change management, audit trails. Limited assurance requires demonstrating data reliability.
• Documentation discipline: Maintain calculation methodologies, assumptions registers, data dictionaries, and change logs. Auditors will request these.

For organizations evaluating build vs. buy decisions for ESG technology infrastructure, our analysis of AI and automation strategies for sustainability reporting provides decision frameworks.

Step 4: Align Reporting Across Jurisdictions

US multinationals juggling ESRS, SEC proposals, TCFD, and ISSB frameworks need systematic alignment strategies:

Content harmonization approaches:

1. Use ISSB as global backbone: IFRS S1 (General Sustainability Disclosures) and S2 (Climate) provide internationally recognized baseline. Layer ESRS-specific datapoints (particularly impact materiality) for EU perimeter.
2. Leverage TCFD alignment: ESRS E1 builds extensively on TCFD. Companies already producing TCFD reports can often adapt these for ESRS with incremental additions.
3. Rationalize Scope 3 methodologies: Avoid parallel Scope 3 calculations for different regimes. Establish one comprehensive value chain emissions inventory meeting the most stringent requirements (typically ESRS or SBTi), then subset for other frameworks.
4. Coordinate scenario analysis: Run climate scenario analyses serving both ESRS E1 and TCFD/ISSB S2 requirements rather than duplicating efforts.

Process synchronization:

• Unified timeline: Align ESRS preparation with annual report cycles and any US sustainability reporting (10-K climate disclosures if SEC rules finalize, voluntary reports).
• Shared governance: Avoid separate US and EU sustainability committees. Establish global governance structures with regional representation.
• Coordinated assurance: If obtaining assurance on voluntary US sustainability reports, coordinate with ESRS assurance to maximize efficiency and consistency.

Step 5: Prepare for Limited Assurance

ESRS mandates limited assurance—a significant departure from voluntary US sustainability reporting. US companies should understand this represents:

More rigorous than unaudited voluntary reports: Assurance providers must obtain sufficient evidence that the sustainability statement is plausible and free from material misstatement.

Less rigorous than reasonable assurance: The evidence threshold is lower than financial statement audits, but the EU intends transitioning from limited to reasonable assurance in future years.

Requires audit-ready infrastructure: Companies need robust internal controls, comprehensive documentation, calculation methodologies, and audit trails supporting all disclosures.

Assurance preparation strategies:

• Conduct internal "dry runs" testing data availability, calculation accuracy, and documentation completeness before engaging external assurance providers
• Engage assurance providers early (ideally during data infrastructure design) to ensure systems generate audit-ready evidence
• Consider whether existing financial auditor (who must perform ESRS assurance under EU rules) has sufficient sustainability expertise or if specialist sustainability assurance firms should supplement
• Build progressive assurance roadmaps anticipating future transition to reasonable assurance requirements

Managing ESRS Alongside US Frameworks: Interoperability Strategies

ESRS and SEC Climate Disclosure: Parallel Paths

Although SEC climate disclosure rules remain stayed pending litigation, many US companies continue voluntary climate reporting in 10-Ks or sustainability reports. Understanding ESRS-SEC alignment enables future-proofing:

Overlapping requirements:

• Governance structures overseeing climate risks
• Climate risk identification and assessment processes
• Scope 1 and 2 GHG emissions (methodologies aligned with GHG Protocol)
• Climate-related targets and transition planning

Key differences:

• Scope 3 emissions: SEC proposed materiality threshold for Scope 3 disclosure, ESRS requires comprehensive value chain coverage regardless of materiality (though phase-in provisions apply)
• Scenario analysis: ESRS explicitly requires climate scenario analysis across multiple temperatures; SEC only requires if used internally for risk assessment
• Impact disclosure: ESRS demands reporting on company's environmental impacts (impact materiality), SEC focuses purely on financial risks
• Assurance: ESRS mandates limited assurance immediately, SEC proposed phased attestation requirements

Practical alignment strategy: Design global climate data platform meeting ESRS requirements, as these tend to be more comprehensive. SEC-compliant disclosures can then be extracted as a subset, avoiding duplicate data collection if SEC rules eventually take effect.

ESRS and ISSB Standards: Natural Alignment

The International Sustainability Standards Board (ISSB), operating under the IFRS Foundation, developed IFRS S1 (General Requirements) and S2 (Climate) as global baseline sustainability disclosure standards. Many US companies adopt ISSB voluntarily given its international recognition and TCFD alignment.

Substantial overlap exists between ESRS and ISSB:

• Both build on TCFD framework for climate-related financial disclosures
• Governance, strategy, risk management, metrics/targets architecture aligns closely
• Climate risk assessment methodologies (scenario analysis, physical/transition risks) are largely compatible
• Both reference GHG Protocol for emissions accounting

Critical distinction—materiality:

• ISSB: Financial materiality only (how sustainability affects enterprise value)
• ESRS: Double materiality (financial + impact perspectives)

For US companies, this means ISSB provides excellent foundation for ESRS's financial materiality dimension, but ESRS demands additional impact materiality assessment and disclosure. Organizations can satisfy both frameworks by:

1. Using ISSB S1/S2 as global reporting baseline
2. Conducting comprehensive double materiality assessment for EU entities
3. Layering impact materiality disclosures onto ISSB framework for EU reporting
4. Maintaining single data platform serving both regimes

ESRS and GRI: Impact Reporting Alignment

The Global Reporting Initiative (GRI) standards emphasize impact reporting—how organizations affect economy, environment, and people. This aligns naturally with ESRS's impact materiality dimension.

Companies already using GRI find strong alignment with ESRS impact disclosures, particularly on:

• Environmental impacts (pollution, biodiversity, resource use)
• Social impacts (workforce conditions, community relations, human rights)
• Governance structures and stakeholder engagement

EFRAG and GRI formalized cooperation ensuring continued alignment, enabling companies to meet both frameworks through coordinated reporting approaches. For US companies serving European stakeholders expecting GRI reporting, ESRS implementation provides natural GRI alignment without additional effort.

Managing Parallel Reporting: Organizational Models

US multinationals successfully managing ESRS alongside domestic reporting typically adopt one of three organizational models:

Model 1: Global Standards Group

• Central sustainability team establishes global data standards meeting most stringent requirements (typically ESRS)
• Regional teams handle jurisdiction-specific adaptations and submissions
• Works well for organizations with strong central governance and standardized operations

Model 2: Regional Autonomy with Coordination

• US and EU sustainability teams operate semi-independently
• Coordination mechanisms ensure data model compatibility and methodology consistency
• Suits decentralized organizations with distinct regional operations

Model 3: Hybrid Hub-and-Spoke

• Global team owns data infrastructure, methodologies, and core frameworks (ISSB, TCFD)
• Regional specialists handle jurisdiction-specific requirements (ESRS for EU, SEC for US)
• Balances efficiency with regulatory responsiveness

The VSME Standard: Strategic Positioning for SME Suppliers

Understanding the Voluntary SME Standard

The Voluntary Standard for Non-Listed SMEs (VSME), finalized by EFRAG in December 2024 and endorsed by the European Commission in February 2025, represents critical infrastructure for small and medium-sized enterprises—including many US companies supplying European markets.

While the Omnibus Package exempts most SMEs from direct CSRD obligations, the VSME establishes a de facto market standard through its unique "shield function."

The Shield Function: Protecting SMEs from Excessive Demands

The Omnibus proposal stipulates that large companies subject to CSRD cannot demand more sustainability data from their SME suppliers than defined in the VSME standard. This legislative protection transforms VSME from voluntary guideline into strategic compliance ceiling.

Practical implications for US suppliers to EU customers:

• European customers subject to CSRD increasingly standardize value chain data requests around VSME framework
• US SMEs implementing VSME can confidently reject customer demands exceeding this standard
• Rather than responding to bespoke sustainability questionnaires from each European customer, VSME enables standardized responses

VSME Modules: Basic and Comprehensive

The VSME standard offers two implementation levels:

Basic Module: Essential sustainability disclosures covering fundamental topics with reduced complexity. Suitable for SMEs with minimal sustainability resources or facing only basic customer queries.

Comprehensive Module: Fuller alignment with ESRS disclosure requirements whilst maintaining SME-appropriate proportionality. Appropriate for SMEs preparing for potential future CSRD coverage, seeking competitive differentiation, or responding to sophisticated stakeholder demands.

For detailed VSME implementation guidance, see our comprehensive VSME reporting guide.

Strategic Considerations for US SMEs

Non-listed small and medium-sized US companies should evaluate VSME implementation based on several factors:

• European customer concentration: Companies deriving >30% revenue from large EU customers benefit significantly from VSME standardization
• European financing: US firms seeking European venture capital, private equity, or bank financing increasingly encounter VSME expectations
• Market positioning: In sustainability-conscious European markets, VSME compliance signals credibility
• Growth trajectory: US companies planning EU expansion or acquisitions benefit from early VSME adoption

Technology and Tools: US Vendor Landscape for ESRS

Major US Software Vendors Supporting ESRS

The US sustainability software ecosystem has rapidly added ESRS capabilities, enabling companies to leverage existing platforms rather than implementing EU-specific solutions:

Enterprise ESG platforms:

• Workiva: Extends its SEC reporting platform to support ESRS, offering integrated financial and sustainability disclosure workflows with XBRL tagging capabilities
• SAP Sustainability Control Tower: Provides ESRS-aligned reporting modules integrated with SAP S/4HANA, enabling European operations to report from core ERP data
• Oracle Sustainability: Oracle Fusion Cloud includes ESRS reporting capabilities alongside broader ESG data management

Carbon accounting and climate platforms:

• Persefoni: Leading carbon management platform now maps emissions data to ESRS E1 requirements, supporting both SEC and EU climate reporting from unified datasets
• Watershed: Climate program management platform with ESRS E1 alignment, particularly strong for Scope 3 value chain emissions
• Emitwise: Specializes in supply chain emissions tracking aligned with ESRS value chain disclosure requirements

Specialized ESRS platforms:

• Benchmark Gensuite: Purpose-built ESRS compliance platform with double materiality assessment tools and XBRL export
• Cority: EHS platform extended to support ESRS environmental disclosures integrated with operational data
• Greenomy: European platform specializing in EU Taxonomy and ESRS alignment (increasingly used by US companies with EU operations)

Build vs. Buy Considerations

US companies should evaluate ESRS technology investments through strategic lenses:

When to leverage existing platforms:

• Already using enterprise ESG software (Workiva, SAP, Oracle) with ESRS modules available
• Primary ESRS need is climate reporting (E1) and existing carbon platform (Persefoni, Watershed) supports requirements
• Limited EU operations making specialized ESRS platform overkill

When to implement specialized ESRS tools:

• Substantial EU operations requiring comprehensive ESRS coverage beyond climate
• Existing platforms lack ESRS capabilities or XBRL taxonomy support
• Managing complex value chains demanding robust supply chain data management

When to build custom solutions:

• Unique business models or data structures poorly served by commercial platforms
• Significant technical resources available and long-term ESRS reporting certainty
• Desire to deeply integrate ESRS with proprietary operational systems

Our analysis of ESG technology decision frameworks provides detailed evaluation methodologies.

Private Equity and Venture Capital: Portfolio Company ESRS Strategies

PE/VC ESRS Exposure

US private equity firms and venture capital funds with European portfolio companies face unique ESRS considerations:

Direct portfolio company obligations:

• Portfolio companies exceeding CSRD thresholds must comply with ESRS regardless of fund's domicile
• Even US funds managing European entities cannot avoid ESRS if size thresholds are met
• Smaller portfolio companies near thresholds should monitor Omnibus outcomes closely

Value creation through ESG readiness:

• Portfolio companies ESRS-ready command premium valuations in European M&A markets
• ESG infrastructure (particularly climate data) increasingly featured in due diligence
• Building ESRS compliance during hold period positions for superior exits to European strategics or listed acquirers

LP reporting considerations:

• European institutional LPs increasingly expect portfolio-level sustainability data
• Article 8/9 funds under SFDR face heightened ESG reporting requirements that ESRS data can support
• Even non-EU funds marketing to European investors benefit from ESRS-aligned portfolio reporting

Portfolio-Level ESG Data Management

Sophisticated PE/VC firms implement portfolio-wide ESG data platforms serving multiple purposes:

Value creation playbook integration:

• Establish ESRS-aligned ESG KPIs as standard value creation metrics alongside financial performance
• Mandate portfolio companies adopt VSME standard minimum, graduating to full ESRS as they scale
• Integrate sustainability data requests into existing portfolio company reporting cycles

Centralized vs. distributed approaches:

• Centralized model: Fund provides portfolio companies with standardized ESRS reporting tools and templates, ensuring consistency and efficiency
• Distributed model: Portfolio companies select their own ESRS solutions, fund aggregates data through standardized exports
• Hybrid approach: Fund provides frameworks and methodologies, portfolio companies implement using appropriate tools for their scale

For comprehensive guidance on ESG integration in venture capital portfolios, see our VC portfolio management guide.

Navigating Regulatory Uncertainty: Strategic Positioning for 2026

Omnibus Trilogue: What to Monitor

As trilogue negotiations between the European Parliament, Council, and Commission continue through December 2025, companies should track several critical decision points:

Final threshold determination: Whether employee threshold settles at 1,000 (Council position) or 1,750 (Parliament position) significantly impacts US subsidiary coverage. Companies between these levels face maximum uncertainty.

Transition provisions: How companies transitioning out of CSRD scope manage stakeholder expectations and whether phase-out periods apply.

VSME shield strength: Whether the provision preventing large companies from demanding more than VSME data from SME suppliers remains intact or faces dilution.

Sector-specific guidance: What form voluntary sector guidelines take and their practical influence despite non-mandatory status.

Strategic Positioning for Uncertain Thresholds

US companies near threshold boundaries should adopt flexible strategies accommodating multiple outcomes:

For companies clearly exceeding highest threshold (>1,750 employees, >€450M EU revenue):

• Proceed with ESRS implementation as planned
• Use Omnibus simplifications (Quick Fix phase-ins, eliminated sector standards) to focus resources
• Maintain 2028 implementation target for Wave 2 if applicable

For companies between 1,000-1,750 employees:

• Monitor trilogue outcomes closely through trade associations and legal counsel
• Implement VSME standard as prudent hedge—positions for either outcome (CSRD compliance or voluntary reporting meeting stakeholder expectations)
• Build basic ESG data infrastructure enabling rapid ESRS escalation if required

For companies between 250-1,000 employees:

• Likely exempt under any Omnibus scenario but should monitor for unexpected outcomes
• Evaluate VSME implementation based purely on strategic value (customer requirements, financing, competitive positioning)
• Maintain lightweight ESG monitoring enabling future ESRS readiness if business scales

Communicating ESRS Strategy to Stakeholders

US companies should proactively communicate ESRS positioning to key stakeholders:

To boards:

• Frame ESRS as strategic infrastructure supporting multiple objectives (EU compliance, voluntary disclosure enhancement, stakeholder expectations management)
• Quantify implementation costs and timelines realistically, avoiding over-optimization during regulatory flux
• Position as part of broader sustainability governance rather than isolated compliance project

To investors:

• Articulate ESRS approach in investor relations materials, particularly for companies with European institutional shareholders
• Highlight alignment with voluntary frameworks (ISSB, TCFD) demonstrating integrated strategy
• Emphasize data quality investments benefiting all sustainability reporting, not just ESRS

To customers:

• For US companies supplying European customers, clarify VSME compliance or equivalent data provision capabilities
• Proactively share sustainability data reducing customer due diligence burden
• Position sustainability transparency as competitive differentiator

To employees:

• Communicate ESRS implementation plans transparently, particularly for social topics (workforce conditions, diversity, safety)
• Engage employee representatives in double materiality assessments where material
• Frame sustainability reporting as reflecting organizational values, not just compliance

Sector-Specific Considerations for US Companies

Technology and Software

US tech companies with European operations typically prioritize:

• ESRS E1 (Climate): Focus on Scope 2 renewable energy for data centers and cloud infrastructure, plus Scope 3 for hardware manufacturing and logistics
• ESRS S1 (Own Workforce): Diversity metrics, pay equity, skills development—areas where US tech industry already reports extensively
• ESRS S4 (Consumers): Data privacy, product accessibility, responsible AI—overlapping with existing GDPR, ADA, and ethics commitments
• ESRS G1 (Business Conduct): Anti-corruption, tax transparency, political engagement—extending SOX infrastructure

Our analysis of ESG strategies for tech companies provides sector-specific implementation frameworks.

Manufacturing and Industrials

US manufacturers with European plants face comprehensive environmental reporting:

• ESRS E1 (Climate): Significant Scope 1 and 2 emissions from manufacturing operations, complex Scope 3 from raw materials and logistics
• ESRS E2 (Pollution): Air emissions beyond GHGs, water discharge, substances of concern—often extensive existing data from environmental permits
• ESRS E3 (Water): Water consumption and discharge, particularly material in water-stressed regions
• ESRS E5 (Circular Economy): Resource efficiency, waste management, circular design—growing importance as EU circular economy policies tighten

Financial Services

US financial institutions with European operations encounter unique requirements:

• Financed emissions: Banks must report GHG emissions attributable to lending and investment portfolios—methodologically complex and data-intensive
• EU Taxonomy alignment: Financial products must disclose sustainable activity alignment under EU Taxonomy regulation
• Climate risk in portfolios: Banks must assess and disclose climate-related risks in loan books and investment portfolios

Our financed emissions measurement guide addresses these complexities specifically.

Consumer Goods and Retail

US consumer brands selling in European markets face particular scrutiny around:

• ESRS E1 (Climate): Product carbon footprints, packaging emissions, retail footprint energy use
• ESRS E4 (Biodiversity): Raw material sourcing impacts, particularly for cosmetics, food, textiles
• ESRS S2 (Value Chain Workers): Supplier labor practices, living wages, working conditions—high-risk in Asian supply chains
• ESRS S4 (Consumers): Product safety, responsible marketing, accessibility

Frequently Asked Questions

Do US companies need to comply with ESRS?

US companies with EU subsidiaries, branches, or listed securities exceeding CSRD size thresholds must comply with ESRS. Additionally, US companies with significant EU revenue (€150M+ annually) and at least one EU subsidiary face requirements. Many US companies also encounter indirect ESRS exposure through European customer sustainability questionnaires increasingly aligned with VSME framework.

How does ESRS differ from SEC climate disclosure rules?

ESRS is active and mandatory for in-scope companies, whilst SEC climate rules remain stayed pending litigation. ESRS employs double materiality (impact + financial), SEC proposed financial materiality only. ESRS covers comprehensive ESG topics beyond climate, SEC proposals focused solely on climate. ESRS mandates limited assurance immediately, SEC proposed phased attestation. Both align on Scope 1/2 emissions methodologies and TCFD framework influences.

Can US companies use existing TCFD reporting for ESRS compliance?

TCFD provides strong foundation for ESRS E1 (Climate) but isn't sufficient alone. Companies must add: comprehensive Scope 3 coverage regardless of materiality, detailed transition plans with interim targets, double materiality assessment (TCFD focuses primarily on financial risks), European XBRL taxonomy tagging, and limited assurance. TCFD-compliant organizations typically complete ~70% of ESRS E1 requirements.

What is double materiality and why does it matter?

Double materiality requires assessing sustainability topics from two perspectives: financial materiality (how sustainability affects company financial performance—familiar to US companies) and impact materiality (how company affects people and environment—less common in US frameworks). A topic qualifies as material if it meets either threshold, expanding reporting scope beyond pure financial considerations. This reflects European stakeholder capitalism orientation versus shareholder primacy.

Should US SMEs supplying European customers implement VSME?

US SMEs deriving substantial revenue from large European customers benefit significantly from VSME implementation. The "shield function" protects against excessive customer demands—companies cannot request more data than VSME defines. VSME standardizes responses across multiple European customers, reducing administrative burden versus bespoke questionnaires. Additionally, European financing increasingly expects VSME alignment. Evaluate based on customer concentration, financing sources, and market positioning.

How does the Omnibus Package affect US companies?

The Omnibus Package raises thresholds significantly (from 250 to potentially 1,000-1,750 employees, €50M to €450M revenue), exempting many US subsidiaries previously expecting CSRD coverage. Wave 2 implementation delay to 2028 provides extended preparation time. However, companies near threshold boundaries face strategic uncertainty pending final trilogue outcomes expected early 2026. Organizations should maintain flexible strategies accommodating multiple scenarios.

What technology platforms support ESRS for US companies?

Major US sustainability software vendors now support ESRS: Workiva (enterprise disclosure management), Persefoni and Watershed (carbon accounting), SAP and Oracle (ERP-integrated ESG modules). These platforms enable unified global data management serving both ESRS and US reporting requirements, avoiding duplicate infrastructure. Evaluate based on existing technology ecosystem, ESRS scope (climate-only vs. comprehensive), and integration requirements.

How should US companies with EU subsidiaries organize ESRS implementation?

Most successful approaches avoid separate US vs. EU sustainability functions. Options include: Global Standards Group (central team sets global data standards meeting ESRS, regional teams handle adaptations), Regional Autonomy with Coordination (semi-independent teams with shared data models), or Hybrid Hub-and-Spoke (global owns infrastructure/methodologies, regional specialists handle jurisdiction-specific requirements). Choose based on organizational structure, operational integration, and governance philosophy.

What are the most common ESRS implementation challenges for US companies?

Primary challenges include: Scope 3 value chain emissions data collection across global suppliers, double materiality assessment requiring stakeholder engagement beyond typical US practices, building audit-ready data systems supporting limited assurance, coordinating ESRS with existing US reporting (SEC, TCFD, ISSB) without duplicating efforts, and navigating regulatory uncertainty during Omnibus negotiations. Organizations succeeding typically invest early in unified global ESG data platforms rather than jurisdiction-specific solutions.

Does ESRS align with ISSB standards?

Substantial alignment exists between ESRS and ISSB, both building on TCFD framework for climate disclosures. Key difference: ISSB uses financial materiality only, ESRS employs double materiality. For US companies adopting ISSB voluntarily, this provides excellent foundation for ESRS financial materiality dimension. Layer impact materiality assessments and disclosures onto ISSB framework for EU reporting, maintaining single data platform serving both regimes. EFRAG and ISSB coordinate actively to maximize interoperability.

Additional Resources

Official ESRS Resources

• EFRAG ESRS Portal: Comprehensive implementation guidance, Q&A platform, data point lists, and XBRL taxonomy resources at efrag.org
• European Commission Sustainable Finance: Official CSRD texts, Omnibus Package proposals, and delegated acts at finance.ec.europa.eu
• ISSB Standards: IFRS S1 and S2 texts and implementation guidance at ifrs.org/sustainability

Fiegenbaum Solutions Resources

We provide specialized guidance for US companies implementing ESRS based on experience across 300+ sustainability projects:

• EU Omnibus Package Strategic Analysis: Decision frameworks for threshold uncertainty
• Double Materiality Implementation Guide: Methodologies aligned with EFRAG 2025 guidance
• ESRS E1 Climate Reporting: Comprehensive implementation strategies
• Scope 3 Emissions Accounting: Value chain measurement aligned with ESRS and SBTi
• VSME Implementation Roadmap: Strategic guidance for SME suppliers

Interactive Assessment Tools

• CSRD Materiality Screening: Interactive double materiality assessment
• Scope 3 Quick Check: Preliminary value chain emissions assessment
• Climate Risk Quick Check: ESRS E1 readiness evaluation
• VSME Readiness Check: SME compliance assessment

Expert Consulting for US Companies Implementing ESRS

Navigating ESRS complexity whilst maintaining alignment with US reporting frameworks demands specialized expertise combining regulatory knowledge, technical implementation capabilities, and strategic positioning insight. Whether you're evaluating ESRS applicability for your EU operations, designing global ESG data infrastructure, or managing stakeholder expectations during regulatory uncertainty, tailored consulting ensures optimal outcomes.

Fiegenbaum Solutions offers specialized support for US companies across the ESRS lifecycle:

• Applicability Assessment: Evaluate your EU footprint against evolving thresholds, assess direct and indirect exposure, and develop strategic positioning recommendations
• Double Materiality Excellence: Conduct rigorous materiality assessments meeting EFRAG standards whilst generating strategic insights
• Global Data Architecture: Design unified ESG data platforms serving ESRS, SEC, ISSB, and voluntary reporting without duplication
• US-EU Reporting Alignment: Develop integrated strategies maximizing efficiency across parallel reporting regimes
• Assurance Preparation: Build audit-ready documentation, controls, and evidence supporting limited assurance requirements
• VSME Implementation: Support SME suppliers positioning for European customer requirements and competitive differentiation

With proven experience supporting US multinationals, mid-market companies, and venture capital investors across 15+ years and 300+ projects, we deliver ESRS solutions aligned with your organization's specific context, resources, and strategic objectives. Contact us to discuss your ESRS implementation strategy.