The value chain and sustainability reporting

For companies that have already worked on their sustainability reports in line with CSRD or VSME standards, the next strategic step often concerns getting more clarity on impacts, risks and opportunities in their value chain. Having completed the Double Materiality Assessment (DMA), companies are well-positioned to map out a more complete picture of their value chains, including relevant business relations and activities. This ensures a holistic understanding of upstream and downstream impacts, risks and opportunities as it enhances transparency, informs mitigation strategies, and improves sustainability reporting.

One of the most common recommendations of auditors after reviewing a company’s first CSRD report is that the value chain information should be further completed and detailed in subsequent reports. Addressing gaps in value chain information early will not only improve reporting quality but also demonstrate to stakeholders that the company has a clear understanding of its entire value chain, and is able to manage its impacts, risks and opportunities well.

Corporate Sustainability Reporting Directive (CSRD)

The CSRD aims to significantly improve the quality, comparability, and reliability of sustainability information disclosed by companies operating in the EU, enabling investors, lenders, and other stakeholders to better assess sustainability risks, impacts, and opportunities. CSRD is a sustainability reporting law, not a standalone due diligence law. It requires in‑scope companies to disclose sustainability information in line with the European Sustainability Reporting Standards (ESRS), covering environmental, social, and governance matters. That being said, CSRD drives due diligence through requiring disclosure on:

  • The company’s due diligence system (ESRS 2)
  • Impacts, risks, and opportunities in the full value chain (all topical ESRS)
  • Policies, processes, and controls for identifying, managing, and mitigating ESG risks across the value chain (all topical ESRS)

In practice, CSRD compliance is best achieved with a documented, repeatable value chain due diligence process, particularly to identify and manage material human rights and environmental impacts, risks, and opportunities across the value chain.

Applicability Following the Omnibus I amendments (2026), CSRD applies to:

  • EU companies with >1,000 employees and > EUR 450 m net global turnover
  • Non‑EU parent companies with > EUR 450 m EU turnover and a significant EU presence (subsidiary or branch)

When

CSRD reporting applies from financial years starting on or after 1 January 2027 (first reports typically published in 2028). For non-EU companies in scope, reporting starts for financial years beginning on or after 1 January 2028, with reports published in 2029. Companies already in scope under the pre‑existing first wave (and still in scope post-Omnibus) continue on the earlier timetable.