EU’s ESG Ratings Regulation (EU 2024/3005) came into effect on 2 July

In short:

EU’s new ESG Ratings Regulation introduces mandatory ESMA supervision of all ESG rating providers from 2 July 2026. The goal is to fix long‑standing issues of opacity, inconsistency and low reliability in ESG ratings that companies use in CSR, sustainability and investor communication. During the transition period (July–November 2026), companies may reference ESG ratings only if the provider has notified ESMA. From 2 November 2026, ratings may be used exclusively from providers that appear in ESMA’s Article 14 public register.

This creates new compliance checkpoints for companies: 

Before publishing annual reports, sustainability webpages or investor presentations, companies will need to verify the regulatory status of any ESG rating provider to ensure that referenced ratings come from transparent, supervised and trustworthy sources.

It also raises expectations for ESRS reporting quality. 

ESRS sustainability statements must be complete, traceable and audit‑ready, as ESG rating providers will increasingly cross‑check ESRS disclosures with their own supervised methodologies. Strong governance around sustainability data is essential – documenting sources, reinforcing controls and clarifying responsibilities.

At the same time, investors and assurance providers will apply greater scrutiny to data quality, methodological alignment and consistency between ESRS disclosures and any ESG ratings referenced.

Cleerit’s guided digital ESRS end‑to‑end templates and governance processes help organisations get a head start, avoid wasted effort and build the robust, well‑structured sustainability statements required under this new regulatory landscape.

---

What the ESGR Regulation mean for you

If you use ESG ratings in your communication, it is essential to understand that the ESG Ratings Regulation (EU 2024/3005) places all ESG rating providers under direct ESMA supervision to enhance transparency, integrity and comparability, and to reduce greenwashing risks. From 2 November 2026, companies may only reference ESG ratings from providers that have submitted their application or notification and appear in ESMA’s Article 14 public register.

ESMA will maintain this public register on its website, along with a transitional list (July–November 2026) of providers that have notified ESMA of their intention to apply. To avoid market disruption, ESMA confirms that third parties may continue publishing or distributing ESG ratings from notified providers between 2 July and ESMA’s decision on their application. This temporary list will be updated regularly until the full register goes live.

From 2 November 2026 onward, only ESG ratings from providers that have applied and are listed in the Article 14 register may be published or distributed. This ensures continuity for financial market participants while the new supervisory framework is phased in.

For CSRD/ESRS‑aligned communication, companies should integrate a provider‑status check into their publication workflow – especially for annual reports, sustainability webpages and investor presentations.

Why this regulation came to be

The ESGR Regulation was introduced because the ESG ratings market had grown rapidly and become highly influential, yet operated without EU‑level rules. The Commission identified persistent issues: low reliability and timeliness, opaque methodologies, unsolicited ratings, and a lack of oversight – all of which created risks for investors and rated companies.

ESMA supervision aims to make ESG ratings clearer, more consistent and more trustworthy, while supporting the EU’s broader sustainable‑finance architecture (Green Taxonomy, SFDR, CSRD).

What problems does it aim to resolve?

1. Low reliability, accuracy, and timeliness of ratings

Investors and companies observed that ESG ratings often differed widely, were based on outdated data, or lacked clear justification.

2. Lack of transparency in methodologies and data sources

Providers used very different approaches, often without disclosing how ratings were constructed or what data they relied on. This made ratings hard to interpret or compare.

3. Unsolicited ratings and unclear provider practices

Companies were sometimes rated without engagement or visibility into the process, creating confusion and reputational risks.

4. No oversight or control of rating providers

Before this regulation, ESG rating providers were not subject to EU rules on governance, conflicts of interest, or operational integrity.

5. Consequences for markets and investors

These issues undermined investor confidence in sustainable products and created risks of misallocation of capital.

The EU’s objectives are clear:

• Improve trust in ESG ratings and sustainable finance.
• Ensure fair and transparent rating practices for companies.
• Support the EU’s broader sustainable finance architecture (Green Taxonomy, SFDR, CSRD).
• Create a level playing field for rating providers operating in the EU.

How the ESGR Regulation connects to ESRS and CSRD reporting

The link to ESRS is direct: ESRS disclosures feed ESG ratings, and ESG ratings shape how ESRS information is interpreted externally.

The ESGR Regulation governs how ESG ratings are produced and supervised, while ESRS governs how companies disclose their own sustainability information.

The ESGR Regulation aims to ensure ratings are “independent, impartial, systematic and of adequate quality”.

Rating providers must now disclose:

• which E, S, G factors they use,
• how they weight them,
• what data limitations exist,
• whether they assess financial materiality, impact materiality, or both.

Companies should expect their ESRS disclosures to be evaluated against these methodological choices, meaning that ESRS disclosures will be scrutinised more systematically and weaknesses will be reflected in ratings.

This creates new expectations for accuracy, traceability, and communication discipline. ESRS disclosures must be reliable because ESG ratings will become more reliable.

For companies, this raises the bar for ESRS reporting quality.

Your ESRS sustainability statement must be well structured, complete, traceable and audit‑ready, as rating providers will rely more heavily on ESRS disclosures – and will be supervised by ESMA.

Strong governance around sustainability data is essential – documenting sources, reinforcing controls and clarifying responsibilities.

Investors and assurance providers will also apply greater scrutiny to data quality, methodological alignment and consistency between ESRS disclosures and any ESG ratings referenced.

New criteria to stop companies from making misleading sustainability claims including through ESG Credentials

In parallel, the European Union is also targeting greenwashing and forcing companies to prove their environmental impact in other ways. The Empowering Consumers for the Green Transition Directive (ECGT) will become fully enforceable on September 27, 2026, banning generic claims like “eco-friendly” or “green” without proof (https://eur-lex.europa.eu/eli/dir/2024/825/oj/eng).

ESMA has also recently published two thematic notes on clear, fair & not misleading sustainability-related claims, addressing greenwashing risks in support of sustainable investments (see one of the notes enclosed). They specifically targeted ESG Credentials:

1. References to ESG credentials are among the most prominently used claims in retail-investor focused communications. These include references to qualifications, labels, ratings, certificates (henceforth referred to as “ESG credentials”): and can be misleading in several ways. For instance, by overstating the significance of having a given label, of receiving an ESG award, of being signatory to a voluntary framework, etc.

2. Notably, these claims are of relevance for the following parties: fund managers (claims about funds’ and asset managers’ credentials), benchmark administrators (benchmarks’ credentials), investment service providers (claims at entity and/or product level) and issuers (entity-level claims).

3. The ESG credential claim types below are considered in particular:

• a) Industry initiatives: actual significance of market participants’ involvement in net zero alliances, in voluntary ESG initiatives, including doing voluntary ESG reporting under specific international frameworks. Sometimes, being a signatory to some of these initiatives leads to receiving an external ESG rating/assessment from the third party, which may be based on self-reported ESG information.

• b) Labels and awards: actual significance of having a given credential like a national or regional label or perceived labels or of having won any type of ESG award (such as sustainability reporting awards for issuers); and

• c) Comparisons to peers: actual significance of ESG credentials that are based on comparing ESG characteristics of a product or an entity (including ESG metrics like carbon footprint, ESG ratings, etc.) to competitors, peer groups, etc. Very often, it is not clear whether a credential is absolute or whether it is based on a comparison to peers.

How to prepare

A well‑structured, machine‑readable ESRS statement not only ensures ESG rating readiness – it strengthens governance, accelerates internal learning, reveals strategic blind spots and positions your organisation for the EU’s dual green and digital transition.

If your first ESRS report is due for FY2027, remember: early reporters will already be on their fourth cycle. Building processes, collecting data, and aligning teams takes time. Waiting until 2027 means falling years behind, so starting now is essential.

👉 Cleerit’s guided digital ESRS end‑to‑end templates and governance processes help you get a head start by saving time, avoiding wasted effort and ensuring a higher‑quality, more trustworthy sustainability statement. Contact us here >>>

---

Sources:

Regulation (EU) 2024/3005 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities: https://eur-lex.europa.eu/eli/reg/2024/3005/oj/eng

ESMA rules for ESG rating providers: https://www.esma.europa.eu/esmas-activities/investors-and-issuers/esg-rating-providers

Public Statement from ESMA on what third parties may legally do with ESG ratings during the transition to the new EU ESG Ratings Regulation: https://www.esma.europa.eu/sites/default/files/2026-07/ESMA84-1427279869-1396_Public_Statement_on_Publication_or_distribution_of_ESG_ratings_by_third_parties_in_the_period_from_2_July_2026_until_authorisation__recogniti.pdf

ESMA’s thematic notes on clear, fair & not misleading sustainability-related claims addressing greenwashing risks in support of sustainable investments : ESMA36-429234738_-154_Thematic_notes_on_clear__fair___not_misleading_sustainability-related_claims.pdf

ESRS for Non-EU Groups (N‑ESRS): What Your Group Needs to Know and Do

N‑ESRS is the EU’s new sustainability reporting standard that requires large non‑EU groups with significant EU turnover to disclose their impacts on people and the environment.

It will reshape sustainability reporting for large non‑EU groups active in the EU.

An estimated 1200 companies will be in the scope of N-ESRS:

• 350-450 USA
• 150-200 UK
• 100-150 Switzerland, Japan
• 20-50 Cayman Islands, China, Canada, Rep. of Korea
• 10-20 Brazil, Mexico, Hong Kong, India, Bermuda, Virgin Islands

The objective of your N-ESRS sustainability report, taken as whole, will be to present fairly all your group’s material sustainability-related impacts, and how it manages them (through policies, actions, metrics and targets), reported at a global level.

N-ESRS is an impact-only reporting standard – the EU cannot impose full financial risk reporting on non-EU parents, and the legal mandate (Article 40a) is impact focused – but there are benefits to applying full ESRS on a voluntary basis:

• If the non-EU ultimate parent company applies full ESRS, the CSRD in-scope subsidiaries of that non-EU company could benefit from subsidiary exemption. But only if the non-EU parent company applies full ESRS.

Timeline: What happens when

• Mid‑July 2026: Exposure Draft published by EFRAG
• Mid‑July – October 2026: Public consultation (100 days)
• Early June 2026: Call for interest to participate field test
• July – October 2026: Field tests with report preparers
• January 2027: EFRAG delivers technical advice to the European Commission
• Mid‑2027: N-ESRS adoption as delegated act
• FY 2028: First reporting year
• 2029: First N‑ESRS report published

Source : EFRAG SRB Online Meeting 3 June 2026, https://vimeo.com/event/5947235

 

1. Who must report and when

Your group is in scope if it meets the both these two threshold criteria (Article 40a after Omnibus I):

• Criteria 1: EU turnover > EUR 450 million for two consecutive years (at group level)

AND

• Criteria 2: at least one EU subsidiary or branch with a net turnover in EU > EUR 200 million during the previous financial year

First reporting year: FY 2028, report published in 2029

2. What you must report 

N‑ESRS is based on simplified ESRS, but focuses only on impacts, not financial materiality:

• Disclosures on risks, opportunities, financial effects, resilience and dependencies are removed.
• But financial information is per se strictly not excluded, it is needed to provide contextual information to understand impacts!

This is the core design choice: N‑ESRS = ESRS minus the financial‑materiality pillar.

Mandatory disclosure areas (Article 40a)

Strategy & business model

• Plans to align with 1.5°C and climate neutrality by 2050
• How stakeholder interests and sustainability impacts are considered
• How sustainability strategy is implemented

Governance

• Role, expertise and skills of administrative/management bodies in sustainability oversight
• Incentive schemes linked to sustainability matters

Policies

• Description of the group’s policies in relation to sustainability matters

Targets

• Time‑bound sustainability targets, including at least GHG targets for 2030 and 2050
• Progress toward targets
• Whether environmental targets are based on scientific evidence

Due diligence

• Description of due diligence process implemented by the group with regard to sustainability matters (aligned with EU requirements where applicable)

Impacts

• Principal actual and potential adverse impacts across own operations and value chain, including products and services, business relationships and supply chain

Actions

• Actions taken to identify and monitor those impacts, and other adverse impacts which your group is required to identify according to other EU requirements to conduct a due diligence process
• Actions taken to prevent, mitigate, remediate or bring to an end actual or potential adverse impacts, and the results of such actions

Indicators

• Metrics relevant to all disclosures above (governance, strategy, policies, actions, targets)

Topics covered

You must report across 12 standards (same structure as ESRS): Climate, pollution, water, biodiversity, circularity, own workforce, value‑chain workers, communities, consumers, business conduct, plus general requirements and disclosures.

3. What perimeter to use (global vs EU‑related)

You will choose between three approaches (no final drafting yet):

Option 1 – Global approach (default)

• Report global impacts for all topics.

Option 2 – Mixed approach (flexible by topic)

• Climate impacts: always global
• Other topics: option to report only EU‑related impacts, if:
  • Impacts are managed separately (e.g., EU segment, EU products)
  • EU‑related impacts include customer‑based and location‑based components

Option 3 – Full ESRS (voluntary)

• If the non‑EU parent applies full ESRS, EU subsidiaries may benefit from the subsidiary exemption.

4. Interoperability with IFRS S1/S2

The objective is to avoid double reporting:

• Large overlap between ESRS 2 / IFRS S1 and ESRS E1 / IFRS S2 (governance, risk management, targets, GHG emissions, transition plan).
• N‑ESRS adds impact‑focused requirements (e.g., compatibility with 1.5°C).

Incorporation by reference to the IFRS sustainability report is an option!

 

What your group should do now (practical preparation plan)

Confirm scope

• Assess EU turnover at group level for the past two years.
• Identify EU subsidiaries/branches with turnover > EUR 200M.

Decide your reporting perimeter

• Global? Mixed? (topic‑by‑topic feasibility assessment) Full ESRS? (if aiming for subsidiary exemption)

Map your current disclosures

• Start from existing sustainability reporting (TCFD, GRI, IFRS S1/S2, local laws…).
• Identify gaps vs. N‑ESRS impact‑focused requirements.

Build or strengthen your due diligence system

• Map and assess actual and potential impacts across entire value chain.
• Document processes, policies, targets, actions and remediation results.

Prepare climate‑related disclosures

• Transition plan aligned with 1.5°C
• GHG inventory (Scopes 1–3)
• 2030 and 2050 targets + progress tracking

Prepare governance & incentives disclosures

• Roles, expertise, oversight mechanisms
• Sustainability‑linked remuneration

Prepare for data collection

• Global data for climate
• EU‑related data for other topics (if mixed approach)
• Value‑chain data (workers, communities, consumers)

Plan for interoperability

• Decide what will be disclosed in the IFRS sustainability report
• Decide what will be incorporated by reference into N‑ESRS

Engage early

• Participate in EFRAG’s consultation and field tests
• Align internal teams (finance, sustainability, legal, operations)

 

Why N‑ESRS focuses only on impacts (and not risks & opportunities)

1. Article 40a of the CSRD requires transparency on impacts, not financial materiality

The policy objectives of Article 40a are: “Level‑playing field” and “Accountability and transparency of non‑EU companies on impacts”.

This is the legal anchor: The EU wants non‑EU companies to disclose their impacts on people and planet when they operate in the EU market. It is not intended as a full double‑materiality regime for foreign groups.

2. The EU cannot impose financial‑risk reporting on non‑EU parent companies

• ESRS for EU companies are not policy neutral, they support the EU Green Deal and transition agenda.
• The EU can require disclosure of impacts caused by non-EU groups in the EU market.
• But it cannot realistically require a non‑EU parent to disclose global financial risks, opportunities, or resilience assessments.

Thus, N‑ESRS focuses on what the EU can legitimately require from non-EU parent companies: impact transparency, not financial risk analysis.

Requiring non-EU groups to perform full double materiality at global level (including financial risks, opportunities, and resilience analysis) would be disproportionate and legally complex.

You may still mention financial data if it helps explain an impact, but you do not perform the ESRS financial‑materiality assessment.

3. Interoperability with IFRS S1/S2 already covers risks for those who need it

• IFRS S1/S2 = financial risks & opportunities
• N‑ESRS = impacts only
• Overlap exists for climate, but N‑ESRS adds impact‑specific requirements

This separation avoids double reporting and respects the different purposes of each framework.

 

Want to participate in EFRAG’s field test?

🌿 EFRAG has launched a call for interest to participate in the field test of the draft Non-EU ESRS (N-ESRS) ahead of its public consultation in July 2026. Register here before 1 July and secure direct interaction with EFRAG shaping the future sustainability reporting standard for non EU groups 👉 EFRAG Resumed Work on the European Sustainability Reporting Standard for Non-EU Groups and Launches Field Test Call for Interest | EFRAG

 

The best way to prepare for N-ESRS reporting? Guided digital ESRS end-to-end templates.

Contact us if you want to use our guided digital ESRS end-to-end templates to get a head start.

On 21 April 2026, the Council of the EU formally adopted the Anti‑Corruption Directive, creating—for the first time—a fully harmonised EU‑wide criminal law framework to prevent, detect and sanction corruption across all Member States.

This is not “just another compliance update.” It is a structural shift with direct implications for governance, internal controls, procurement, reporting, and sustainability disclosures.

And it aligns closely with the Draft ESRS G1 (Business Conduct)—meaning companies will need to integrate anti‑corruption compliance into their CSRD‑aligned sustainability reporting.

What the Directive Changes — at a Glance

Harmonised EU definitions of corruption offences

The Directive standardises what constitutes:

• Public and private bribery
• Misappropriation
• Trading in influence
• Obstruction of justice
• Enrichment from corruption
• Concealment
• Serious unlawful exercise of public functions

This closes long‑standing gaps between Member States and removes ambiguity for cross‑border operations.

Turnover‑based sanctions for companies

For the most serious offences, companies face:

• Fines of at least 5% of global turnover or €40M
• For other offences: 3% of global turnover or €24M

This mirrors the GDPR model and raises the stakes dramatically.

Corporate liability for lack of supervision

Companies can be held liable when offences are committed for their benefit, including when failures in oversight or internal controls enabled the misconduct.

Extended jurisdiction & longer limitation periods

Member States may prosecute offences committed abroad if the company benefits within their territory. Limitation periods extend to 8–10 years, reflecting the complexity of corruption cases.

Mandatory national anti‑corruption strategies & specialised bodies

Member States must establish dedicated prevention bodies and structured risk assessments.

Whistleblower protection reinforced

The Directive confirms the applicability of the EU Whistleblowing Directive to corruption cases and requires strong protection for individuals reporting or cooperating.

Why This Matters for Companies — Beyond Criminal Law

The Directive is not only about criminal sanctions. It directly intersects with corporate governance, procurement, sustainability reporting, and stakeholder trust.

And this is where ESRS G1 (Business Conduct) becomes central.

3. How the Anti‑Corruption Directive Connects to ESRS G1 (Nov 2025)

The Draft ESRS G1 requires companies to disclose policies, actions, targets and metrics related to business conduct, including:

Anti‑corruption & anti‑bribery policies

Companies must disclose whether they have policies aligned with the UN Convention Against Corruption—the same international standard the Directive incorporates.

Whistleblower protection

ESRS G1 requires disclosure of whistleblower protection policies—now reinforced by the Directive’s mandatory protections.

Functions most exposed to corruption risk

ESRS G1 requires companies to identify roles most at risk (e.g., procurement, public‑sector interactions, high‑risk geographies). The Directive’s broad definitions of public officials and influence‑trading expand this risk perimeter.

Actions & procedures to prevent, detect, investigate corruption

ESRS G1 requires disclosure of:

• Training for high‑risk roles
• Supplier engagement and ESG due diligence
• Procedures for investigating allegations

These map directly to the Directive’s expectations for effective internal controls and corporate liability mitigation.

Metrics: convictions, fines, political influence, payment practices

ESRS G1 requires transparency on:

• Convictions and fines for corruption
• Political contributions and lobbying
• Payment practices (especially late payments to SMEs)

The Directive’s turnover‑based sanctions will make these disclosures far more material.

What Companies Should Do Now — A Practical Roadmap

With a 24‑month transposition period (36 months for national risk assessments and strategies), companies should not wait.

1. Conduct a corruption‑risk gap analysis

Assess alignment with:

• New EU offence definitions
• Corporate liability triggers
• Turnover‑based sanctions
• ESRS G1 disclosure requirements

2. Update policies and codes of conduct

Ensure consistency with:

• Harmonised EU definitions (e.g., “undue advantage”)
• Broader scope of public officials
• Trading in influence and misappropriation

3. Strengthen procurement & third‑party due diligence

Given the Directive’s broad liability scope, companies should:

• Screen intermediaries, agents, distributors
• Reinforce supplier ESG assessments
• Monitor high‑risk relationships continuously

4. Enhance internal controls & audit mechanisms

Courts will assess the effectiveness, not the existence, of compliance systems.

5. Reinforce whistleblowing channels

Ensure:

• Confidential reporting
• Anti‑retaliation measures
• Awareness and training

6. Prepare for ESRS G1 reporting

Integrate anti‑corruption data into:

• Policies (G1‑1)
• Actions (G1‑2)
• Targets (G1‑3)
• Metrics (G1‑4 to G1‑6)

7. Train leadership and high‑risk functions

The Directive explicitly requires training for roles most exposed to corruption risk.

The Strategic Opportunity

Beyond compliance, this Directive is a catalyst for:

• Stronger governance
• More resilient value chains
• Better investor confidence
• Enhanced CSRD‑aligned transparency
• A culture of integrity

Companies that act early will not only reduce legal exposure—they will strengthen their competitive position in a market where trust, transparency and accountability are becoming decisive.

—

The new Directive will enter into force 20 days after its publication in the Official Journal of the EU.

Source: https://www.consilium.europa.eu/en/press/press-releases/2026/04/21/council-adopts-new-eu-wide-law-to-combat-corruption/

—

👉 Want to strengthen resilience, compliance and stakeholder trust? Get in touch — Cleerit can help you operationalise all of this efficiently.

#SustainabilityReporting #Governance

ESRS E4, datapoints 24.d and 38.a, require companies to disclose adopted policies to address deforestation and relevant metrics.

EUDR, the EU Regulation on Deforestation-free Products (EU 2023/1115), introduces obligations relating to the placing or making available on the EU market, and exporting from the EU, of deforestation-related commodities and associated products.

The EU Commission has published a guide to help companies understand the level of due diligence required depending on the type of company, its position in the supply chain (first placing/downstream) and its size.

The document provides an overview of how the obligations apply illustrated through 11 supply chain scenarios.

You will find the document enclosed, and you can also download “EUDR compliance – a guide to understanding your position in beef, cocoa, coffee, palm oil, rubber, soy, and wood supply chains” here: https://data.europa.eu/doi/10.2779/4084343

In December 2024 the EU granted a 12-month additional phasing-in period, making the EUDR law applicable on 30 December 2025 for large and medium companies and 30 June 2026 for micro and small enterprises.

Traceability and transparency are at the heart of the system, to make the sustainability of supply chains a new standard.

⭕ Deforestation

Is defined as the conversion of forest to agricultural use, whether human-induced or not, which includes situations caused by natural disasters.

The assessment of whether the commodity has contributed to deforestation is conducted by looking backwards in time to see if the crop land was a ‘Forest’ at any time since the date specified in the Regulation (31 December 2020).

A forest that has experienced a fire and is then subsequently converted into agricultural land (after the cut-off date) would be considered deforestation under the Regulation.

In this specific case, an operator would be prohibited from sourcing commodities within the scope of the Regulation from that area (but not because of the forest fire).

Conversely, if the affected forest is allowed to regenerate, it would not be deemed deforestation, and an operator could source wood from that forest once it has regrown.

⭕ Forest degradation

Means structural changes to forest cover, taking the form of the conversion of:

🌿 primary forests or naturally regenerating forests into plantation forests or into other wooded land, or

🌿 primary forests into planted forests.

Wood products coming from such converted land cannot be placed on the market or exported.

Sustainable forest management systems can be employed and encouraged, provided they do not lead to a conversion that meets the degradation definition.

⭕ Which products are covered?

Palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate)

See the full list of commodities in Annex I of the Regulation: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461#d1e32-243-1

 

Source: https://green-business.ec.europa.eu/deforestation-regulation-implementation_en

 

Stay tuned for more CSRD, ESRS and VSME insights on our LinkedIn page >>