In CSRD’s post-Omnibus era, supply chains are the new driver of ESG
In recent years, European companies have largely pursued ESG initiatives in response to regulatory pressure – particularly the CSRD. That mindset is shifting, as organizations increasingly recognize ESG’s genuine competitive advantage and its close link with supply chain considerations, according to a new white paper from RSM.
While the European Union has recently scaled back its mandatory sustainability reporting requirements, companies are finding that the pressure to maintain ESG standards is higher than ever. This new era is defined by the supply chain itself acting as a de facto regulator, enforcing rules with an urgency that traditional directives often lack.
EU regulations
In early 2026, the EU Omnibus package significantly altered the Corporate Sustainability Reporting Directive (CSRD), the main regulatory driver of ESG in the bloc. This legislative update reduced the number of companies required to report by approximately 85%.
More specifically, the threshold for compliance was raised to include only companies with 1,000 or more employees and at least €450 million in net turnover. Meanwhile the Corporate Sustainability Due Diligence Directive (CSDDD) thresholds were raised even higher – to 5,000 employees and €1.5 billion in turnover
These two regulations are similar, but there are key differences: The CSRD requires companies to publish an annual report detailing their ESG impact, while the Corporate Sustainability Due Diligence Directive (CSDDD) goes a step further by requiring companies to specifically identify and fix human rights or environmental issues within their own operations and supply chains.
Despite this reduction in legal red tape, the global operating environment has become increasingly volatile. Geopolitical fragmentation is another important part of what is driving ESG, the whitepaper argues. EU organizations currently face structural stresses including ongoing armed conflicts worldwide. The wars in Ukraine and the Middle East are especially concerning for Europe.
In addition to that, global supply chain disruptions now cost businesses an estimated $184 billion annually. These factors, combined with trade policy shifts and climate-related risks, mean that ESG data is no longer just for a report; it is essential for survival.
“You did not do ESG because a directive told you to. You did it because your supply chain was about to demand it. Now it has,” says Mario van den Broek, partner at RSM in the Netherlands. “The question is what you do with the capability you built. The regulatory retreat and the market reality.”
The supply chain ‘cascade effect’
Even companies that are no longer legally required to report under the new 1,000-employee threshold are facing intense pressure from their own customers. Large entities that remain in scope must report on their entire value chain, which includes their upstream suppliers. This creates a cascade effect where a mid-sized manufacturer may lose a contract if they cannot provide emissions data or labor practice documentation to a larger partner.
Financial markets are also driving this change. Banks, investors, and insurers are increasingly using ESG metrics to determine lending rates and insurance premiums. One recent study indicated that 65% of companies face at least one major bottleneck in their supply chain, prompting insurers to factor ESG exposure directly into their costs.
“The Sustainable Finance Disclosure Regulation still applies to financial market participants, requiring them to disclose how sustainability risks are integrated into investment decisions and how adverse sustainability impacts are considered,” notes Van den Broek.
“ESG ratings agencies continue to evaluate companies irrespective of regulatory reporting obligations. A company’s ESG rating does not reset because the CSRD scope has narrowed. If anything, the absence of mandatory reporting may increase reliance on ratings agencies as the primary source of ESG intelligence, raising the stakes for companies that fail to manage their data proactively.”
From compliance to intelligence
The most successful firms are moving away from a reactive compliance mindset toward what RSM calls a proactive model based on intelligence. This transition calls for using AI and advanced data tools to monitor geopolitical signals and trade policy changes in real time. Instead of viewing ESG as a yearly reporting chore, these organizations treat it as a continuous input for making better sourcing and logistics decisions.
“The companies that consistently outperform are not those that reacted fastest to regulatory deadlines. They are those that read the structural signals early, invested in ESG intelligence ahead of any directive, and are now positioned to act while others are still diagnosing their exposure,” said Van den Broek.
The RSM whitepaper suggests that the investments made during the initial push for CSRD readiness were not in vain. The data infrastructure and governance structures built then are the exact tools needed now to navigate the current era of supply chain ESG.
As trade barriers and climate disruptions grow, the ability to read these signals early provides a distinct competitive advantage. Companies that paused their programs after the regulatory rollbacks are now finding themselves scrambling to meet the immediate demands of their commercial partners.
“The rules are changing, but the urgency is increasing,” says van den Broek. “With the EU Omnibus adjustments, a large number of companies are no longer required to comply with CSRD. At the same time, supply chains are under pressure from geopolitical developments, climate change and evolving stakeholder expectations.”
