Four Key Sustainability Regulations for 2026 and Beyond: ESOS, SFDR, SDR, CSRD

Introduction

Sustainability reporting has undergone a massive transformation over the past decade. According to KPMG, 96% of the world's 250 largest companies now report on sustainability, up from 64% in 2011. This has been driven by both regulatory requirements, as well as demands from investors, customers, staff and beyond.

As we move through 2026 and beyond, firms are facing several important milestones across both the UK and EU regulatory landscape. ESOS, SFDR, SDR and CSRD have all undergone revisions in recent years and deadlines for disclosure are now looming.

In this article, we review four key sustainability regulations, providing a clear guide to what’s needed to comply, by when and how to get started.

ESOS Phase 4

Scope and requirements

The Energy Savings Opportunity Scheme (ESOS) is the UK's mandatory energy assessment scheme for large organisations, designed to improve energy efficiency across operations, buildings and transport. Under the upcoming Phase 4, emphasis is shifting from a fairly static focus on reporting energy data and identifying energy efficiency opportunities to a more advanced approach that prioritises continuous action and improvement.

ESOS applies to large UK companies, including those with 250 or more employees or annual turnover exceeding £44 million and a balance sheet total exceeding £38 million. Qualification is assessed at group level, meaning private equity-backed portfolio companies may be included even when they themselves are below the threshold.

Participating organisations must assess and measure energy use across their operations, identify areas of significant consumption and undertake energy audits covering a substantial proportion of total energy use. Companies then need to commit to quantified cost-effective actions to improve efficiency and reduce consumption, track progress against them, and explain why any actions are not implemented.

Key dates and what to do now

As a first step, companies need to assess whether they are in scope for ESOS Phase 4 on 31st December 2026. Those that qualify must complete their assessment and submit a compliance notification by 5th December 2027, followed by an action plan in 2028 and annual progress updates through to 2031.

Companies should begin preparing now by reviewing energy data, governance arrangements and audit requirements to avoid last-minute challenges and ensure they have enough time to get everything in place. Companies in scope for ESOS Phase 3 will also need to submit their annual progress update in line with existing regulations.

Read more about the scope, requirements and key dates here.

SFDR and SFDR 2.0

Scope and requirements

In response to market feedback on the original Sustainable Finance Disclosure Regulation (SFDR), European policymakers have developed SFDR 2.0, which seeks to simplify the existing regime and introduce a clearer product categorisation framework.

While primarily an EU regulation, many non-EU firms may be affected because of their European investor base, distribution arrangements or operations within the bloc. Under the proposed SFDR 2.0 regime, investment products would be classified into defined categories such as ESG Basics, Sustainable, Transition and Impact, replacing the existing Article 8 and Article 9 framework. Funds seeking to use these labels would need to meet specific eligibility criteria and provide evidence to support their sustainability objectives. The reforms would also retain entity-level sustainability disclosures, with Principal Adverse Impact (PAI) reporting expected to remain a key component of the framework, helping investors understand the negative sustainability impacts associated with investment decisions.

Key dates and what to do now

The final implementation timeline for SFDR 2.0 is yet to be confirmed. Following the adoption of negotiating positions by both the European Parliament and Council, trilogue negotiations are underway throughout Q4 2026 to determine the final framework.

In the meantime, firms should assess how their existing products would align with the proposed categories and review the quality of data supporting sustainability claims and PAI disclosures. For many managers, a challenge may be identifying gaps in portfolio company data and ensuring governance processes are robust enough to support more prescriptive sustainability classifications when SFDR 2.0 comes into force.

More details of the proposed changes can be found here and here.

SDR Sustainability Entity Reporting

Scope and requirements

While much of the attention surrounding the UK's Sustainability Disclosure Requirements (SDR) has focused on sustainable investment labels, Sustainability Entity Reporting is an equally important part of the regime, requiring in-scope firms to disclose how they identify, manage and oversee sustainability-related risks and opportunities.

The requirements apply primarily to managers of UK alternative investment funds (AIFs) with more than £5 billion in assets under management, who will need to publish their first SDR sustainability entity reports by 2nd December 2026.

The Sustainability Entity Reporting requirements build on the existing TCFD framework (governance, strategy risk management, metrics and targets) meaning firms with established TCFD processes already have a strong foundation.

However, it’s important to note that SDR broadens the focus beyond climate to include consideration of wider sustainability topics such as biodiversity, human rights and ethical business practices, while also encouraging firms to consider their impacts on people and the environment alongside financial risks to the firm from sustainability factors.

Key dates and what to do now

The first reporting deadline has already passed for the largest firms (>£50bn AUM) required to publish their first reports by 2nd December 2025.

The next cohort, covering firms with more than £5 billion AUM, need to publish their first reports by 2nd December 2026. Importantly, the Sustainability Entity Report is required for in-scope managers regardless of whether they have adopted SDR product labels.

Firms should start by assessing whether they are in scope, before exploring how to build on existing TCFD reporting to include broader sustainability topics.

Find out more about the scope and requirements of SDR Sustainability Entity Reporting, here.

CSRD and the updated ESRS

Scope and requirements

After several years of negotiation and debate, including the recent Omnibus simplification package, the Corporate Sustainability Reporting Directive (CSRD) has been substantially revised. Under the new regime, CSRD will primarily apply to larger organisations with more than 1,000 employees and either annual turnover exceeding €50 million or a balance sheet total above €25 million.

For in-scope companies, reporting will continue to be based on the ESRS framework, with double materiality remaining a core principle. Companies will need to conduct a double materiality assessment (DMA) to assess both how sustainability issues affect the business and how the business impacts people and the environment. While the revised standards reduce the number of mandatory datapoints, companies will still need a robust materiality assessment process to determine which sustainability topics are relevant for disclosure.

Key dates and what to do now

The revised ESRS were published in the Official Journal of the EU on 31st July 2026 and entered into force on 20th August 2026. Following the Omnibus reforms, large companies that remain in scope will generally report for financial years beginning on or after 1st January 2028, with the first reports to be published in 2029. Non-EU parent companies meeting the relevant thresholds are expected to report from 1st January 2029, with the first reports to be published in 2030.

The priority for companies should be implementation readiness. Companies expecting future reporting obligations should already be progressing double materiality assessments, identifying material sustainability topics, mapping ESRS disclosure requirements and assessing where data gaps exist across their operations and value chains.

Conclusion

The sustainability reporting landscape continues to evolve but the emphasis is shifting, from basic compliance and data reporting to the implementation of action supported by reliable evidence.

While ESOS, SFDR, SDR and CSRD each have their own requirements, they all rely on the same underlying capabilities: robust data, clear governance and a strong understanding of sustainability risks and impacts.

For firms and companies facing reporting obligations in the coming years, early preparation will be critical. Those that take action now will not only be better positioned for compliance, but also better equipped to respond more confidently to the growing demands of investors, customers and other stakeholders.

For more information on how we can help you comply with these and other sustainability regulations and standards, please get in touch.