The regulatory and voluntary standard landscape is evolving fast, increasingly focusing on Scope 3 emissions and product-level data, while the EU has narrowed who must report.
Sustainability reporting, or reporting on sustainability, is now essential for businesses. As stakeholders and regulations push companies to prove their commitment to environmental sustainability, knowing how to navigate this ever-changing landscape can feel overwhelming. But don’t worry, you’re not alone!
In this blog, we explain what sustainability reporting is, why it’s important and the key EU environmental regulations and voluntary standards to have on your radar. We will also explore the benefits and challenges of reporting, where to start and how Root simplifies reporting for companies.
What is sustainability reporting and what is an ESG report?
Sustainability reporting is how your company showcases its environmental, social and governance (ESG) performance. It’s about transparently showing your business’s efforts to address key sustainability challenges and demonstrating your commitment to environmental sustainability. By publicly disclosing sustainability information like your carbon footprint, you meet regulatory requirements and prove you’re serious about sustainability to key stakeholders like investors, customers and employees.
There are two types of sustainability reporting: mandatory and voluntary. Mandatory reporting focuses on complying with regulatory requirements, whereas voluntary reporting goes beyond compliance, where companies disclose their social and environmental sustainability performance to various voluntary reporting frameworks. With increasing stakeholder demand for transparency, reporting is essential to any robust sustainability strategy.
Why is sustainability reporting important?
Sustainability reporting isn’t just important, it’s essential for your company’s future. Complying with regulations like CSRD and the ESPR isn’t just about avoiding fines, it’s about future-proofing your business. These regulations help your company adapt to a world where increasing environmental issues affect business operations, such as the rising number of natural disasters causing supply chain disruptions. Compliance keeps your business resilient to a rapidly changing world.
Disclosure to voluntary standards demonstrates your commitment to sustainability and builds stakeholder trust. Not reporting to voluntary frameworks can make your company appear to lag behind competitors who are prioritising sustainability. Stakeholders like investors are increasingly interested in which voluntary standards companies disclose to, so not engaging with these standards risks damaging vital relationships.
Key regulations, voluntary standards and frameworks to have on your radar
Europe is leading the way in sustainability reporting, and the landscape is rapidly changing.
If you are a product company, there are several EU environmental regulations and voluntary standards which will impact your business that you should be aware of:
Key regulations
| Regulation | What it does | Who it applies to | When |
|---|---|---|---|
| CSRD (Corporate Sustainability Reporting Directive) | Requires detailed reports on environmental impact and strategy, including the carbon footprint and the often overlooked Scope 3 emissions. Companies with a climate transition plan must disclose it. | Companies with more than 1,000 employees and over €450 million net turnover. Listed SMEs are excluded. | Financial years starting on or after 1 January 2027 |
| ESRS (European Sustainability Reporting Standards) | Set which environmental, social and governance topics a CSRD report must cover. The simplified version has around 60% fewer mandatory datapoints and no sector-specific standards. | Companies in CSRD scope | Mandatory from FY2027, opt-in for FY2026 |
| CSDDD (Corporate Sustainability Due Diligence Directive) | Requires due diligence across the supply chain on human rights and environmental practices. The obligation to adopt a climate transition plan has been removed. | Companies with more than 5,000 employees and over €1.5 billion net turnover | Member States transpose it by July 2028 |
| ESPR (Ecodesign for Sustainable Products Regulation) | Sets ecodesign requirements, limits hazardous materials, creates the Digital Product Passport and bans destroying unsold apparel, clothing accessories and footwear. | Product groups covered by an ESPR delegated act. The destruction ban covers large companies, then medium-sized ones. | Destruction ban: large companies since 19 July 2026, medium-sized from 19 July 2030. Passports per product group, textiles among the first. |
| EmpCo (Empowering Consumers Directive) | Bans generic environmental claims without proof, offset-based "climate neutral" product claims and sustainability labels without certification. | All consumer-facing environmental claims | Since 27 September 2026 |
| PPWR (Packaging and Packaging Waste Regulation) | Sets EU-wide requirements on packaging recyclability, recycled content, reuse and labelling. | All packaging on the EU market | From August 2026 |
The CSRD, CSDDD and ESRS rows reflect Omnibus I, the EU's simplification package. It amends these laws rather than replacing them, and it removed most mid-sized companies from CSRD scope. Companies outside the new scope can still report voluntarily with a lighter standard published alongside the revised ESRS. See our CSRD reporting use case.
The Green Claims Directive, a separate proposal, has been stalled since June 2025.
Key voluntary standards
- SBTi (Science Based Targets initiative): helps companies set carbon reduction targets and net-zero pathways in line with the Paris Agreement. Version 2.0 of its Corporate Net-Zero Standard takes effect on 31 January 2027. See our SBTi target setting use case.
- GRI (Global Reporting Initiative): the most widely used voluntary framework for reporting environmental, social and economic impacts. The ISSB (International Sustainability Standards Board), which absorbed the Sustainability Accounting Standards Board (SASB), sets a separate baseline aimed at investors and financial reporting.
- CDP (formerly the Carbon Disclosure Project): a platform for disclosing environmental impact on climate change, water security and deforestation.
- VSME: the European Commission's voluntary reporting standard for small and medium-sized enterprises (SMEs). It gives companies outside CSRD scope a simple way to answer data requests from customers, banks and investors. See our VSME reporting use case.
- EPDs (Environmental Product Declarations): third-party verified data on a product's environmental impact across its life cycle, based on Life Cycle Assessment (LCA). Most established in construction, voluntary in other sectors. See our EPD use case.
- ISO 14040 and 14044: the global standards for conducting a consistent, comprehensive LCA.
What are the benefits of sustainability reporting?
Increasingly, companies see sustainability reporting as a value-creation opportunity rather than a compliance tick-box exercise.
Let’s explore some of the key ways it benefits your business:
Future-proofs your business
Sustainability reporting prepares your business for a rapidly changing world. Ensuring your operations and supply chains meet environmental standards builds resilience against disruptions and ensures your business is adaptable and competitive in the long run.
Drives innovation
Sustainability reporting encourages product innovation by highlighting opportunities for improvement, such as using sustainable materials or refining production processes. You ensure your products are compliant and competitive in a rapidly evolving market by reporting to regulations and voluntary standards.
Make trustworthy green claims
Robust, reported data lets you substantiate your environmental claims, as required by the Empowering Consumers Directive. This builds consumer trust and protects your business from greenwashing accusations. Your marketing team can confidently promote your products, knowing they meet strict environmental standards.
Builds trust with stakeholders
Sustainability reporting strengthens relationships with key stakeholders such as customers, investors and employees. By providing transparent, accurate data, you demonstrate your commitment to sustainability.
Strengthen supplier relationships
Regulations like CSRD and CSDDD are pushing for greater supply chain transparency. Collaborating with suppliers to understand and improve their environmental performance deepens relationships and builds long-term partnerships.
What are the challenges of sustainability reporting?
Reporting to environmental regulations and voluntary standards presents numerous challenges for companies. Below are some of the most significant hurdles companies face:
Navigating evolving regulations
Keeping up with ever-changing sustainability regulations and voluntary standards is time-consuming but essential. Non-compliance can lead to fines and damage to your reputation, making it crucial for your company to stay informed and adapt quickly.
Data collection complexities
Data collection is one of the biggest hurdles, especially for companies with global supply chains. With regulations like CSRD requiring in-scope companies to report on their Scope 3 emissions, gathering accurate and comprehensive data on your supply chain can be resource-intensive, especially for smaller companies.
Untransparent supply chains
One of the biggest challenges to sustainability reporting is companies gathering data on their supply chain. Measuring and disclosing their value chain’s sustainability performance is challenging when companies have untransparent supply chains.
Resource-intensive process
Sustainability teams already manage a wide range of initiatives and balancing these with reporting responsibilities can be overwhelming. Without efficient data management and reporting systems, gathering data and reporting on various regulations and voluntary standards with different reporting requirements becomes time-consuming.
Where to start with your sustainability report
So, where should you begin with sustainability reporting? Here are the key steps to get started:
Understand your reporting obligations
Identify which sustainability regulations apply to your business. Not all will be relevant, so focus on the ones you must comply with to avoid unnecessary work. With the new CSRD and CSDDD thresholds, re-check whether you are still in scope. For voluntary standards, prioritise those valued by your stakeholders to ensure your reporting aligns with their expectations and adds value to your business.
Conduct LCAs on your product portfolio
LCAs provide robust data that you can use to comply with mandatory regulations and disclose to voluntary standards. By analysing your product portfolio, LCAs generate accurate, comprehensive data for sustainability reporting. This product-level data will also help you comply with new regulations which require detailed product footprints , such as Digital Product Passports.
Collaborate with your suppliers
You can’t manage sustainability reporting alone, especially when disclosing Scope 3 emissions, which mainly occur within your supply chain. Early collaboration with suppliers is crucial. Set clear expectations for data collection and work closely with your suppliers to gather accurate information for reporting. Reporting is an excellent opportunity to gain visibility into your supply chain and strengthen supplier relationships.
Create a centralised data system
Streamline your reporting process by using a centralised data system. Having one data system ensures all your data is organised and accessible, allowing you to use data to report on multiple regulations or voluntary standards efficiently. This will keep your sustainability data accurate, easily accessible and ready for reporting, including your annual report.
How automated LCA can help with sustainability reporting
Automated LCA platforms like Root simplify reporting by providing detailed company-wide and product-level data for regulations and voluntary standards.
Here’s how we can help:
- Company and product-level footprints: Root’s platform creates detailed LCAs for your company and your entire product portfolio, ensuring you comply with regulations and disclose to voluntary standards using accurate, verifiable, audit-ready data.
- Holistic data: Root’s platform creates comprehensive data on a wide range of environmental metrics, including carbon emissions, water usage and waste. This holistic data allows you to report on various sustainability topics.
- Quick data export: With Root’s Snapshot function, you can download all the necessary data in just a few clicks. The Snapshot function, combined with Root collating all your data in one central place, enables you to quickly access the correct information for reporting without delays or complications.
We can help
At Root, we aim to redefine the norm by making company and product footprints universal. Our platform conducts automated LCAs for entire product portfolios, helping businesses report effectively on regulations, avoid greenwashing and become industry leaders in sustainability.
Root creates thousands of comprehensive LCAs at once, providing you with the detailed, holistic environmental data needed to report with confidence.
Interested to learn more? Get in touch with our team to discover how Root can help you achieve compliance and drive sustainable growth.
and sustainability claim you can trust.
