The Corporate Sustainability Reporting Directive is, on paper, a European law. It is an EU directive implemented through national legislation, supervised by national authorities, with a scope defined by European company categories and thresholds.
In commercial reality, it is becoming a global standard.
How the Brussels Effect works
Scholars call this the Brussels Effect: the way European rules, through the sheer size and reach of the European market, become the working standard for any organisation with significant European business. It has happened before in competition law, in data protection through the GDPR, in chemicals through REACH and in financial services through MiFID. It is now happening in sustainability disclosure.
The CSRD reaches beyond the EU through three channels.
Channel one: direct scope
The first is direct. The CSRD covers not only EU companies but also non-EU groups with substantial European business. Since the 2026 Omnibus reforms, that means groups with more than €450 million of turnover in the EU and a sizeable EU subsidiary or branch. The reforms cut the number of companies in scope sharply, but most large multinationals with real European operations are still covered, wherever their headquarters sit. Groups that assumed the CSRD was a matter for their European subsidiaries have been surprised to find that group level reporting is required.
Channel two: the supply chain
The second is the supply chain. The CSRD asks companies to report material sustainability information across their value chain, which in practice means suppliers, logistics partners and service providers. An EU manufacturer sourcing components in Vietnam, materials in Brazil and assembly in Nigeria needs information from each of them to meet its own obligations. Those suppliers are not subject to the CSRD themselves, and since 2026 a value chain cap protects companies with up to 1,000 employees from requests that go beyond a voluntary standard. But commercial contracts with EU buyers still increasingly ask suppliers for the data, and suppliers that can provide it easily have an advantage.
Channel three: investor expectations
The third is capital. European investors operate under the Sustainable Finance Disclosure Regulation, which requires them to assess and disclose the sustainability characteristics of their holdings. Any company seeking European capital, through listings, bonds, bank facilities or institutional investors, meets requests shaped by European disclosure rules, and those requests do not stop at the border. A Chilean company seeking European institutional money faces expectations much like a German company does.
The wrong question, and the right one
For most global organisations with real European relationships, “does the CSRD apply to us?” is becoming the wrong question. The right one is: where are our customers, investors and partners working under European sustainability standards, and what information do we need to be ready to give them?
The answer, increasingly, is almost everywhere.
California: an American Brussels Effect
The pattern is not only European. In the United States, California plays a similar role at state level. The Climate Corporate Data Accountability Act requires companies with more than US$1 billion in revenue doing business in California to disclose their Scope 1 and 2 emissions from 2026, and Scope 3 from 2027. A companion law requires companies above a lower revenue threshold to report climate related financial risks, although a federal appeals court paused that requirement in late 2025 while a constitutional challenge proceeds. Measured as a country, California would be the fourth largest economy in the world, so for large organisations with US operations its rules work as a national standard by default.
At federal level, the SEC abandoned its climate disclosure rule in 2025 after legal challenges and a change of administration. That has not removed the pressure. Institutional investors still expect large US public companies to disclose much of what the rule would have required.
ISSB: the global convergence layer
The ISSB standards add a third layer. More than 35 jurisdictions have adopted them or committed to do so. For companies operating across several of those markets, adopting the ISSB approach voluntarily, whatever the local timetable, avoids running several incompatible reporting systems for different markets.
Strategic implications
The disclosure environment is converging faster than the formal rules suggest. Companies that build their sustainability approach around the minimum their home country requires are often below what their actual commercial relationships demand. Companies building infrastructure that meets CSRD level expectations globally, whether or not the CSRD technically applies, are preparing for a trajectory that is clear in direction even if the formal rules are not yet complete.
For most global organisations, CSRD readiness is not a question of European jurisdiction. It is a question of commercial sustainability.
Those that understand this are investing in the infrastructure now. Those that do not are betting that their customers and investors will lower their expectations.
That bet does not have a good track record.
Draws on Chapters Two, Three and Nine of my book, Sustainability Leadership: The Global Outlook.