CSRD: Corporate Sustainability Reporting Directive

Overview

The Corporate Sustainability Reporting Directive (CSRD) is a landmark EU regulation that significantly expands ESG disclosure requirements for companies. It replaces the Non-Financial Reporting Directive (NFRD) and introduces more detailed, standardized, and auditable sustainability reporting.

Key Requirements

Scope

The CSRD applies to (as narrowed by the 2025 Omnibus I package):

• Large EU companies: more than 1,000 employees and more than €450M net turnover (narrowed from the original "2 of 3" criteria of 250+ employees / €50M revenue / €25M assets)
• Listed SMEs: removed from mandatory scope by the Omnibus
• Non-EU companies: with €450M+ EU revenue (raised from €150M)

Timeline

• FY2024 (report 2025): Companies already under NFRD (Wave 1 — proceeded as planned)
• FY2027 (report 2028): Remaining large companies (Wave 2 — delayed two years by the "stop-the-clock" directive)
• 2028: Non-EU companies above the €450M EU revenue threshold

ESRS Standards

What Are ESRS?

European Sustainability Reporting Standards (ESRS) provide detailed disclosure requirements:

• Cross-cutting: Governance, strategy, impacts, risks/opportunities
• Sector-agnostic: Apply to all companies
• Sector-specific: Additional standards by industry (future)

Disclosure Areas

Double Materiality

Concept

Companies must report on:

1. Financial materiality: ESG issues affecting company performance
2. Impact materiality: Company's impacts on people and environment

Assessment Process

• Identify stakeholders
• Assess actual/potential impacts
• Evaluate financial risks and opportunities
• Determine material topics

Practical Guidance

Steps to Prepare

1. Gap analysis: Compare current reporting to ESRS
2. Data collection: Establish systems for required metrics
3. Governance: Assign board and management responsibility
4. Assurance: Plan for limited reasonable assurance

Required Disclosures

• Strategy: How sustainability issues affect business model
• Targets: Time-bound, science-based where applicable
• Metrics: Quantitative data using ESRS standards
• Transition plans: Climate transition plans for large companies

Key Takeaways

• CSRD significantly expands ESG reporting scope (narrowed by ~80% under the 2025 Omnibus I package)
• Double materiality is central concept
• ESRS provides detailed disclosure standards
• Assurance requirement: limited assurance (progression to reasonable assurance removed by Omnibus)
• Non-EU companies also affected (€450M threshold)
• Preparation should begin now

References

• European Commission — Corporate Sustainability Reporting — CSRD framework, scope, ESRS adoption
• European Parliament — First Omnibus Package on Sustainability (legislative train) — 2025 Omnibus changes: scope narrowing, SME removal, stop-the-clock
• EUR-Lex — Directive (EU) 2022/2464 (CSRD) — adopted CSRD text