Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is a directive by the European Union that replaces the Non-Financial Reporting Directive (NFRD), significantly expanding the scope and depth of corporate sustainability reporting requirements. It requires companies to report on the impact of their activities on the environment and society and mandates the audit of the reported information to ensure reliability and transparency.

This directive is part of the EU’s broader goal to integrate sustainability into corporate governance and align with the European Green Deal objectives​.

Scope of Application:

1. CSRD applies to all large EU companies, all listed companies (except micro-enterprises), and non-EU companies operating within the EU. This includes companies meeting certain size thresholds under Directive 2013/34/EU​​
2. Small and medium-sized enterprises (SMEs) may opt into voluntary reporting based on VSME standards​​

Double Materiality Principle

Companies are required to report on the financial risks and opportunities arising from sustainability issues and their impact on society and the environment. This approach is central to the European Sustainability Reporting Standards (ESRS)​​

Reporting Standards (ESRS)

Companies must comply with European Sustainability Reporting Standards (ESRS). These cover general requirements, disclosures, and topic-specific issues, such as climate change (E1), biodiversity (E4), and business conduct (G1). The ESRS were developed by EFRAG based on stakeholder input​​​

Streamlined Reporting

CSRD aims to ensure compatibility with existing regulations like the Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR)​​

Alignment with International Standards

ESRS are aligned with global frameworks like the GRI Standards and ISSB to ensure interoperability and reduce redundancy​​

Materiality Assessment

Companies must perform a robust materiality assessment, identifying significant sustainability impacts, risks, and opportunities across their operations and value chains​​

Digital Reporting and Assurance

Encourages the use of digital taxonomies to facilitate seamless data integration and emphasizes external assurance of sustainability data to enhance reliability​​

*UPDATE:

The European Commission's "Simplification Omnibus" package, introduced in February 2025, proposes significant changes to the Corporate Sustainability Reporting Directive (CSRD) to reduce administrative burdens and enhance competitiveness.

On July 11th, 2025, the European Commission adopted a targeted "quick fix" Delegated Act amending the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD). This amendment postpones certain reporting requirements for "wave one" companies—those who began reporting in 2024—for the 2025 and 2026 financial years. It extends phase-in reliefs to larger companies within this group, reducing their immediate reporting burden while maintaining transparency. The Delegated Act is now undergoing scrutiny by the European Parliament and Council and will enter into force unless objected to.

Key changes for companies in the first wave of sustainability reporting include:

• All first-wave companies can omit disclosures related to ESRS E4 (biodiversity), S2 (workers in the value chain), S3 (affected communities), and S4 (consumers and end-users) for 2025 and 2026.
• They can omit information about expected financial effects for 2025 and 2026.
• They may omit certain parts of ESRS S1 disclosures (specific topics S1-7, S1-8, S1-11 to S1-15) for 2025 and 2026.
• Companies with up to 750 employees can also omit Scope 3 emissions and total emissions results, plus all S1 disclosures, for 2025 and 2026.

​The European Commission's "Stop-the-Clock" proposal, part of the broader Omnibus Simplification Package, intend to agree on postponement of the directive.

🔗 EP, EC, EFRAG