July 23, 2023
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ESG Reporting has become increasingly important for businesses worldwide, and the European Union has introduced the Corporate Sustainability Reporting Directive (CSRD) to update and strengthen the existing Non-Financial Reporting Directive (NFDR). The CSRD requires all large and listed companies to disclose sustainability-related information in their annual reports, including their policies, risks, and outcomes on environmental, social, and governance issues. Its primary objective is to provide accurate, relevant, and comparable sustainability information to stakeholders for informed decision-making and is part of the EU's Sustainable Finance Action Plan. The CSRD's scope is much broader than the NFRD, including detailed reporting requirements, such as reporting on the company's impact on climate change, biodiversity, and human rights, and introducing mandatory digital reporting in a standardised format.

When does the CSRD come into effect?

On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD)EN entered into force. The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. Find out more here.


How do I comply with CSRD

To comply with the CSRD, companies will need to follow these steps:

1. Check eligibility with the CSRD: Companies should determine whether they fall under the CSRD's scope, which includes all large companies and all listed companies operating within the EU. Who’s eligible?

  • The CSRD applies to EU-based public companies (excluding micro-enterprises) and large EU-based private organizations. Large organizations are defined as those meeting two or more of the following criteria:
  • 250 or more employees
  • Annual revenues of €40 million or more
  • A balance sheet of €20 million or more
  • Non-EU parent companies may need to file CSRD disclosures for their EU subsidiaries if they meet the criteria mentioned above. However, some companies can choose to consolidate reporting globally.
  • Eventually, the CSRD will require consolidated reporting for non-EU parent companies with annual EU revenues of €150 million or more. They must have at least one branch with annual EU revenues of €40 million or more or an EU-listed subsidiary, along with meeting the "large" criteria mentioned earlier. In such cases, the parent company is also responsible for including their non-EU activities.
  • The CSRD's technical rules, known as ESRS (European Sustainability Reporting Standards), provide guidance on what information should be included in each of the four disclosure sections.

2. Assess sustainability risks and impacts: Companies should identify and assess their sustainability risks and impacts, such as climate change, biodiversity, and human rights issues. This involves analysing the company's operations, supply chain, products, and services.

CSRD will be integrated with other reporting standards, and it will cover SFDR Principal Adverse Impacts (PAI) indicators. It will have higher alignment with international standards, such as the Sustainability Accounting Standards Board (SASB), GRI standards, UN guiding principles on business and human rights, and the OECD guidelines for multinational enterprises. In addition, further alignments with TCFD and TNFD will be made.

  1. Establish a reporting framework: Companies should establish a reporting framework that outlines how they will report on their sustainability-related information. The framework should be aligned with the CSRD's reporting requirements and include clear and relevant metrics and targets. Check the details below.
  2. Implement reporting processes: Companies should implement reporting processes that enable them to collect and report on sustainability-related information. These processes should be aligned with the reporting framework and should involve all relevant departments and stakeholders.
  3. Ensure accuracy and transparency: Companies should ensure that their sustainability-related information is accurate and transparent. This involves verifying data and information and disclosing any material information that could impact the company's financial performance.
  4. Submit reports in a standardised format: Companies should submit their reports in a standardised digital format, as required by the CSRD. This format should enable stakeholders to access and analyse sustainability-related information easily. Companies will be required to prepare their management report in the European Single Electronic Format (ESEF). Companies will also have to mark up their sustainability reporting, including the disclosures required by Article 8 of the EU taxonomy regulation. This will allow making sustainability reports available in the European Single Access Point.

How does the CSRD fit in with other legislations?

Understanding the interplay between different legislations can be a complex task, given the multitude of mandates in place. One important aspect to note is that the CSRD and ESRS will supersede and enhance the existing Non-Financial Reporting Directive (NFRD), representing a significant development in sustainability reporting requirements.

However, it is crucial to recognise that the CSRD is not an isolated regulation but rather integrates with other existing EU mandates. One notable legislation is the Sustainable Finance Disclosure Regulation (SFDR), which outlines ESG disclosure obligations for participants in financial markets. Additionally, the EU Taxonomy serves as a classification system for identifying economically sustainable activities.

These various regulations, including the CSRD, SFDR, and the EU Taxonomy, operate in harmony to advance sustainable investments. The objective is to consolidate these requirements, streamline processes, minimise complexity, and avoid redundant reporting obligations. This integration aims to create a unified framework that promotes transparency, consistency, and accountability in sustainability reporting and disclosure practices.

What “double materiality” means in the CSRD

In the realm of corporate sustainability reporting, the "double materiality" concept holds immense significance. The latest guidelines of the Corporate Sustainability Reporting Directive (CSRD) require companies to provide general disclosures in their reports while reporting on specific standards only for those deemed material. The process of determining materiality must be transparently outlined and validated in the general disclosures.

To ascertain materiality, companies conduct a "double materiality" assessment, which involves evaluating two crucial aspects. Firstly, they assess how their operations impact both people and the environment, considering the social and environmental consequences. Secondly, they examine how sustainability-related developments affect the company itself. If an impact is deemed material from either or both perspectives, the topic is classified as material.

These assessments involve actively engaging diverse stakeholders, such as scientific experts, customers, employees, and investors. Stakeholders provide valuable input, evaluating risks and opportunities related to the topics covered by the CSRD. Moreover, metrics-based measurements are employed to augment the understanding of potential impacts.

Through a combination of qualitative and quantitative insights from stakeholders, companies can identify the truly material topics. These materiality assessments significantly influence which specific standards of the CSRD must be included in a company's reporting. This ensures that reporting efforts focus on the topics that hold significance for both the organization and society as a whole, promoting transparency and accountability in environmental and social responsibilities.


What are the required elements to disclose under CSRD?

1. ESRS 2- General Disclosures. The European Sustainability Reporting Standards (ESRS) is a proposed set of reporting standards that aim to create a common language for sustainability reporting across Europe. The ESRS is being developed by the European Lab Project Task Force and will cover a range of sustainability topics, such as climate change, social issues, and biodiversity. The general disclosures in this context would refer to the basic information that companies would be required to provide in their sustainability reports, such as the company's name, the scope of the report, reporting period, and the sustainability reporting framework used.

2. EU legislation data points (SFDR, EU benchmark, climate law,…). EU legislation data points refer to specific pieces of information related to European Union (EU) laws and regulations. These are in ESRS 2 and topical standards refer to Appendix C of ESRS 2 for a full list.

3. E1 - climate change. E1 refers to one of the topics covered in the sustainability reporting framework of the Global Reporting Initiative (GRI). The topic is climate change and it focuses on how organizations are addressing their greenhouse gas emissions, as well as the risks and opportunities related to climate change.

4. S1- own workforce DRs  1 to 9 for undertakings with 250 employees or more. S1 refers to one of the topics covered in the sustainability reporting framework of the Global Reporting Initiative (GRI). The topic is "Labor Practices and Decent Work" and it includes various indicators related to the management of a company's workforce. One of the indicators within this topic is S1, which focuses on a company's own workforce disclosures.

What are the challenges of the CSRD Disclosure?

The disclosure requirements of the CSRD present several challenges for companies. One significant hurdle is the increased level of detail compared to the previous NFRD regulations. This means that companies must gather vast amounts of accurate and verifiable data. Tracking Scope 3 emissions, which encompass indirect emissions throughout the supply chain, poses a particular difficulty due to the complexities involved in monitoring factors such as transportation and product usage.

Companies already familiar with reporting under the NFRD will face a steep learning curve to adapt to the new CSRD requirements. On the other hand, organizations that are preparing their first ESG report under the CSRD face an even more significant challenge in terms of understanding and implementing the guidelines.

Moreover, it is important to note that the CSRD is being integrated into national legislation across the European Union. The level of enforcement may vary from country to country, but non-compliance could result in penalties or legal action, presenting a substantial business risk for organisations.


In conclusion, the CSRD represents a significant step towards greater corporate transparency and accountability, which are essential for achieving a sustainable future. The directive's impact will extend beyond the EU, as it will influence global reporting practices and help establish sustainability as a core aspect of corporate decision-making.