What is the CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's landmark legislation designed to enhance and expand corporate sustainability reporting. Adopted in 2022 and entering into force on January 5, 2023, the CSRD replaces the previous Non-Financial Reporting Directive (NFRD) with significantly more comprehensive requirements.
The directive requires approximately 50,000 companies across the EU to report detailed information about their sustainability performance, including environmental, social, and governance (ESG) factors. This represents a massive expansion from the roughly 11,000 companies previously covered under NFRD.
Key Requirements for 2025
European Sustainability Reporting Standards (ESRS)
Companies subject to CSRD must report according to the European Sustainability Reporting Standards (ESRS). These comprehensive standards are organized into four major categories:
Cross-Cutting Standards
- ESRS 1: General Requirements - establishes the foundation for sustainability reporting
- ESRS 2: General Disclosures - outlines key information companies must disclose about their business and sustainability practices
Environmental Standards
- ESRS E1: Climate Change - Learn about climate disclosure requirements
- ESRS E2: Pollution
- ESRS E3: Water and Marine Resources
- ESRS E4: Biodiversity and Ecosystems
- ESRS E5: Resource Use and Circular Economy
Social Standards
Coverage includes labor practices, human rights policies, community engagement, working conditions, and diversity initiatives.
Governance Standards
- ESRS G1: Business Conduct - covers corporate culture, whistleblower protection, animal welfare, political engagement, and corruption
Double Materiality Assessment
One of the CSRD's most significant innovations is the requirement for "double materiality." Companies must assess and report on:
- Financial Materiality: How sustainability issues affect the company's financial performance
- Impact Materiality: How the company's business model affects the environment and society
This dual perspective ensures companies report not just on risks to their business, but also on their impact on stakeholders and the planet.
Implementation Timeline
The CSRD follows a phased implementation approach. However, note that in April 2025, the EU Parliament voted to postpone CSRD compliance by two years for most companies:
Wave 1: Reports Due in 2025
Large companies with over 500 employees already subject to NFRD must start reporting in alignment with CSRD guidelines for fiscal year 2024, with reports due in 2025.
Wave 2: Originally 2026 (Now Delayed)
Large companies not previously subject to NFRD (more than 250 employees and/or €40 million in net turnover and/or €20 million in total assets) were originally scheduled to begin reporting in 2026 for fiscal year 2025.
Update: The EU's "stop-the-clock" directive postpones these requirements by two years.
Wave 3: Listed SMEs (Potentially Delayed)
Listed SMEs (except micro undertakings), small and non-complex credit institutions, and captive insurance undertakings face delayed implementation, subject to the Omnibus proposal.
Wave 4: Reports Due in 2029
Non-EU companies generating €150M+ revenue within the EU and at least one large EU subsidiary or EU branch must submit their first report covering 2028 fiscal year activities.
Important: In February 2025, the European Commission introduced the Omnibus proposal, which suggests raising reporting thresholds (companies with more than 1,000 employees and €450M net turnover) and providing two-year extensions for certain businesses. These changes are still pending formal approval.
10 Steps to CSRD Compliance
1. Assess Readiness
Conduct a thorough assessment of your company's existing data, reporting practices, and workforce capabilities to identify gaps and areas for improvement.
2. Build Cross-Functional Teams
Effective sustainability reporting demands collaboration across finance, legal, sustainability, HR, and operations departments.
3. Determine In-Scope Entities
Identify which entities fall under CSRD requirements and decide on your reporting approach (global consolidation, artificial consolidation, or individual entity reporting).
4. Perform Double Materiality Assessment
Identify relevant ESRS impacts, risks, and opportunities through a comprehensive double materiality assessment involving stakeholder engagement.
5. Identify Data Gaps
Compare ESRS requirements against currently available information to identify what additional data you need to collect.
6. Build Data Collection Systems
Implement systems that track, store, and update ESG metrics across departments. Consider using AI-powered ESG software platforms to automate data collection and ensure clear ownership for each data point.
7. Collect Relevant Data
Gather climate and workforce metrics along with all other material data points required by applicable ESRS standards.
8. Draft CSRD Disclosure
Create comprehensive disclosure documents that include all material topics, disclosure requirements, and data points as specified in the ESRS.
9. Prepare for Assurance
All companies in CSRD's scope must obtain limited assurance from a third-party verifier in their first reporting year. Conduct assurance readiness assessments prior to pursuing formal assurance.
10. Monitor and Update
CSRD reporting is an ongoing process. Continuously monitor your data collection, update your materiality assessment every 2-3 years, and refine your reporting processes based on experience and regulatory updates.
Who Must Comply?
The CSRD mainly targets large EU firms, including both publicly traded companies and European subsidiaries of companies based outside the EU. Companies must fulfill at least two of these conditions:
- More than 250 employees
- Net turnover exceeding €40 million
- Total assets exceeding €20 million
Under the proposed Omnibus changes, these thresholds would increase to 1,000 employees and €450 million net turnover, significantly reducing the number of affected companies.
It is currently estimated that approximately 50,000 companies across the EU will be affected by the CSRD, though this number may decrease if the Omnibus proposal is approved.
Key Takeaways
- ✓ Start early: CSRD compliance requires significant preparation, data collection infrastructure, and stakeholder engagement
- ✓ Embrace double materiality: Report on both how sustainability affects your business and how your business affects society
- ✓ Invest in systems: Robust data collection and management systems are essential for accurate, auditable reporting
- ✓ Engage stakeholders: Meaningful stakeholder engagement is central to effective materiality assessment
- ✓ Stay informed: Monitor regulatory developments, including the Omnibus proposal, which may significantly alter requirements
- ✓ Seek expertise: Consider working with ESG consultants who specialize in CSRD compliance to navigate complex requirements
Need Help with CSRD Compliance?
Navigating CSRD requirements can be complex. Connect with experienced ESG consultants who can guide you through every step of the compliance process, from materiality assessment to final reporting and assurance.
Find CSRD Compliance ExpertsRelated Resources
Essential guides for CSRD compliance:
- Double Materiality Assessment - Master the core CSRD requirement
- ESG Reporting Standards - Compare ESRS with other frameworks
- Climate Risk Disclosure - Detailed guidance for ESRS E1
- ESG Software Platforms - Technology solutions for CSRD data management