CSRD Requirements in a Nutshell

The CSRD (Corporate sustainability reporting directive) requires all large companies and listed SME companies to disclose information on their identified risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment.

CSRD requirements and compliance

CSRD expands the detail of reporting compared with the requirements defined under the NFRD. Furthermore, companies are required to report their sustainability information following the new European Sustainability Reporting Standards (ESRS). These standards define in more detail what companies need to report regarding their:

  • governance relating to sustainability impacts, risks and opportunities
  • impacts of sustainability-related risks and opportunities on the company’s strategy, business and financial planning
  • processes for identifying and assessing sustainability impacts, risks and opportunities
  • metrics and targets that are used to assess and manage sustainability risks and opportunities

The CSRD also defines a requirement that the sustainability information needs to be externally verified under limited assurance.

Which companies have to comply with CSRD requirements?

The CSRD applies to companies in the following order:

  • From January 2024, listed companies with more than 500 people (i.e. those already covered by the NFRD are obliged to prepare a statement of non-financial information and publish information according to the EU taxonomy).
  • From January 2025, listed and unlisted companies that meet at least two of the following criteria: more than 250 employees, more than 25 million euros in their balance sheet and more than 50 million euros in turnover.
  • Listed SMEs from 1 January 2026.
  • From January 2028 CSRD expands to third-country companies with turnover over 150 million euros.

However, countries may implement the company size definitions in the Accounting Directive differently, and some countries may have stricter numbers for balance sheet and turnover.

The European Sustainability Reporting Standards (ESRS)

Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS), which aims to fulfil the purpose of CSRD to standardise sustainability reporting across EU.

The standards were developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various stakeholders. The standards are tailored to EU policies, while building on and aligning with international sustainability reporting frameworks such as GRI, SASB and TCFD.

These mandatory reporting standards aim to ensure that companies are fully transparent about their impact on people and the environment and the risks and opportunities to the companies arising from sustainability issues. The standards will also be a key tool in trying to extinguish green washing. The new standards will assist companies in communicating and managing their sustainability performance more efficiently as well as providing investors with information necessary to make more informed decisions based on sustainability criteria.

Note that large companies, SMEs and third country companies will have separate sets of standards to follow. Currently, standards are ready for large companies and standards that apply to listed SMEs as well as voluntary standards for SMEs are open for public consultation until 21 May 2024. Draft standards for third-country companies are expected in 2026.

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