Corporate sustainability reporting: What is the CSRD? 

“By improving transparency and providing stakeholders with reliable sustainability data, companies can build greater trust with investors, customers and regulators.” 

What is CSRD reporting? 

The Corporate Sustainability Reporting Directive (CSRD) was adopted by the European Union in November 2022. Its purpose? To improve the quality and transparency of sustainability reporting by ensuring that companies provide reliable and accurate sustainability data to facilitate stakeholder engagement. It requires organisations to disclose their environmental, social and governance (ESG) impacts across a broad range of topics – from greenhouse gas (GHG) emissions to biodiversity and human rights. 

Read on to find out what the CSRD requirements mean for your company, and how you can leverage the CSRD reporting process to drive long-term sustainability progress. 

Where does the CSRD come from? 

The CSRD evolved from the Non-Financial Reporting Directive (NFRD). Building on this earlier framework, the CSRD aims to further standardise sustainability reporting across industries – ensuring that the information companies provide is accurate, comparable and relevant. Many more companies are also required to report under the CSRD. 

CSRD timeline: Which companies need to report? 

The CSRD expands the scope of companies required to report on their sustainability efforts. The NFRD only applied to large public interest entities such as listed companies, banks and insurance firms with over 500 employees – around 12,000 organisations. These companies will be required to publish CSRD-compliant reports starting in 2025. 

From 2026, the CSRD will also apply to companies that meet at least two of the following criteria for ‘large’ organisations: 

• > 250 employees 

• > €50 million in annual turnover 

• > €25 million in total assets 

This will add up to around 50,000 organisations, accounting for over 75% of the turnover of all EU companies. SMEs listed on regulated markets will also join this group in 2027, albeit with simplified ESRS reporting standards. 

Finally, in 2029, some non-EU companies will also be required to produce CSRD-compliant reports if they have a net turnover in the EU of at least €150 million in each of the preceding 2 years and have one of the following: 

1. a listed or large subsidiary, determined according to the same criteria for “large” organisations as above; 

2. a significant EU branch, i.e. one with a turnover of at least €50 million.  

What are the CSRD reporting requirements? 

The CSRD requires companies to report on a wide range of environmental, social and governance factors, using the key concept of double materiality. A double materiality assessment (DMA) involves reporting not only on how sustainability issues affect a company’s performance (financial materiality) but also on how its operations affect the environment and society (impact materiality). 

The materiality of a particular factor – such as GHG emissions, resource use, biodiversity impacts or anti-corruption measures – determines the amount of information the organisation should provide to be compliant. If the data is not available, an explanation and a timeline for obtaining it must be provided. The organisation shall also provide a justification if it deems a factor to be immaterial. 

The CSRD also introduces the requirement for forward-looking disclosures, which means that companies must set sustainability targets and report on their progress toward achieving them. These reports must be integrated into companies’ annual management reports and be subject to external verification by independent auditors. 

How to prepare for CSRD reporting  

Preparing for CSRD compliance involves a comprehensive approach to collecting and reporting data on both financial and non-financial sustainability factors. The process can be divided into several key steps: 

1. Engaging internal and external stakeholders  

2. Collecting and managing data 

3. The double materiality assessment 

4. Developing forward-looking ESG strategies 

Engaging internal and external stakeholders 

Cross-departmental collaboration is essential to the success of a double materiality assessment. Involving a cross-functional team ensures that all aspects of ESG – environmental, social and governance – are adequately covered. Typically, the following roles are key to the process: 

• Sustainability or ESG managers lead the double materiality assessment. 

• Finance teams identify financial risks and opportunities related to sustainability. 

• Legal teams ensure that the company meets all regulatory requirements. 

• Operations managers evaluate the sustainability of the company’s operations. 

• Human Resources oversees factors such as labour practices and employee welfare.  

• Board members provide oversight and ensure that ESG strategies are aligned with the company’s governance and risk management frameworks. 

Reporting on certain factors, such as Scope 3 emissions, also requires collaboration with partners up and down the value chain. However, there is a three-year grace period when companies come under the scope of the CSRD before they must include full value chain reporting. Nonetheless, they must record their efforts to obtain the information and the reasons for not being able to supply any missing data. 

Collecting and managing data 

Accurate data is critical to CSRD compliance. This requires integrating ESG data collection into existing business processes and often implementing new systems for tracking and reporting. ESG management platforms such as Position Green are powerful tools to streamline this process. 

The CSRD double materiality assessment 

As discussed above, the double materiality assessment is central to CSRD reporting, and will require different focus areas depending on the context of the company. For example, a manufacturing company may focus on the financial risks associated with future carbon taxes (financial materiality), while also considering how its production processes contribute to air pollution and local health concerns (impact materiality). 

Meanwhile, a retailer may assess the impact of its supply chain on labour rights in developing countries, alongside the financial risks posed by shifting consumer preferences towards more sustainable products. 

Developing forward-looking ESG strategies 

Beyond data collection, companies need to develop strategies and set measurable sustainability goals to comply with the CSRD. This may include setting GHG emission reduction targets, advancing social responsibility efforts and ensuring good governance practices. For example, a company might set a target to achieve net-zero emissions by 2030, reduce water consumption by 20% over five years or implement more inclusive hiring policies. 

The benefits of the CSRD for businesses 

While the CSRD introduces significant new reporting requirements, it also offers businesses a number of benefits. By improving transparency and providing stakeholders with reliable sustainability data, companies can build greater trust with investors, customers and regulators. This transparency can enhance a company’s reputation and improve its competitive position in an increasingly sustainability-focused market. 

The process of preparing for CSRD compliance can also drive operational improvements. As companies gather data on their environmental impact and social performance, they may uncover inefficiencies and opportunities for cost savings, such as reducing energy consumption or improving supply chain management. CSRD reporting can therefore be essential in taking your business beyond compliance to target long-term improvements. 

Want to find out more about getting CSRD reporting support? Visit our CSRD and reporting service page or get in contact with a Nexio Projects expert today.