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Corporate Sustainability Reporting Directive – are you ready?

The EU Corporate Sustainability Reporting Directive (CSRD) requires organizations to report their material risks, opportunities and impacts in relation to environmental, social and governance issues. Find out what you need to do, and why now is the time.

The EU Corporate Sustainability Reporting Directive (CSRD) requires organizations to report their material risks, opportunities and impacts in relation to environmental, social and governance issues. It aims to enhance the consistency, comparability, relevance and reliability of your sustainability reporting.

Organizations should disclose how such issues affect their development, performance and position in accordance with the European Sustainability Reporting Standards (ESRS).

The CSRD should not be viewed as a compliance activity. Your organization could use CSRD requirements as a strategic tool to better understand, articulate and unlock long-term business success through sustainability.

The CSRD requires companies to report on their material risks, opportunities and impacts relating to environmental, social and governance (ESG) matters.

The centerpiece of the Directive is the introduction of 12 mandatory European Sustainability Reporting Standards developed by the European Financial Reporting Advisory Group (EFRAG), which total 95 Disclosure Requirements (DR) with 1,086 possible Datapoints (DP). Some DR can be phased in and some are voluntary.

The 12 European Sustainability Reporting Standards (ESRS)
 Cross-cutting standardsTopical standards – expanding on disclosure requirements mandated by ESRS 2
 Basic guiding principlesMandatory disclosure requirementsSubject to materiality assessment
 EnvironmentSocialGovernance
 ESRS 1 - General requirementsESRS 2 - General disclosuresESRS E1 - Climate changeESRS E2 - PollutionESRS E3 - Water and marine resourcesESRS E4 -Biodiversity and ecosystemsESRS E5 - Resource use and circular economyESRS S1 - Own workforceESRS S2 - Workers in the value chainESRS S3 - Affected communitiesESRS S4 - Consumers and end usersESRS G1 - Business conduct
Disclosure requirements (DR)N/A16127687197778
Data points (DP)N/A99643818613510657555525
Sub-data points (SDP)N/A8911153267389045444141
Required by other EU legislationN/A86926621710774
RequiredN/A1791744036735815376787352
OptionalN/A2513102063226233283022
This table outlines the 12 European Sustainability Reporting Standards (ESRS) and the disclosure requirements for each.

For HR teams, the S1-Own Workforce Standard of CSRD will be where most will focus their attention, which covers 17 Disclosure Requirements. Four of these (S1.10, S1.11, S1.15 and S1.16) will necessitate the most upfront work in our experience. Our article CSRD: An approach for human resources explains this in more detail.

The CSRD replaces the Non-Financial Reporting Directive (NFRD). However, the number of companies impacted, and the scope of the requirements are much more extensive with different timescales (see section below). Companies that must comply are:
  • EU-based large companies regardless of listed status that meet two of the three criteria:
    1. Balance sheet total > €25 million
    2. Net sales > €50 million
    3. Number of employees > 250
  • Any small and medium enterprise listed on an EU-regulated market (except micro-enterprises)
  • Ultimate non-EU parent companies with combined group turnover in EU greater than €150m

Note: there are provisions for consolidated reporting where multiple companies in same group are affected.

Large EU companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. The full timeline for companies to comply is below.
2024First financial year 2024, with first sustainability statement published in 2025 for companies previously subject to NFRD (+500 employees) with BS >25 M€ or revenues >50 M€.
2025Other EU large companies (+250 employees with BS >25 M€ or Revenues >50 M€), financial year 2025 for 2026 publication.
2026Listed EU SMEs, financial year 2026, with first sustainability statements published in 2027 if two out of three following criteria: >50 employees, BS >4 M€, Revenues >8 M€ + captives.
Possible opt out for a further two years. Last date: 2028 for 2029.
2028Companies from non-EU member states that have generated a net turnover of >EUR 150 million in the EU for each of the last two consecutive financial years and have at least one EU-subsidiary (large or SME) or EU-branch (with net turnover of >EUR 40 million): financial year 2028, with first publication in 2029. 
The subsidiary/branch is responsible to publish the sustainability report with information at the group level of the non-EU parent company.
PendingSector Standards, proportionate standards for listed SMEs to be developed.

CSRD beyond compliance

While the CSRD is fundamentally a compliance requirement, approaching CSRD preparation and reporting with a compliance mindset could mean strategic opportunities are missed.

The disclosure framework established by the CSRD is a powerful strategic instrument that can help align and enhance the visibility of various ESG initiatives within the organization. It can also help companies pinpoint and articulate the business case, strategic and financial value of specific aspects of ESG for their business. This deepened alignment and understanding is crucial for stakeholders such as investors, employees, customers, and service providers.

Many organizations will likely choose to use the CSRD framework to organize their sustainability programs, set global minimum standards, and prepare for the forthcoming Pay Transparency Directive.

We are helping organizations of all sizes to get ready. From helping clients getting the necessary information for these Standards and using proper methodologies to avoid unnecessary work, working on other issues related to CSRD (such as double materiality and the Environment Standards), or running action planning workshops.

Given the amount of information to collect, work for preparing for reporting deadlines you must start now. If you’d like to discuss your individual requirements and next steps please get in touch using the form on the right, or below on a mobile device.

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