Envint

Modern office buildings representing corporate entities subject to the EU’s Corporate Sustainability Reporting Directive (CSRD) for transparent sustainability and regulatory reporting.

CSRD Explained: How Reporting Must Be Done

Why CSRD Was Introduced

The EU’s Corporate Sustainability Reporting Directive (CSRD) establishes a new framework for reliable, comparable sustainability information. It builds on earlier non-financial reporting rules and requires companies to disclose both:

  • How sustainability issues affect their business, and
  • How their business affects people and the environment (the “double materiality” approach).

The European Commission’s objectives are clear: improve data quality, reduce greenwashing risk, and integrate sustainability information into mainstream financial markets.

What Companies Must Report (ESRS at the Core)

CSRD reporting is based on the European Sustainability Reporting Standards (ESRS), a comprehensive set of disclosure requirements covering environmental, social, and governance (ESG) topics.

  • Adoption: The first ESRS set was adopted in July 2023 through a Delegated Act.
  • Updates: In 2025, revisions are being introduced to give early reporters more flexibility for FY2025-FY2026, without expanding content beyond FY2024 requirements.
  • Structure: If you are familiar with TCFD, the organisation will look familiar (governance, strategy, risk management, metrics & targets). ESRS, however, goes far beyond climate to cover the full ESG spectrum.

Who Falls Under CSRD

CSRD applies in stages, capturing:

  • Large EU companies and EU-listed companies (including many non-EU issuers listed in the EU).
  • Certain non-EU groups with significant EU operations or turnover.
  • Listed SMEs, with phased timelines and limited opt-outs.

Exact thresholds and scope tests are defined in the Directive and national transposition laws. Companies should confirm applicability using both the EU legal text and local rules.

Reporting Timeline (2024 → 2028, with Adjustments)

  • Wave 1 (FY2024 reports in 2025): The first set of companies has already entered CSRD.
  • April 2025 “Stop the Clock”: EU legislators agreed to postpone CSRD application for “wave 2” and “wave 3” companies due to implementation concerns.
  • July 2025 “Quick Fix”: The Commission revised ESRS to avoid additional disclosure obligations for FY2025–FY2026 compared with FY2024 requirements.

    Important: Timelines vary by member state transposition and remain subject to updates. Companies must track local implementation closely.

How Reporting Must Be Done

  • Double Materiality: Disclose topics material to both enterprise value and to impacts on people and the environment.
  • Assurance: Reports require limited assurance initially, moving to reasonable assurance later, so internal controls should be designed early.
  • Digital Tagging: Information must be digitally tagged (ESEF/XBRL) to ensure machine readability and comparability with financial data.
  • Location: Disclosures appear in the management report and are filed alongside financial statements.

Interaction with Other Frameworks

  • ISSB & TCFD: ESRS was designed for interoperability. The European Commission continues to coordinate with ISSB to reduce duplication and streamline global reporting.
  • EU Sustainable Finance Regulations: CSRD data supports the EU Taxonomy and SFDR by providing consistent corporate information for investors.

What’s Changing in 2025 and Why It Matters

  • Policy Adjustments: The “stop the clock” delay and ESRS “quick fix” highlight the EU’s aim to balance robust data with feasible timelines.
  • Ongoing Guidance: EFRAG and the Commission are issuing FAQs, consultations, and technical clarifications to ease early adoption.
  • Proportionality Focus: Expect further guidance designed to reduce the reporting burden for SMEs and for companies reliant on complex value-chain data.

Five Steps to Prepare for CSRD

  1. Confirm scope and timing under CSRD in your member state (and check implications for non-EU parents with EU subsidiaries).
  2. Conduct a double materiality assessment and map results to ESRS disclosure requirements.
  3. Address data gaps, especially on Scope 3 emissions, workforce, and value chain issues, and strengthen internal controls for assurance.
  4. Build digital tagging processes (ESEF/XBRL) in coordination with finance and IT teams.
  5. Monitor EU and national updates, including SME standards and phased timelines, and adjust your roadmap accordingly.

Bottom Line

CSRD represents a significant evolution in corporate reporting, putting sustainability information on the same level as financials: assured, digital, and comparable. Companies that align early with ESRS, establish robust data systems, and integrate digital tagging will reduce compliance risk and provide investors with decision-useful information,the Directive’s ultimate goal.

Click here to know about EU CBAM Compliance guide.

Sources