What is the EU’s Corporate Sustainability Reporting Directive (CSRD)?
In this blog post, learn about the EU’s CSRD legislation, the requirements, and the essential timelines your business needs to meet.
The EU’s Corporate Sustainability Reporting Directive (CSRD) is set to enhance how companies report on their environmental, social, and governance (ESG) performance. The comprehensive legislation will significantly increase the scope, quality, and comparability of sustainability information, impacting a wide range of businesses across Europe. This blog will break down the key aspects of the CSRD, including its scope, reporting requirements, and implications for companies.
CSRD Top Level Overview
- CSRD sits within EU financial reporting and will be found in each company’s Management Report. CSRD replaces the Non-Financial Reporting Directive (NFRD).
- Companies must conduct a materiality assessment to determine which sustainability matters are relevant to their business, value chain, and identified stakeholders (split into two categories). They must use double materiality logic—impact materiality and financial materiality—and look at both positive and negative impacts, risks, and opportunities.
- Each identified sustainability matter must then be reported according to the ESRS Disclosure Guidelines—each matter has its reporting requirements listed in the ESRS.
- Companies must also consider sector-specific sustainability matters and disclosure requirements; however, the European Financial Reporting Advisory Group (EFRAG) is still drafting and finalising these.
- The sustainability report must be ‘audited’ by either a financial auditor (can be the same one auditing the Management Report or a different one) or an Independent Assurance Services Provider (IASP) if allowed by the relevant Member State.
Affected Companies
As of Jan 1st, 2024, CSRD will apply to companies meeting the following criteria (around 50k companies):
- Over 250 employees
- Over €50 million turnover
- Over €25 million in total assets
Note: If the company is already subject to the NFRD, it must begin tracking in 2024 for reporting in 2025. If it was not in the scope of the NFRD, it gets an additional year, so it must begin tracking in 2025 for reporting in 2026.
As of Jan 1st, 2026, SMEs will be in scope for reporting published in 2027. They must meet the following criteria:
- Over 50+ employees
- Over €8 million turnover
- Over €4 million assets
As of Jan 1st, 2028, any non-EU companies that do more than €150 million net turnover within the EU will be in scope for reporting published in 2029. They must also meet the following criteria:
- A large EU subsidiary (meeting the EU company criteria above)
- A brand in the EU with net turnover exceeding €40 million turnover
- Securities listed on EU-regulated markets

Reporting Requirements
The CSRD reporting requirements are laid out in the European Sustainability Reporting Standards (ESRS), a 284-page document that provides formal guidance on what companies should report on and how. It was created alongside guidance from EFRAG, the European Financial Reporting Advisory Group.
The first step in CSRD reporting is for the business to conduct a materiality assessment. The ESRS does not specify how this should be done, but it must follow the standard, consider all elements of ESG, and fit the business’s unique circumstances.
Double Materiality
Double Materiality is critical to CSRD. CSRD increases the organisation’s disclosure about ‘material’ sustainability matters. Specifically, the organisation must conduct a ‘double materiality assessment’ to identify which sustainability areas are most important to both the organisation and its stakeholders. The assessment will drive sustainability reporting and allow the company to allocate resources efficiently to achieve compliance in those areas and shape its own strategy.
What is double materiality? It means that the company must assess the relevance of a sustainability matter from two perspectives. The two materiality perspectives that CSRD requires are impact materiality and financial materiality.
Impact materiality refers to positive and negative people and planet impacts that relate to the business as identified through an impact materiality assessment. It includes both actual and potential future impacts in the short, medium and long term. It must apply to both the company’s own operations and its value chain.
Financial materiality looks at how a sustainability matter could (or be expected to) trigger financial effects on the business. For example, how a sustainability matter could have a material influence on the business’s development, financial position, financial performance, cash flow, access to finance or cost of capital. The financial materiality risk assessment should look at the short, medium and long term and apply to both the business itself and its business relationships.
All materiality assessments must consider stakeholders. Stakeholders are split into two groups and defined as:
- Affected stakeholders: individuals or groups whose interests are affected or could be affected – positively or negatively – by the business’s activities and its direct and indirect business relationships across its value chain
- Users of sustainability statements: primary users of financial reporting, such as existing and potential investors, lenders and other creditors, including asset managers, credit institutions, insurance undertakings, and other users of sustainability statements, including business partners, trade unions, civil society, NGOs, governments, analysts and academics.
Engagement with affected stakeholders is crucial to ongoing due diligence and materiality assessments. The affected stakeholders must be identified to complete the materiality assessments as they are an affected party.
Materiality assessments must look at impacts, risks and opportunities.
The CSRD aims to help companies identify their material impacts, risks, and opportunities to better manage their climate impact and human rights issues. The identified material sustainability matters then set the focus and scope of sustainability reporting. Based on their materiality assessment, the companies themselves determine the ESRS requirements they must meet.
Sustainability Matters
Companies should review the Sustainability Matters list, available here on pages 27 to 29, and conduct a materiality assessment to determine its importance. If the materiality assessment deems that a matter in the list is indeed ‘material’ through severity and/or likelihood, the company must report on it according to the Disclosure Requirements. The list is not exhaustive, and the company must also consider their unique circumstances.

Information Presentation
Once the business is ready to write its sustainability report, it must ensure the data and reporting meet the qualitative characteristics outlined in ESRS Appendix B, available here. These are:
- Relevance
- The information provided must be helpful to the end-reader and may help them make decisions under double materiality (i.e. should they invest in the business?).
- ESRS emphasises information’s predictive or confirmatory value. The report’s information can help confirm existing thoughts or help understand future outcomes.
- Faithful representation
- The information must be complete, neutral and accurate
- Complete information must be presented for the end reader to understand everything required for impacts, risks and opportunities
- Neutral information must be presented for the end-reader to understand it is present without bias in selection or disclosure and is balanced in terms of positives and negatives. Opportunities must not be overstated, and risks must not be understated. – the company has not lied or misrepresented its findings
- Accurate information must be presented so the end-reader feels they can trust what is presented. Any estimates must be given with the required caveats, and there must be no material errors in presenting the data.
- Comparability
- Data must be presented to be easily compared with previous reports or reports from other businesses. Industry benchmarks should be used where possible for cross-referencing. Consistent reporting and data collection methodologies can help with comparability.
- Verifiability
- The information must be verifiable upon request so that end-readers or other bodies can reasonably agree that the depiction is faithful.
- The report can continue workings, calculations, and confirmations from external bodies about the data.
- Understandability
- The information must be understandable by the end user through clear and concise reporting. The report should also be well written and edited and not duplicate financial information from the rest of the management report.
- Abbreviations or jargon should be avoided, and units of measurement or calculations should always be provided for clarity.
Auditing
An external body must audit the sustainability report. It can be the same financial auditor auditing the management report, a different financial auditor, or a separate third party called an Independent Assurance Services Provider (IASP) if the relevant Member State allows this.
The body must provide an assurance opinion on the sustainability report. A company can have limited assurance auditing for the first year of sustainability reporting, a lower level than usual auditing. An EU limited assurance standard is due by 1st October 2026. In the meantime, companies can default to the auditing standards set by their Member State
After the first year of reporting, companies must audit their sustainability report to reasonable assurance standards, a much more comprehensive check of claims, data, and adherence to regulations.
If you are want to accelerate your CSRD and sustainability reporting, please reach out to us so we can explore your requirements.