Corporate Sustainability Reporting Directive


Corporate Sustainability Reporting Directive


The Corporate Sustainability Reporting Directive (CSRD) is a European Union initiative aimed at improving the transparency and comparability of non-financial information disclosed by companies. Replacing the previous Non-Financial Reporting Directive (NFRD), the CSRD expands its scope and rigor, with an estimated coverage of around 50,000 companies.

The CSRD requires companies to report on environmental issues as well as social and governance aspects. It aims to provide investors and other stakeholders with a clearer view of the companies’ sustainable performance, enabling more informed decisions and encouraging responsible business practices.

The CSRD represents a significant step towards integrating sustainability into business practices within the European Union, promoting a more sustainable and resilient economy.

Key Requirements of the CSRD

The Corporate Sustainability Reporting Directive (CSRD) sets out a series of detailed requirements to ensure that companies disclose comprehensive and accurate information about their sustainability practices. Here are the main requirements of the CSRD:

  • Scope: The CSRD covers a larger number of companies compared to the previous Non-Financial Reporting Directive. It includes not only large companies but also medium-sized companies across various sectors.
  • ESG Information (Environmental, Social, and Governance): Companies must report detailed data on their practices and performance concerning environmental, social, and governance issues. This includes carbon emissions, natural resources use, diversity and inclusion practices, and business ethics.
  • Double Materiality: The CSRD introduces the concept of double materiality, requiring companies to consider not only how sustainability issues impact their business (internal or financial materiality) but also how their activities impact the environment and people (external materiality). This ensures a more comprehensive and responsible approach to corporate sustainability.
  • External Verification: Sustainability reports must be verified by independent auditors. This measure aims to ensure the accuracy and credibility of the disclosed information, increasing investor and stakeholder trust.
  • Digital Reporting: The CSRD requires companies to present their sustainability reports in digital format, using the European Single Electronic Format (ESEF). This format facilitates access to and comparability of information for investors and regulators.
  • Integration with Financial Reports: Companies must include sustainability information in their annual reports, integrating it with financial reports. This promotes a holistic view of the company’s performance.
  • Disclosure of Risks and Opportunities: Companies must identify and disclose sustainability-related risks and opportunities that could impact their business. This includes assessing climate risks, regulatory changes, and market trends.
Summary of the Main Changes Brought by the CSRD

These requirements aim to increase transparency, improve the comparability of sustainability reports, and promote more responsible and sustainable business practices.

Impact of the CSRD on Organizations

The Corporate Sustainability Reporting Directive (CSRD) will significantly impact organizations, changing how they approach and report on their sustainability practices. This directive not only expands the universe of companies obliged to report, but also increases the rigor and depth of the information that must be disclosed. Here are the main impacts of the CSRD on organizations.

Scope and Applicability

The CSRD significantly expands the scope of sustainability reporting obligations, affecting a broader spectrum of companies compared to the previous Non-Financial Reporting Directive. Key aspects of the CSRD’s scope and applicability include:

  • Scope by Size: Under the CSRD, companies with more than 250 employees, a turnover exceeding 40 million euros, or a total balance sheet exceeding 20 million euros are now subject to sustainability reporting requirements.
  • Sectoral Scope: The CSRD applies to companies across all sectors of the economy, ensuring that all areas are aligned with sustainability and transparency goals.
  • Listed Companies: The CSRD covers all companies listed on stock exchanges in the European Union, regardless of their size. This inclusion ensures that publicly traded companies provide information about their sustainability practices, enabling investors to make more informed choices.
  • Subsidiaries and Group Companies: The CSRD also applies to subsidiaries and companies that are part of a larger group, ensuring consistent and comprehensive sustainability reporting across all organizational levels.
  • Non-EU Companies: While the CSRD is an EU directive, it also impacts non-EU companies operating in the European market. Foreign companies with significant operations or listings on European stock exchanges must comply with CSRD requirements.
Applicability of the CSRD According to Company Characteristics.

Broadening the scope and applicability of the CSRD represents a significant step in promoting corporate sustainability. By including a larger number of companies and sectors, the CSRD ensures that sustainability practices are broadly and consistently adopted, encouraging a more transparent and responsible economy. Organizations should prepare for these changes by adjusting their internal processes.

Standards and Reporting Structure

With the implementation of the CSRD, companies must adopt the European Sustainability Reporting Standards (ESRS), a comprehensive set of standards designed to standardize and improve the quality of sustainability reports. The ESRS, developed by the European Financial Reporting Advisory Group (EFRAG), guides companies in preparing their sustainability reports. The ESRS are divided into three main categories:

  • Environmental Standards (ESRS E): Cover topics such as climate change, water resources, biodiversity, and pollution.
  • Social Standards (ESRS S): Focus on human rights, working conditions, gender equality, and community impact.
  • Governance Standards (ESRS G): Involve business ethics, anti-corruption measures, corporate governance, and board diversity.

The first group of standards available consists of 12 topics.

Listing of the 3 Types of ESRS Standards by Environmental, Social, and Governance Categories.

By establishing clear and comprehensive standards for sustainability reporting, the EU aims to promote more sustainable business practices and better inform investors’ and other stakeholders’ decisions.

Benefits for Organizations and Stakeholders

Implementing the Corporate Sustainability Reporting Directive offers benefits for both organizations and their stakeholders. The transparency and detail of sustainability information strengthen the competitive position and trust in companies.

Benefits for Organizations

For organizations, compliance with the CSRD can result in direct and indirect benefits. Companies that adopt sustainability practices and reporting transparently gain a positive market reputation, which can attract customers, investors, and talent. Additionally, companies providing sustainability information are more likely to attract investments and financing at favorable rates.

Moreover, detailed analysis of sustainability data can identify areas for operational improvements, leading to greater efficiency and cost reductions related to energy and resource use. Identifying and managing sustainability-related risks helps companies avoid negative impacts, such as regulatory fines, litigation, and environmental damage, that can adversely affect their business.

Lastly, implementing sustainability practices can drive innovation, leading to the development of new products and services that meet the growing demand for sustainable solutions.

Benefits for Stakeholders

The implementation of the Corporate Sustainability Reporting Directive also brings several benefits for various stakeholders, including investors, customers, and local communities.

For investors, the CSRD provides a more robust set of ESG data, allowing a more accurate assessment of companies’ sustainable performance. The main benefits for investors are more informed decision-making, risk reduction, and the possibility of aligning with investment preferences.

The CSRD promotes greater transparency in companies’ sustainability practices, influencing customers’ purchasing decisions and strengthening brand trust. Customers benefit from more informed purchasing decisions and increased trust in brands.

For local communities and the social sector, the CSRD can bring benefits through more responsible and transparent business practices that promote sustainable development and social well-being.


Although the CSRD brings numerous benefits, its implementation presents challenges that may require organizational investments and adaptations, impacting various operational and strategic aspects of companies. One of the main challenges is the need to collect and report detailed and accurate sustainability data, which may require:

  • Investments in Technology: Implementing IT systems for sustainability data collection and analysis can be costly and complex.
  • Skill Development: Companies need to develop or hire specialized sustainability skills.
  • Data Integration: Integrating sustainability data with financial reports and other corporate systems can be challenging, requiring adjustments to processes and organizational culture.
  • Continuous Monitoring: Maintaining continuous compliance with CSRD standards requires regular monitoring and updating of processes, which can increase companies’ workloads.

The best way for companies to overcome these challenges is to ensure that processes are well-structured from the outset and that automation is implemented only after simplifying and optimizing processes. This approach ensures that processes do not consume unnecessary resources over time.

Still have some questions about the CSRD?

What is the CSRD (Corporate Sustainability Reporting Directive)?

The CSRD is a European Union directive aimed at improving and expanding sustainability reporting requirements for companies. The CSRD replaces the NFRD (Non-Financial Reporting Directive) and introduces more detailed and comprehensive standards to ensure companies disclose information about their environmental, social, and governance (ESG) impacts more consistently and comparably. The CSRD requires companies to publish their sustainability information in accordance with the European Sustainability Reporting Standards (ESRS).

What is the NFRD (Non-Financial Reporting Directive)?

The NFRD is the predecessor to the CSRD, introduced by the EU in 2014. It required large public-interest entities with over 500 employees to disclose information on how they operate and manage social and environmental challenges. The NFRD established disclosure requirements on policies, outcomes, and risks related to environmental, social, labor, human rights, anti-corruption, and bribery issues. With the CSRD coming into effect, the NFRD will be replaced.

What is the ESEF (European Single Electronic Format)?

The ESEF is a unique electronic format introduced by the European Securities and Markets Authority (ESMA) for the presentation of annual financial reports by EU-listed companies. From January 1, 2020, all EU-listed companies must prepare their annual financial reports in compliance with the ESEF, which uses the XHTML format and incorporates iXBRL tagging to improve the accessibility, analysis, and comparability of financial reports.

What are the ESRS (European Sustainability Reporting Standards)?

The ESRS are sustainability reporting standards developed by the European Union to provide a detailed and uniform framework for sustainability information disclosure. These standards are designed to be used in conjunction with the CSRD and cover a wide range of sustainability topics, including environmental impact, social aspects, and governance. The ESRS aims to ensure that the sustainability information companies disclose is consistent, comparable, and useful for investors and other stakeholders.

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