The Corporate Sustainability Reporting Directive (CSRD) is designed to replace the Non-Financial Reporting Directive (NFRD). The reporting standards set out in the CSRD are detailed in the European Sustainability Reporting Standards (ESRS). The CSRD entered into force in January 2023 and must be implemented in all EU Member States. This new directive requires all large and listed (micro-enterprises exempted) companies to disclose information on:

  • Impact materiality (inside-out): The impact of their activities on people and the environment.
  • Financial materiality (outside-in): The impact, risks and opportunities arising from environmental, social and governance (i.e. ESG) related issues. 


Under the predecessor of the CSRD, the NFRD, companies had the autonomy to decide how and where to report on environmental and social impacts. As a result, it was often challenging to compare the performance of companies because they could independently determine the reporting methods. The CSRD brings about a change in this regard. Since companies must now report in a standardised manner, it is much easier to compare them. The European Commission hopes that high-quality and reliable public sustainability reporting will lead to increased funding for economically sustainable activities and accelerate the transition to a more sustainable world.

The CSRD aims to review and strengthen disclosure requirements by providing relevant, comparable, reliable, and accessible sustainability information for investors and stakeholders. The CSRD will significantly expand the scope of sustainability information, increase the number of reporting companies required to disclose such information, and mandate limited assurance for the published sustainability report.

Scope of the CSRD

Once the CSRD comes into force, many more companies will have to start reporting on sustainability. Now, these are only the large listed companies, banks and insurers. Soon this will be all large companies, listed and unlisted. In general, companies meeting two of the three criteria for two consecutive financial years are required to report:

  1. €50 million in net turnover;
  2. €25 million in assets; and/or
  3. 250 or more employees.

This means that the following types of companies will fall within the scope:

  • Large, listed companies, banks, and insurance companies already covered by the NFRD (also known as OOBs).
  • Other listed EU companies that were not previously covered by the NFRD.
  • Listed European SMEs (able to report based on simplified standards).
  • Large private European companies.

Additionally, non-European companies with significant activities in the EU (i.e., annual turnover exceeding 150 million euros in the EU) will need to comply with the rules.

”The days of judging companies solely on the basis of financial performance are now definitely a thing of the past.”

CSRD reporting

The CSRD requires reporting on forward-looking, retrospective, qualitative, and quantitative information necessary to understand a company’s impact on sustainability issues and, conversely, the information needed to understand how sustainability issues can affect the company. The principle of double materiality requires entities to look inward (outside-in) and outward (inside-out) to understand how the entity impacts people and the environment. If a sustainability issue is material from either or both perspectives, the company must report on it in accordance with the requirements outlined in the ESRS. In general, all reporting entities must disclose the following:

  1. Strategy: Their business model and strategy, including:
    • The resilience of their business model and strategy against risks related to sustainability issues.
    • Opportunities in the sustainability domain.
    • Plans to ensure their business model and strategy align with the transition to a sustainable economy and the goal of limiting global warming to 1.5°C in line with the Paris Agreement, aiming for climate neutrality by 2050.
    • Consideration of stakeholder interests and their impact on sustainability issues.
    • Implementation of their strategy regarding sustainability issues.
  2. Targets: Time-bound sustainability goals and the progress made towards achieving them.
  3. Governance: The role of governance, management, and supervisory bodies in relation to sustainability factors.
  4. Policies: Relevance of their sustainability policies.
  5. Incentive Schemes: Information on the existence of sustainability-linked incentive programs offered to members of governance, executive, and supervisory bodies.
  6. Due Diligence: The due diligence process implemented regarding sustainability issues.
  7. Impact: Their major negative impact on sustainability factors.
  8. Remediation Measures: All actions taken, and the results of such actions, to prevent, limit, rectify, or end actual or potential negative consequences.
  9. Risks: Their major risks related to sustainability issues, including their key dependencies on such matters, and how these risks are managed.

CSRD roadmap

CSRD has a phased implementation, meaning that the timing for reporting on sustainability issues under the CSRD and ESRS varies depending on the type of company. The CSRD outlines the following timeline:

CSRD reporting roadmap

Sustainability reporting under the CSRD and ESRS

The CSRD is further elaborated in technical standards for sustainability reporting, which are also called the European Sustainability Reporting Standards (ESRS). The ESRS provide rules for the design and disclosure requirements of the sustainability report. They contain guidance on what the sustainability report should look like.

The sustainability report aims to provide insight to stakeholders. These are individuals who are or can be influenced by the company. ESRS 1 categorises stakeholders into two different groups:

  1. Financial stakeholders: primary users of general financial reporting. These include existing and potential investors, lenders and other creditors. But these may also include other users, including trade unions, governments and analysts. The sustainability report provides information that contributes to understanding the company’s sustainability risks and opportunities.
  2. Affected stakeholders: individuals or groups whose interests – positive or negative – are affected or could be affected by the company’s activities and its direct and indirect business relationships in the value chain. Examples include employees, customers, local residents and interest groups focusing on environmental and human rights issues.

The cross-cutting standards deal with how and what to report on, and the organisation’s structure and strategy. The topical standards address Environmental, Social and Governance (ESG) topics. The ESRS rely on a double materiality assessment to identify material impacts, risks and opportunities for sustainability reporting.

Regardless of the outcome of the materiality assessment, all companies are required to disclose certain information (including certain data points) under ESRS 2 (including Appendix C).

ESRS 1 requires that the disclosure requirements in ESRS 2, the 10 thematic ESRS and the sector-specific ESRS must include the following reporting areas:

  • Governance: the governance processes, controls and procedures used to monitor and manage impacts, risks and opportunities.
  • Strategy: how the company’s strategy and business model interact with material impacts, risks and opportunities. Includes the strategy to address impacts, risks and opportunities.
  • Impact, risk and opportunity management: the process by which impacts, risks and opportunities are identified, assessed and managed through policies and actions.
  • Metrics and targets: how the company measures its performance, including the progression of its target.

Companies are required to provide limited assurance on their reported sustainability report. This is less far-reaching than reasonable assurance, but still requires cooperation with an auditor. Furthermore, the sustainability report must be in XHTML format and certain data points must be ‘tagged’ according to a digital categorisation system. Work is currently underway on a European Single Access Point (ESAP) to give stakeholders easy access to both financial and sustainability information.

How can we help?

The impact of the CSRD and ESRS will be enormous for many companies. Companies will need to make major organisational changes and invest in information, risk management and control systems. Projective Group has developed a roadmap to help you prepare for the far-reaching obligations imposed by the CSRD.

Although ‘sustainability’ is a broad term, the EC has provided a consistent framework for sustainability reporting in Europe with the first set of ESRS. However, the full and appropriate coverage of the complex issues surrounding sustainability remains a challenge. To comply with the CSRD and the ESRS, companies’ sustainability reports must therefore be comprehensive and consider the full impact of their activities on economic, social and environmental issues.

Our consultants can help you to produce a sustainability report that meets all the requirements of the CSRD and ESRS. Please do not hesitate to contact us.