Corporate Sustainability Reporting Directive (CSRD) explained

EU flag outside Parliament

What is CSRD?

The EU is bringing sustainability reporting in line with financial reporting, with the introduction of the Corporate Sustainability Reporting Directive (CSRD). The new framework will be rolled out in a phased approach from 2024. It will require companies to report on how sustainability issues, such as climate change, impact their business and how their operations in turn affect people and planet – a unique principle called ‘double materiality’. 

The new regulation updates previous corporate sustainability reporting under the 2014 Non-Financial Reporting Directive (NFRD), which some companies will already have been following. CSRD is much more ambitious than NFRD and pitches Europe as a frontrunner in this space due to its advanced rules that extend beyond the continent.  

Who needs to comply?

Almost 50,000 companies are expected to be impacted by CSRD, making up some three quarters of business in the European Economic Area. CSRD will apply to all:

  • Companies listed on regulated markets in the EU (apart from listed micro-enterprises), and large companies. The CSRD classifies a large company as one that meets two out of three of the following criteria: more than 250 employees, a turnover of over €40 million and over €20m total assets. These companies will also have to take into account information at subsidiary level.
  • Listed SMEs, although there will be a transitional period when SMEs can opt out until 2028. However, there are big benefits for SMEs to comply with the reporting. 
  • Non-EU companies with a net turnover of €150 million in the EU, and with at least one subsidiary or branch in the union.

How will the changes affect businesses?

Companies will need to be more detailed in their sustainability reporting, covering issues such as environmental, social and human rights, plus governance factors. 

Companies must publish their information in a dedicated section of their company management reports, usually included in their annual report. Reports must cover:

Companies will need to provide information that is: 

  • Qualitative and quantitative. 
  • Forward-looking and retrospective. 
  • Based in the short, medium and long-term. 

The CSRD also features mandatory assurance for reporting by an independent assurance service provider against sustainability reporting standards. This is to make sure information is accurate and reliable.

These standards are being developed by the European Financial Reporting Advisory Group (EFRAG), with additional technical advice from other European agencies. The standards will be shaped to EU policies, but also feed into and incorporate global initiatives. The first set of standards are expected from June 2023.

Better accessibility of information is also part of the new directive and companies will need to make sure their information feeds into a digital open access database.

According to the European Commission (EC), CSRD aims to lower companies’ reporting costs over the medium to long-term. The EC has said that while there might be increased costs initially, 'most companies will face an increase in costs anyway because of the growing demand from investors and other stakeholders for corporate sustainability information.' 

What are the timescales?


The application of CSRD will take place in four stages: 

  • 1 January 2024 – for companies already reporting in line with NFRD (reporting in 2025 on 2024 data).
  • 1 January 2025 – for large companies that are not currently subject to NFRD (reporting in 2026 on 2025 data).
  • 1 January 2026 – for listed SMEs, small and non-complex credit institutions and captive insurance undertakings (reporting in 2027 on 2026 data).
  • 1 January 2028 - reporting in 2029 on the financial year 2028 for third-country undertakings with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds

Please note the above timeline differs from the original Commission proposal. 

What are the opportunities?

Rather than just seeing CSRD as a mandatory requirement, there are benefits for businesses:

  • Streamlining and transparency are vital for any reporting. CSRD reduces the risk of greenwashing and provides clarity for external stakeholders, whether those are investors or consumers.
  • Reporting gives enhanced credibility, and the chance to attract external investment and comparability in the market. 
  • Regulation such as CSRD makes climate reporting standard practice and part of everyday business. That means companies can play a part in taking tangible climate action, and prove their plans are based on science-based parameters, while also tracking their implementation.

Why have the changes been made?

Companies have a crucial role to play in the transition to a low-carbon, resource-efficient economy. 

CSRD improves on the NFRD, which has seen large companies reporting sustainability information annually, and has applied to more than 11,000 businesses. However, evidence found that the information reported is often not enough for investors and other stakeholders to feel fully informed or confident about sustainability-related risks. 

Increasingly, investors need to understand what impact companies have on the environment and people. Consumers also need more information to make sustainable choices. And so sustainability information increasingly needs to be comparable, trusted and reliable, not just to build confidence in the green investment market, but also to create greater public accountability.

This is the backdrop to the creation of CSRD.

How does CSRD link to wider regulation and policies?


With the growing impact of the climate crisis, the EU has created the European Green Deal, a framework of rules and guidelines that aim to 'transform the EU into a modern, resource-efficient and competitive economy…' The deal is designed to make sure that:

  • There are no net emissions of greenhouse gases by 2050 – with an ambition to become the first climate-neutral continent.
  • Economic growth is ‘decoupled’ from the use of resources.
  • There are no people or places left behind.

As part of the European Green Deal, the EU Action Plan on Sustainable Finance aims to help more money flow from investors into sustainable projects, assets and companies. An essential part of that is the EU Taxonomy. The EU Taxonomy is a classification system, establishing a list of environmentally sustainable economic activities (you can read more in this insight), and is an essential part of CSRD.

On a global scale, there are similar reporting mechanisms in place. For example, in the United States, the Securities and Exchange Commission (SEC) has rules around Environmental, Social and Governance (ESG) reporting and has plans to extend these to climate risk. Meanwhile, the UK has the Task Force on Climate-Related Financial Disclosures (TCFD). But Europe is leading in terms of how extensive and ambitious the reporting is.

The Carbon Trust’s view

While expanded sustainability reporting may feel like an extra burden of work for many companies, we believe taking this kind of action is vital if we are to bring about the kind of change we need to reach a low-carbon future. Legislation like this supports sustainability reporting to be a part of standard practice and everyday business. In the long-term it will eliminate discussions and time spent on what to report on, and which parameters to measure. The learning curve might be steep but the aim should be that it becomes integrated in all reporting systems and drives tangible action. 

Next steps

Companies should start taking action now to prepare for the new rules. The Carbon Trust recommends the following steps:

  1. Understand whether your company will fall under the new rules, and what timescale you will be working towards.
  2. Look at what you are currently reporting on.
  3. Do you have sustainability targets? Ensure they are robust and based on correct methodology.
  4. Train key employees on CSRD. 

How we can help

The Carbon Trust is a global climate consultancy driven by the mission to accelerate the move to a decarbonised future. We have been pioneering decarbonisation for more than 20 years, including supporting organisations as they transition to more sustainable business models. Drawing on a network of over 400 experts internationally, the Carbon Trust guides organisations through their journey to Net Zero. From strategic planning and target setting to delivery, activation and communication – we provide smarter ways to turn intent into impact. 

We have an established European team who can partner with your organisation, advising on meeting the reporting requirements, and preparing you for upcoming regulations. For more information, get in touch at

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