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An Introduction to the CSRD

To many, the CSRD will be a game changer in ESG reporting. But what is it, who will it affect, and when does it come into force? This introduction breaks it all down.

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What is the CSRD?

The CSRD is the Corporate Sustainability Reporting Directive. First proposed in April 2021, this new EU legislation developed by the European Financial Reporting Advisory Group (EFRAG) will gradually be coming into play over the next few years. It expands upon, and will replace, the Non-Financial Reporting Directive (NFRD), which has been in force since 2018. Like the NFRD, the CSRD sets out environmental, social and governance (ESG) reporting requirements for companies. Its aim is to significantly expand the scope of the NFRD, both in terms of who needs to report and what needs to be reported.
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What are the new requirements?

  • Integration of ESG in the Management Report (Annual Report)
  • Mandatory standards for sustainability reporting
  • Financial Reporting team is responsible
  • Audit (assurance) mandated
  • Digital tagging of information
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What is the scope of the CSRD?

All large companies(1) and all companies listed on regulated markets (except listen micro-enterprises).
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When is the CSRD mandated by?

Officially entered into force on 5 January 2023.

Gradual rollout with first companies due to file in Q1 2025 (applies to FY 2024).

Frequently Asked Questions

The CSRD will have a considerably larger reach than the NFRD, taking the number of companies affected from 11,000 to around 50,000.

As well as organisations currently in scope of the NFRD, the CSRD will affect all EU-based companies who have:

  • A net turnover of €40 million or more
  • At least €20 million in assets 
  • 250+ employees
  • All listed companies (with the exception of micro-enterprises) will also be affected. 

Additionally, non-EU companies who have with EU-based subsidiaries, or who have securities on EU-regulated markets, are also required to comply with the CSRD. This means, for example, that a UK or US-based multi-entity corporation with a single subsidiary in the EU will need to report in line with CSRD regulations, even if all their other subsidiaries are outside of the EU. 

The European Sustainability Reporting Standards (ESRS) are the new standards being brought in by the CSRD. These provide the specific requirements that companies will need to follow in their reporting practices.

In November 2022, EFRAG published the first set of draft ESRS, covering 12 standards. These cover:

  • General: 1- General requirements, 2- General disclosures
  • Environmental: E1 - Climate Change, E2 - Pollution, E3 - Water and Marine Resources, E4 - Biodiversity and Ecosystems, E5 - Resource Use and Circular Economy
  • Social: S1 - Own Workforce, S2- Workers in the value chain, S3 - Affected communities, S4 - Consumers and end users
  • Governance: G1 - Business Conduct

While reporting in line with E2 - General disclosures and E1 - Climate change is required for all companies in scope of the CSRD, not all of these are mandatory for every company. EFRAG and the ESRS provide detailed information on who needs to follow which specific standards.

The EU has long believed that investors and consumers are entitled to understand the ESG impact of businesses in a clear, easily comparable manner. Though existing regulations (such as the NFRD) provided a step in this direction, the consensus was that they weren’t sufficient.

Investors found that many ESG reports omitted important or useful information, used differing metrics, and had different areas of focus, making it difficult to trust the data or benchmark companies against one another. As the EU found, this can have a knock-on effect on sustainable investment, one of its key areas of focus.

The CSRD aims to establish a shared framework for reporting non-financial data. The idea is that by enforcing thorough, robust, standardised reports, everyone— from policymakers and investors to clients and consumers—can make informed decisions on a company’s ESG performance.

One of the major aims of the CSRD is to bring together the ‘E’, ‘S’, and ‘G’ of ESG reporting in a more cohesive and coherent manner. Companies will need to disclose information concerning:

  • The environment
  • Treatment of staff and approach to social matters
  • Human rights
  • Anti-bribery and corruption
  • Board diversity
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Executive Summary: A Snapshot of the CSRD

This guide distills key information about the mandate and how it will impact your organisation.

What else should I know?

The CSRD will be granting individual Member States the opportunity to open the market to ‘independent assurance services providers’. Countries that choose to take this option would allow assurance firms as well as auditors to verify the sustainability information within reports.

In the future, smaller organisations will also need to report in accordance with the CSRD. Modified regulations tailored for SMEs will be published, and those listed on a regulated market will need to start reporting from 2028.

Our recommendations

All hands on deck

The CSRD is a substantial step up from previous ESG reporting requirements. To meet these high standards, your company will need full engagement from all stakeholders, particularly C-level executives and the board of directors. More than putting together a report, the CSRD requires a clear vision and goal setting.

Prepare now

Now that we know exactly what the CSRD entails, it's time to make the necessary decisions to ensure that your organisation complies with the mandate.

Remain agile

As the reporting landscape develops, it’s important to assess the processes and tools that underpin daily operations throughout the organisation. Do you have access to all the data your organisation may need to report on? How is it being gathered? Is it secure, verifiable, and connected? Having these building blocks in place (with the help of the right technology and processes) will prepare you for any upcoming reporting requirements.

Learn how Workiva can help you on your sustainability journey

To help you stay ahead of evolving legislations, our platform connects data across your entire organisation and existing systems, all while maintaining control and mitigating risk. By empowering you to trust your data and report in a transparent and verifiable manner, Workiva enables you to go beyond compliance and focus on communicating—and achieving—your company’s goals.

ESG Software

Our ESG solution has all CSRD reporting requirements built into the platform, which we continually optimise to enable its seamless integration within the reporting process.

ESG Demo Video

Workiva stands out from other ESG reporting tools by fostering collaboration among various teams and intelligently integrating data to ensure transparency throughout the entire reporting process.

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