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An Introduction to the CSRD

To many, the Corporate Sustainability Reporting Directive will be a game changer in ESG reporting. But what is it, who will it affect, and when does it come into force? This introductory guide breaks it all down.

sustainable green building design

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD), sets out environmental, social and governance (ESG) reporting requirements for companies and aims to significantly expand the scope of the NFRD, both in terms of who needs to report and what needs to be reported.

First proposed in April 2021, this new European Union (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.

New Requirements

What are the new CSRD requirements?

The new CSRD requirements introduce mandatory corporate sustainability reporting standards and the integration of ESG information in management and annual reports. This means mandatory assurance audits and digital tagging of information by the financial reporting team.

scope of CSRD

What is the scope of the CSRD?

All large companies(1) and all companies listed on regulated markets (except micro-enterprises) must comply with CSRD reporting requirements.

CSRD Mandates

When is the CSRD mandated by?

The Corporate Sustainability Reporting Directive officially entered into force on 5 January 2023. A gradual rollout with the first companies due to file will occur in Q1 2025 (applies to FY 2024).

Frequently Asked CSRD Questions

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.

The CSRD, having a considerably larger reach than the NFRD, (up from 11,000 to around 50,000) also impacts 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 standards being brought in by the CSRD to 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 reporting standards.

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

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.

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

Inner courtyard of the European Parliament building

Executive Summary: A Snapshot of the CSRD

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

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 corporate sustainability reporting information provided.

In the future, smaller organizations 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 standards. To meet these high CSRD 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 organization 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 organization. Do you have access to all the data your organization 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 CSRD 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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