Corporate Sustainability Reporting Directive (CSRD)

  • The Corporate Sustainability Reporting Directive (CSRD) is a European Union directive that overhauls and expands corporate sustainability disclosure requirements. Adopted in 2022 and in force since January 2023, it replaced the earlier Non-Financial Reporting Directive (NFRD) and established a comprehensive framework for environmental, social, and governance (ESG) reporting.

    The CSRD requires companies within its scope to report detailed information on their sustainability risks, impacts, and performance in their annual management reports, using common EU reporting standards. In essence, the directive elevates sustainability reporting to a level comparable with financial reporting, embedding ESG disclosure into mainstream corporate reporting and governance.

    The CSRD has subsequently been substantially simplified through the EU’s Omnibus I package. The revised rules narrow the scope of mandatory reporting, simplify reporting requirements and reduce the reporting burden for companies and their value-chain partners. The revised framework also introduces a voluntary sustainability reporting standard for companies outside the mandatory scope.

  • Objectives

    Improve Transparency and Comparability:
    A core goal of the CSRD is to ensure stakeholders (investors, financial institutions, consumers, and the public) have access to reliable, consistent, and comparable ESG information about companies. The directive aims to improve the flow of sustainability data so that it can be readily used in decision-making, much like financial data. By standardizing what companies report, it makes it easier to compare sustainability performance across companies.

    Broaden Disclosure & Prevent Greenwashing:
    The CSRD expands the level of sustainability information that companies within its scope must disclose. This reporting mandate is intended to hold businesses accountable for their social and environmental impacts and to help prevent “greenwashing” – i.e. unfounded or misleading claims about sustainability. Companies report both how sustainability issues affect their business and how their business impacts people and the environment (the CSRD’s “double materiality” approach). By capturing both perspectives, the directive promotes greater transparency around companies’ sustainability impacts and risks.

    Standardize Sustainability Reporting:
    The directive introduces common reporting standards for companies within its scope. Under the CSRD, firms report in line with the European Sustainability Reporting Standards (ESRS), which define the sustainability information to be disclosed. The ESRS are being simplified and streamlined to reduce the reporting burden while maintaining consistent and comparable sustainability information across the EU.

    Ensure Accountability and Trust:
    The CSRD moves sustainability reporting from a voluntary or informal practice to a regulated process. It requires sustainability information to be integrated into annual management reports and subject to external assurance, initially at a limited assurance level. By placing sustainability information within formal corporate reporting and subjecting it to assurance requirements, the CSRD increases the credibility and accountability of reported information.

    Support EU Sustainable Finance Goals:
    A broader objective of the CSRD is to align corporate reporting with the EU’s climate and sustainability targets. By enhancing transparency, the directive helps channel investments toward sustainable businesses and activities, supporting the European Green Deal ambitions. The CSRD works alongside other EU initiatives such as the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy, helping provide sustainability information relevant to these frameworks.

  • Scope

    The CSRD now applies to a significantly narrower group of companies following the EU’s Omnibus I simplification package.

    Large EU Companies:
    The mandatory CSRD requirements apply to EU companies with more than 1,000 employees and more than €450 million in net annual turnover. The revised scope therefore excludes many companies that would have been covered under the original CSRD framework, including most listed SMEs and many large companies below the new thresholds.

    Listed Companies:
    Being listed on an EU-regulated market no longer by itself brings a company into the mandatory CSRD scope. Companies must meet the revised size and turnover thresholds to be subject to the mandatory reporting requirements.

    Non-EU Companies with Significant EU Operations:
    The CSRD retains an element of extra-territorial reach. Under the revised rules, specific reporting requirements apply to certain third-country undertakings where the parent undertaking generates more than €450 million in net turnover within the EU and the relevant EU subsidiary or branch generates more than €200 million in net turnover. Specific conditions apply depending on the structure and activities of the undertaking.

    Companies Outside the Mandatory Scope:
    Companies that fall outside the revised CSRD scope may still face sustainability information requests from customers, investors, financial institutions or business partners. To help address this, the EU has introduced a voluntary sustainability reporting standard for smaller companies outside the mandatory CSRD scope. The revised framework also limits the amount of sustainability information that companies within the CSRD scope may request from smaller companies in their value chain.

    Overall, the revised CSRD focuses mandatory reporting on larger companies with significant economic activity, while providing a more proportionate and voluntary approach for smaller businesses.

    • January 2023 – CSRD enters into force:
      The Corporate Sustainability Reporting Directive entered into force, replacing the previous Non-Financial Reporting Directive (NFRD) and establishing a broader and more detailed framework for sustainability reporting.

    • 2024 financial year – First reporting wave:
      Companies already subject to the NFRD began reporting under the CSRD framework for financial year 2024, with their first reports published in 2025.

    • 26 February 2025 – Omnibus I proposed:
      The European Commission proposed a major simplification of the CSRD as part of the Omnibus I package, including a significant reduction in the number of companies subject to mandatory reporting and changes to reporting requirements.

    • April 2025 – “Stop-the-clock” adopted:
      The EU formally postponed the application of CSRD reporting requirements for companies that had not yet started reporting and for listed SMEs by two years. This provided additional time while the substantive CSRD changes were negotiated.

    • July 2025 – ESRS “quick fix”:
      The European Commission adopted targeted amendments to the first set of ESRS, giving companies in the first reporting wave additional flexibility for financial years 2025 and 2026.

    • 24 February 2026 – Omnibus I finally approved:
      The Council gave final approval to the legislation simplifying the CSRD. The revised rules narrow the mandatory scope to companies with more than 1,000 employees and more than €450 million in net annual turnover. They also introduce additional safeguards around value-chain information requests and voluntary reporting for companies outside the mandatory scope.

    • July 2026 – Revised ESRS adopted by the Commission:
      The European Commission adopted revised European Sustainability Reporting Standards, reducing the number of mandatory datapoints by more than 60% and the total number of datapoints by more than 70%. The revised standards remain subject to scrutiny by the European Parliament and Council before they apply.

    • 2026 onwards – Implementation of the revised framework:
      Member States will transpose the revised CSRD requirements into national legislation. Companies within the revised scope will need to monitor national implementation, the final ESRS and applicable reporting dates as the simplified framework takes effect.

  • 26 February 2025 – Omnibus I proposed
    The European Commission proposed a major simplification of the CSRD as part of the Omnibus I package. The proposal aimed to reduce the administrative burden, narrow the number of companies subject to mandatory reporting, simplify the ESRS and limit the amount of sustainability information that larger companies can request from smaller value-chain partners.

    April 2025 – “Stop-the-clock” Directive adopted
    The EU formally adopted the “stop-the-clock” mechanism, postponing the application of CSRD reporting requirements for companies that had not yet started reporting and listed SMEs by two years. This provided additional time for the EU institutions to agree on the substantive changes to the CSRD.

    11 July 2025 – ESRS “Quick Fix”
    The European Commission adopted a targeted “quick fix” to the first set of ESRS. The amendments provided additional flexibility for companies in the first reporting wave and ensured that they would not face additional reporting requirements for financial years 2025 and 2026 compared with their 2024 reporting requirements.

    24 February 2026 – Omnibus I approved
    The Council gave final approval to the Omnibus I simplification package. The revised CSRD significantly narrows the mandatory scope to companies with more than 1,000 employees and more than €450 million in net annual turnover. The revised rules also reduce the reporting burden and limit the information that companies can request from smaller value-chain partners.

    3 July 2026 – Revised ESRS adopted by the European Commission
    The Commission adopted revised ESRS designed to make sustainability reporting shorter, clearer and more proportionate. The revised standards reduce the number of mandatory datapoints by more than 60% and the total number of datapoints by more than 70%. They are subject to scrutiny by the European Parliament and Council before becoming applicable.

    Current status – August 2026
    The CSRD is therefore no longer in the same implementation phase originally envisaged in 2022. The scope has been significantly reduced, reporting requirements have been simplified, and the ESRS are being revised. Companies should monitor the finalisation and national implementation of the revised framework, as well as the final application dates and reporting requirements.