4 most-asked questions about the CSRD

The game-changing CSRD demands more detailed ESG data – with surely more requirements to come. We break down the who, what, when & what now. 

by Paula Galbiatti Silveira & Beatriz García Fernández-Viagas

The CSRD is here – and it wants details. Adopted and now officially published by the EU, the Corporate Sustainability Reporting Directive (or, the CSRD) is an overhaul of ESG and sustainability reporting requirements. And not just for companies in the EU. It was published on 16 December 2022 and entered into force the first week of January 2023. Member States are being required to transpose the adopted rules 18 months later. The CSRD will be followed by a flurry of changes to how your business must report on environmental, social, and governance issues. Here’s a look at what it’s all about and what it means for your business: 

1. What does the CSRD change?

The CSRD aims to improve sustainability reporting by expanding the applicability of the existing Non-Financial Reporting Directive (NFRD). It is all about the details – literally. 

On top of requiring further businesses to report, the directive sets out a general EU-wide audit obligation. This means that companies’ sustainability reports will have to be certified to ensure that the reported sustainability information is accurate and reliable.  

In short, the EU has called for much more detailed as well as independently audited or certified data on environmental, social, and governance issues.  

2. Who will need to comply with the CSRD?

To expand the scope of the NFRD, the CSRD introduces more detailed requirements and to more companies, including:  

  • large EU companies (with over 250 employees and a net turnover of EUR 40 million) 
  • companies listed on regulated markets (except listed micro undertakings) 
  • listed small and medium enterprises (SMEs) 
  • non-EU companies generating a net turnover of over EUR 150 million in the EU and having at least one subsidiary/branch in the EU. 

That’s right, the CSRD wants details not just from EU-based companies but also from certain businesses operating in the region as well.  

3. Where do the ESRS come in?

If the CSRD tells us that certain businesses must report on ESG issues, the European Financial Reporting Advisory Group (EFRAG) tells us how they must do so. For the first time, we have an EU directive that obliges businesses to report on sustainability matters according to mandatory standards. 

On 23 November 2022, EFRAG submitted the first set of these proposed standards, the draft European Sustainability Reporting Standards (ESRS). This first draft of 12 ESRS comprises cross-cutting standards (on general requirements and general disclosures) and topics such as climate change, resources and circular economy, workers in the value chain, end-users, and business conduct – to name a few. The commission adopted this first set of ESRS by means of delegated acts on 31 July 2023 (although they’re yet to be published in the Official Journal). 

In the following months, EFRAG will develop another 2 sets of draft ESRSon sector-specific standards (more specifically, sectors covered by the Global Reporting Initiative – GRI – and high-impact sectors), such as mining, energy production, and textiles, which must be adopted by the Commission by June 2024. 

The Delegated act will apply from 1 January 2024 to companies that were already subject to NFRD, while the application will be phased-in for the other categories of companies. Besides, listed SMEs will have the option of meeting their reporting requirements under the CSRD by reporting according to separate, proportionate standards that the Commission will adopt by end of June 2024. 

4. When will businesses need to comply?

Under the CSRD, companies will have to report on sustainability matters according to the mentioned future standards as of the following dates:  

  • 2025 (reporting on the financial year 2024): If your company is a large public-interest company, meaning, with over 500 employees and already subject to the NFRD
  • 2026 (reporting on the financial year 2025): If your company is a large company not currently subject to the NFRD, meaning with more than 250 employees and/or EUR 40 million in turnover and/or EUR 20 million in total assets
  • 2027 (reporting on the financial year 2026): If your company is a listed SME, small and non-complex credit institution or captive insurance undertaking
  • 2029 (reporting on the financial year 2028): If your company is a third-country undertaking with net turnover above 150 million in the EU and having at least one subsidiary or branch in the EU 

If your business meets one of the profiles above, that first reporting deadline could hit you rather hard – knowing the range of issues to report on and the level of verification required.

So, now how do you get ahead of the CSRD?

Now with the CSRD published and ESRS approved by Delegated Act, the next developments will come from the Member States – who will need to transpose the adopted rules within 18 months after. It all translates into more sustainability reporting rules coming down the pipeline. More to keep track of and more requirements to meet. 

If your business lies in the path of these upcoming changes, the first way to prepare is to take a closer look at your EHS compliance information. Is it in a consistent and verifiable format? Are you up to date on the latest requirement changes? Do you know what’s coming your way? Make sure that your data can withstand more stringent ESG reporting standards – contact our team to discover how our solutions can help you get ahead of the CSRD and more.  

Subscribe to stay on top of emerging EHS issues with our latest resources

Sign up to receive updates on what’s happening in environmental, health and safety regulations – and what to do about it, including: today’s risks and safeguarding against them, changing regulatory developments and your requirements, trends to get ahead of in your program…