CSRD Reporting 2025: Corporate Sustainability Reporting Directive

The CSRD Reporting Framework, Requirements & all the information you need.

The Corporate Sustainability Reporting Directive (CSRD) is a legislative proposal from the European Union (EU) designed to improve and expand sustainability reporting by companies. It builds upon the earlier Non-Financial Reporting Directive (NFRD), which was enacted in 2014. While the NFRD required large companies to disclose non-financial information, it was criticized for being insufficient and inconsistent across member states. The CSRD aims to address these shortcomings by introducing more detailed, standardized, and comparable reporting requirements for environmental, social, and governance (ESG) matters.

Companies are expected to report CSRD standards in 2025 (based on 2024 data).

The directive was officially adopted in 2022 and is set to be implemented across EU member states starting from the 2024 financial year. Its objective is to enhance transparency, ensure better accountability, and drive the EU’s sustainability agenda forward, contributing to the EU Green Deal and the EU’s wider climate and environmental objectives.

Key Aspects of the CSRD Reporting Framework

1. Expanded Scope: The CSRD Reporting framework significantly broadens the scope of companies that must comply with the reporting requirements. It extends the obligation to all large companies, defined as those meeting at least two of the following three criteria:
   • A net turnover of over €40 million.Total assets exceeding €20 million.More than 250 employees.
   Moreover, the directive includes not only EU-based companies but also non-EU companies with substantial activity in the EU (revenue exceeding €150 million in the EU). This means that even foreign firms will be required to disclose ESG-related data if they meet certain thresholds.
2. Detailed CSRD Reporting Requirements: The CSRD mandates comprehensive ESG disclosures that encompass environmental, social, and governance factors. It requires companies to report on:
   • Environmental impacts (e.g., carbon footprint, water usage, waste management, biodiversity protection).Social issues (e.g., human rights, labor practices, diversity and inclusion).Governance (e.g., board composition, anti-corruption practices, executive compensation).
   These disclosures must align with the EU’s European Sustainability Reporting Standards (ESRS), which are developed by the European Financial Reporting Advisory Group (EFRAG). The standards will provide a unified framework for reporting across sectors and countries, ensuring consistency and comparability.
3. Digitalization and Accessibility: Another key feature of the CSRD is the emphasis on digitalization. Companies are required to prepare their reports in a machine-readable format (XHTML or inline XBRL). This facilitates easier access to the data for investors, regulators, and the public. Digitalization also ensures that ESG data is integrated into financial reporting, making it easier for stakeholders to analyze and compare sustainability performance.
4. Assurance of Reporting: Under the CSRD, companies are also required to obtain third-party assurance for their sustainability disclosures. This is a critical element aimed at enhancing the credibility of the reported information. The CSRD suggests that companies must ensure their reports are verified by independent auditors to increase trust and reliability in ESG reporting.
5. Forward-Looking Information: Unlike traditional financial reporting, the CSRD requires companies to provide forward-looking statements. Companies must disclose not only past and present sustainability risks but also their plans to address those risks in the future. This helps investors and other stakeholders evaluate a company’s long-term sustainability strategy.

Objectives and Purpose of the CSRD Reporting Framework

The primary goals of the CSRD are:

1. Increased Transparency: By ensuring consistent and comparable ESG disclosures, the CSRD aims to improve the transparency of companies’ environmental and social impacts. This allows stakeholders, including investors, consumers, and regulators, to make more informed decisions.
2. Alignment with the EU Green Deal: The directive supports the EU’s broader sustainability goals, particularly the European Green Deal and the Climate Law, which aim to achieve net-zero emissions by 2050. By encouraging companies to disclose their sustainability strategies and risks, the CSRD helps create accountability and aligns business practices with environmental goals.
3. Enhanced Accountability and Trust: By requiring independent third-party verification and stringent reporting standards, the CSRD aims to foster greater corporate accountability in relation to ESG issues. This is especially important in countering the growing concern of “greenwashing”—the practice of misleading consumers or investors about the environmental or social benefits of a company’s products or operations.
4. Encouraging Sustainable Investment: The CSRD is designed to provide investors with clear, standardized, and reliable information about companies’ sustainability practices. This facilitates better decision-making, potentially leading to increased investments in companies that demonstrate genuine commitment to sustainability.

Strengths of the CSRD Reporting Framework

1. Comprehensive and Detailed Reporting: One of the major strengths of the CSRD is its comprehensive nature. It covers a broad spectrum of ESG factors, which gives stakeholders a holistic view of a company’s sustainability practices. By requiring both backward-looking and forward-looking disclosures, the directive also provides insights into the company’s long-term sustainability trajectory.
2. Standardization and Comparability: The CSRD introduces a standardized reporting framework across all EU member states, which helps overcome inconsistencies and discrepancies that were present under the NFRD. This makes it easier to compare companies’ sustainability performance on a regional and global scale.
3. Focus on Digitalization: By mandating that ESG data be disclosed in a machine-readable format, the CSRD promotes the digitalization of sustainability reporting. This improves the accessibility and usability of the data, enabling better analysis by stakeholders and reducing the time needed to process information.
4. Enhanced Credibility: The requirement for third-party assurance helps ensure that the reported sustainability information is accurate and reliable. This adds credibility to the reports and makes it more difficult for companies to engage in “greenwashing” or misrepresenting their sustainability efforts.

Weaknesses of the CSRD Reporting Framework

1. Increased Compliance Costs: One of the key criticisms of the CSRD is the potential increase in compliance costs for companies. Implementing the reporting standards, especially for smaller companies, can be expensive and time-consuming. For instance, gathering the necessary data and undergoing third-party audits could be particularly challenging for companies with limited resources.
2. Complexity of Reporting: The CSRD introduces a detailed and complex reporting framework that may be difficult for companies to navigate. The requirements for extensive disclosure on various ESG factors, along with the need to provide both qualitative and quantitative information, could overwhelm some businesses, particularly smaller ones.
3. Limited Scope for SMEs: While the CSRD significantly expands the scope of reporting, many small and medium-sized enterprises (SMEs) will still be excluded from mandatory reporting. However, some critics argue that SMEs, which play an important role in the economy, should also be encouraged or required to disclose ESG information, even if on a less detailed basis.
4. Data Reliability and Assurance Challenges: Although the CSRD requires third-party assurance, the process of verifying ESG data is still in its infancy, and assurance providers may face challenges in evaluating non-financial information with the same rigor as financial data. This could lead to inconsistencies in the level of assurance provided and undermine the directive’s goals of improving data reliability.

Conclusion

The Corporate Sustainability Reporting Directive (CSRD) represents a significant step forward in the EU’s effort to enhance corporate transparency and accountability in relation to environmental, social, and governance issues. By introducing more detailed reporting standards, a digital-first approach, and a focus on independent verification, the CSRD is poised to make a positive impact on sustainability practices across Europe. However, the directive also poses challenges, particularly around compliance costs, reporting complexity, and the need for greater consistency in data assurance. Despite these challenges, the CSRD reporting framework is a vital part of the EU’s sustainability strategy and could play a key role in driving more sustainable business practices globally.

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