CSRD and ESRS: An Introduction to the New Guidelines for Sustainability Reporting

The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) form the new standard for sustainability reporting within the EU. But what do these guidelines entail? Why were they introduced, and which companies fall under the CSRD obligation? In this article, you will get a complete overview of the CSRD and ESRS, including the key obligations and benefits.

What is CSRD? – Explanation of the Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is a European directive that requires companies to report more transparently on their impact on the environment, society, and governance (ESG factors).

CSRD Replaces the NFRD

The CSRD replaces the Non-Financial Reporting Directive (NFRD) and imposes stricter requirements on how companies report. While the NFRD only applied to a limited number of large companies, the CSRD applies to a much broader group of enterprises.

Objective of the CSRD

The directive is part of the European Green Deal, aiming to make Europe climate-neutral by 2050. By requiring companies to provide extensive sustainability reporting, investors, consumers, and other stakeholders can make better-informed decisions.

Why was the CSRD directive introduced and what does it mean for companies?

The introduction of the CSRD aims to:

• Increase transparency: Companies must report both their positive and negative impacts on people and the environment.
• Improve comparability: Standardized reporting allows stakeholders to easily compare companies.
• Encourage sustainability: Mandatory disclosure prompts companies to address sustainability risks and set ESG goals.

The main goals of the CSRD: Transparency, Double Materiality, and Harmonization.

Increased Transparency

Companies must provide detailed information about their environmental and social impact, as well as governance processes.

Double Materiality

The CSRD introduces the concept of double materiality, which means that companies must report on:

• Impact Materiality: How does the company affect people and the environment?
• Financial Materiality: How do sustainability factors influence the company’s financial performance?

Harmonization of Reporting

By applying the European Sustainability Reporting Standards (ESRS), a uniform reporting structure is adopted within the EU, ensuring consistent and comparable sustainability information.

Who is obligated under CSRD? – Check if your company must comply with the directive

Not all companies fall directly under the CSRD, but the directive is being implemented in several phases:

Date	Who?	Report submitted in
January 1, 2024	Large listed companies (>500 employees, already under NFRD)	2025
January 1, 2025	Large companies (>250 employees, revenue >€40 million, balance sheet total >€20 million)	2026
January 1, 2026	Listed SMEs and other enterprises (opt-out possible until 2028)	2027
January 1, 2028	Non-European companies with revenue >€150 million in the EU	2029

CSRD Legislation: What does the new EU directive for sustainability reporting entail?

The CSRD legislation is laid out in Directive (EU) 2022/2464, which was adopted in December 2022. This legislation:

• Extends the existing NFRD with stricter reporting requirements.
• Requires companies to follow ESRS standards in sustainability reports.
• Defines the size criteria for companies that fall under the CSRD.

What are the ESRS? – Explanation of European Sustainability Reporting Standards

The European Sustainability Reporting Standards (ESRS) form the basis for CSRD reporting. These standards are divided into three main themes:

General Requirements

• ESRS 1 – General Principles
• ESRS 2 – General Disclosures

Environmental (E)

• E1 – Climate Change
• E2 – Pollution
• E3 – Water and Marine Resources
• E4 – Biodiversity and Ecosystems
• E5 – Resource Use and Circular Economy

Social (S)

• S1 – Own Employees
• S2 – Workforce in the Value Chain
• S3 – Affected Communities
• S4 – Consumers and End Users

Governance (G)

• G1 – Business Conduct and Transparency

What does a disclosure mean in CSRD reporting?

A disclosure within the CSRD refers to the mandatory public disclosure of ESG information. It must include both qualitative and quantitative data and is structured according to ESRS guidelines. Minimum Disclosure Requirements (MDR) determine what core information is mandatory, regardless of the materiality analysis.

The role of stakeholders in CSRD: Influence of investors, governments, and consumers

Various stakeholders play a role in the implementation of the CSRD:

• Investors – Use ESG information for risk analysis and investment decisions.
• Governments & Regulators – Monitor compliance (e.g., AFM in the Netherlands).
• Consumers – Expect transparency and sustainability accountability.
• Employees & Suppliers – Contribute to the sustainability of the value chain.
• NGOs & Social Organizations – Monitor sustainability goals and accountability.

What are the benefits of CSRD for companies? – Risk management, financing, and reputation

Compliance with the CSRD offers companies:

• Improved risk management – Prevents ESG-related risks.
• Access to capital – Transparency makes companies more attractive to investors.
• Stronger reputation – Open communication about sustainability enhances the image.
• Operational efficiency – Sustainability data helps with cost savings and innovation.

The CSRD and ESRS contribute to a more transparent and sustainable business world. Companies that prepare well benefit from strategic advantages and compliance with EU legislation.