Complete Guide to EU CSRD Compliance
Everything you need to know about the Corporate Sustainability Reporting Directive, including timelines, requirements, and implementation strategies.
1. CSRD Overview
The Corporate Sustainability Reporting Directive (CSRD) is a comprehensive EU regulation that significantly expands sustainability reporting requirements for companies operating in the European Union. Adopted in December 2022, the CSRD replaces the Non-Financial Reporting Directive (NFRD) and introduces more detailed reporting obligations.
The directive aims to improve the quality, consistency, and comparability of sustainability information reported by companies, enabling investors and stakeholders to make more informed decisions about environmental, social, and governance (ESG) performance.
Key Fact:
The CSRD will affect approximately 50,000 companies in the EU, compared to about 11,000 under the previous NFRD framework—a more than 4x increase in scope.
2. Implementation Timeline
The CSRD follows a phased implementation approach, with different company categories required to comply at different times:
Financial Year 2024 (Reports in 2025)
Large public-interest entities already subject to NFRD (approximately 11,000 companies with more than 500 employees).
Financial Year 2025 (Reports in 2026)
Large companies not currently subject to NFRD (companies meeting 2 of 3 criteria: >250 employees, >€50M turnover, >€25M balance sheet total).
Financial Year 2026 (Reports in 2027)
Listed SMEs, small and non-complex credit institutions, and captive insurance undertakings.
Financial Year 2028 (Reports in 2029)
Non-EU companies with significant EU operations (>€150M EU turnover and at least one EU subsidiary or branch meeting certain thresholds).
3. Key Requirements
The CSRD introduces several significant requirements that go beyond the previous NFRD framework:
Double Materiality Assessment
Companies must report on both:
- Impact materiality: How the company's activities affect people and the environment
- Financial materiality: How sustainability matters affect the company's financial performance and position
Value Chain Reporting
Companies must report on sustainability matters throughout their entire value chain, including upstream (suppliers) and downstream (distribution, end-of-life) activities. This extends reporting obligations far beyond the company's direct operations.
Digital Tagging (XHTML/iXBRL)
Sustainability reports must be prepared in a digital, machine-readable format using the European Single Electronic Format (ESEF), enabling automated data extraction and analysis.
Third-Party Assurance
Sustainability information must be assured by an independent third party. Initially, limited assurance is required, with reasonable assurance planned for the future.
4. European Sustainability Reporting Standards (ESRS)
The CSRD requires companies to report according to the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG). The ESRS consist of:
Cross-Cutting Standards (2)
- • ESRS 1: General requirements
- • ESRS 2: General disclosures
Environmental Standards (5)
- • ESRS E1: Climate change
- • ESRS E2: Pollution
- • ESRS E3: Water and marine resources
- • ESRS E4: Biodiversity and ecosystems
- • ESRS E5: Resource use and circular economy
Social Standards (4)
- • ESRS S1: Own workforce
- • ESRS S2: Workers in the value chain
- • ESRS S3: Affected communities
- • ESRS S4: Consumers and end-users
Governance Standards (1)
- • ESRS G1: Business conduct
5. Implementation Strategy
Successfully implementing CSRD compliance requires a structured, multi-phase approach:
Phase 1: Gap Analysis & Readiness Assessment (3-6 months)
- Conduct double materiality assessment to identify relevant ESRS topics
- Map current reporting capabilities against CSRD requirements
- Identify data gaps, particularly in value chain information
- Assess technology and systems readiness for digital reporting
Phase 2: Data Collection & Systems Setup (6-12 months)
- Establish data collection processes across the organization and value chain
- Implement or upgrade sustainability data management systems
- Develop internal controls and governance structures
- Train relevant personnel on CSRD requirements and processes
Phase 3: Reporting & Assurance (3-6 months)
- Prepare sustainability statement according to ESRS
- Tag report in XHTML/iXBRL format
- Engage external assurance provider
- Integrate sustainability statement into management report
Phase 4: Continuous Improvement (Ongoing)
- Monitor regulatory developments and ESRS updates
- Refine data collection and reporting processes
- Enhance value chain engagement and data quality
- Prepare for transition to reasonable assurance
6. Best Practices
Start Early
Begin your CSRD journey well before your compliance deadline. The scope and complexity of requirements mean that rushed implementation often leads to poor data quality and missed deadlines.
Engage Your Value Chain
Proactively communicate with suppliers and partners about your data needs. Many companies will be requesting similar information, so early engagement improves response rates and data quality.
Invest in Technology
Manual processes cannot scale to meet CSRD requirements. Invest in sustainability data management platforms that can handle data collection, validation, and digital reporting.
Build Cross-Functional Teams
CSRD compliance requires input from finance, operations, HR, procurement, legal, and sustainability teams. Establish clear governance and collaboration structures from the start.
Align with Existing Frameworks
If you're already reporting under GRI, SASB, or TCFD, leverage that work. The ESRS have significant overlap with these frameworks, though CSRD requirements are more prescriptive.