Frameworks

Corporate Sustainability Responsibility Directive (CSRD)

Heightened demand for transparency in the EU led to the introduction of the Corporate Sustainability Reporting Directive (CSRD). Today, companies in the region are adopting the CSRD, which has a wider scope than previous regulations. The European Union plays a central role in shaping sustainability regulation across its member states, using binding directives and regulations to create consistent standards for the single market. Over the years, the EU has positioned sustainable finance and corporate accountability as key priorities, introducing legislation that requires companies to disclose how their operations impact the environment and society.

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What is CSRD?

The European Union introduced the Corporate Sustainability Reporting Directive (CSRD) in 2023 to widen the implementation of non-financial reporting among large listed or unlisted companies, SMEs, and subsidiaries operating within the region. The directive superseded the Non-Financial Reporting Directive (NFRD) — the first EU directive implemented in 2014 to promote ESG responsibility for 11,700 large companies.

CSRD facilitates comprehensive non-financial disclosures through its introduction of new reporting requirements such as double materiality, due diligence, and third-party audits. It also complies with reporting regulations governed by the EU, including the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR).

Today, the CSRD regulates sustainability reporting for nearly 50,000 large EU companies and subsidiaries of non-EU companies operating in the region. Recent changes introduced by the Omnibus Directive raise certain thresholds, which may reduce impacted companies by 80-90% from the original scope. This urges companies to analyse their environmental and social impacts, making ESG data more comprehensive and accessible to investors and stakeholders.

With the holistic approach of CSRD, ESG reports come out more comparable, aiding a broader range of audiences when benchmarking sustainability performances, developing data-driven strategies, and making sound investments.

Which companies have to comply with the CSRD?

The CSRD expands sustainability reporting requirements across the EU, targeting a larger scope of companies than the NFRD.

Companies by size and listing status

Large EU companies must comply if exceeding at least two of the following criteria:

• Over 250 employees
• More than €25 million in assets
• Over €50 million in annual revenue

The list also includes listed companies on EU-regulated markets, as well as listed SMEs starting in 2026.

Financial and insurance sectors

Banks, insurance companies, and other public-interest entities with over 500 employees were first required to report under CSRD for FY2024, building on NFRD obligations. Small and non-complex credit institutions, as well as captive insurers, are to follow in 2026.

Non-EU companies

Non-European firms must comply if they meet two of the following criteria:

• Over €150 million in net turnover in the EU in the last two years
• Has a large EU subsidiary
• Has an EU branch with over €40 million turnover

Why was the CSRD adopted?

In 2021, the European Parliamentary Research Service deemed in one of their reports that NFRD reports lack consistency and comparability. Committed to addressing these limitations, the EU developed a solution to encourage more sustainability-focused investments and avoid higher data analysis costs for stakeholders in the long term. They developed the CSRD to:

Close the accountability gap

CSRD strengthens the EU’s commitment to ESG transparency by reducing the accountability gap identified during the implementation of the NFRD. Regulators developed more specific requirements to target companies not yet subject to sustainability reporting.

Enhance green investments

A key objective of the CSRD is to empower investors through standardised sustainability reporting. The use of consistent formats and metrics in reports transforms ESG data from a scattered collection into a readily accessible and comparable resource. This empowers investors to conduct in-depth risk assessments with greater efficiency, lower costs, and make profitable investments based on accurate data.

Combat greenwashing

CSRD introduces stringent audit and assurance requirements to reduce the chances of reports having greenwashing claims. As a result, this motivates companies to be more transparent and improve their ESG scores through data-driven initiatives.

Support Green Deal Initiative

The EU employs CSRD to advance its long-term sustainability goals outlined in the Green Deal Initiative. Region-wide CSRD reporting provides regulators and policymakers with a comprehensive data set for climate risk assessments, enabling them to develop initiatives towards a more sustainable future and circular economy.

CSRD vs NFRD: A Side-by-Side Comparison

The CSRD and NFRD are two major EU directives promoting sustainable business practices. However, they target different types of companies and have varying requirements. Dive deeper into the comparison below to understand their key distinctions and similarities.

Scope

While both share the same overarching objective of regulating corporate sustainability, the scope of CSRD is broader than NFRD. In terms of numbers, the NFRD only covered 11,700 companies when it took effect in 2018. On the other hand, the CSRD applied to about 49,000 companies when it started in 2023.

Additionally, CSRD’s guidelines are more encompassing and specific. It applies to all businesses within the EU, including subsidiaries of global non-EU companies and SMEs. In contrast, NFRD focused only on EU-based companies with over 500 employees, which mostly captured banks, insurance companies, and listed companies.

Reporting Format

The NFRD initially encouraged digital reporting, but lacked specific formatting requirements. It focused on offering flexibility and allowed companies to choose between international, European, or national reporting standards. This created a challenge for stakeholders, particularly when comparing reports due to the lack of uniformity.

The CSRD addresses these pain points by mandating companies to produce reports in XBRL format while ensuring compliance with the European Single Electronic Format (ESEF) Regulation and the EU Sustainability Taxonomy. Companies are also required to report according to the ESRS. With a defined standardisation process, the CSRD has led companies to produce uniform reports, significantly enhancing their comparability and quality.

Audit Requirements

The CSRD has rigid requirements for auditing and imposes penalties for non-compliance, while the NFRD, during its implementation, did not require auditing. Instead, reporting under the NFRD only required companies to disclose whether there was an auditor in the process. Continuing its drive towards enhancing corporate transparency, the CSRD plans to expand its audit requirements from limited assurance to reasonable assurance in the coming years.

Assurance Standard

The NFRD relies on national regulations and practices for enforcing assurance on companies, while the CSRD implements EU-specific assurance standards for sustainability information — ensuring consistency and reliability in reported data.

Implementation Timeline of CSRD Reporting

The timeline for companies to comply with CSRD reporting requirements varies based on company size and any existing reporting obligations. Below is a breakdown of the CSRD rollout phases:

The introduction of the Omnibus Directive introduced changes impacting thresholds for companies in the region, but also the dates for certain corporate sustainability reporting and due diligence requirements. In April 2025, the Council of the EU gave its final green light on the “stop-the-clock” mechanism, postponing the application of the CSRD by two years for large companies that have not started reporting, as well as SMEs. The transposition deadline and first phase of the application of the Corporate Sustainability Due Diligence Directive (CSDDD) were also postponed by one year.

CSRD Reporting Requirements: What to Consider

The CSRD mandates that companies comply with its established reporting requirements to ensure comprehensive sustainability disclosures. Below is an overview of its core elements:

Can companies get sanctioned if they don’t comply?

To ensure enforcement and promote transparency and accountability, companies that fail to meet the CSRD’s disclosure requirements are subject to substantial fines and penalties.

It’s important to note that there are no directly specified fines or penalties for non-compliance. Instead, the legislation amends other laws related to annual financial reports and audits, which dictate how separate EU member states will enforce the CSRD. This means:

• Fines and penalties are defined separately for each EU member state.
• These can be expected to be equivalent to the current enforcement of annual report auditing and submission.
• Certain factors, such as thresholds for company size, will differ.

While no specific sanctions for non-compliance are specified, these may range from monetary fines to legal implications such as investigations and litigation risks. Failure to comply with the CSRD will also likely incur sanctions similar to non-compliance for other forms of corporate reporting.

Best Practices for Creating Compliant CSRD Reports

The CSRD mandates specific reporting requirements, but companies can go beyond compliance to create truly impactful reports. Find out the best practices for crafting CSRD reports that effectively communicate your sustainability journey and achievements to stakeholders.

1. Conduct double materiality assessments

Before diving into report creation, companies complying with the CSRD should conduct a double materiality assessment. This crucial step helps companies pick and rank each sustainability topic depending on their industry, business model, ESG maturity, and goals.

For example, an IT company can focus its materiality assessment on data privacy, security, and hosting. A finance company can assign financial inclusion as its most material sustainability topic.

2. Engage management and stakeholders

Like other reporting standards, complying with the CSRD encourages collaboration across various teams and stakeholders. This includes the finance department, executive management, and investors. Communicating the CSRD reporting process to management and stakeholders helps manage expectations and form a shared understanding to facilitate a seamless transition to the next steps.

3. Ensure data accuracy and assurance

Conducting gap analysis on data guarantees an overall accurate and consistent report. Such practice identifies areas where information is missing and allows teams to work on specific areas, commonly in data collection, validation, or integration.

The CSRD has been precise with its requirement to ensure that reports undergo audits, assurance, and due diligence to maintain data credibility and avoid deceptive claims.

4. Adopt EU-recognised standards

As the CSRD expands its reach in the coming years, a strong understanding of EU-aligned reporting requirements and frameworks like the ESRS, IFRS S1 & S2, GRI, double materiality, and the EU Sustainability Taxonomy becomes essential. This proactive approach will help companies stay ahead of the curve and minimise transition challenges.

5. Continuously improve reporting practices

For the continuous production of competitive sustainability reports, companies must stay up-to-date on reporting trends. Digital tools such as ESG reporting software can help sustainability teams define and simplify their reporting process through technology. Achieving agility with help from technology is a good strategy to stay relevant as EU regulations, such as the European Financial Reporting Advisory Group (EFRAG), are proposing new scope-specific standards and launching the XBRL Taxonomy for digital tagging.

ESG reporting software can be a valuable investment to help unify data collection and monitoring. Having this kind of solution can assist stakeholders in getting ESG information faster and enhance decision-making and collaboration in the long run.

Achieve CSRD Reporting Compliance with Presgo

Do not let the complexity of CSRD compliance hinder your corporate sustainability success. CSRD is a valuable opportunity for businesses to showcase their commitment to the environment, society, and the bottom line. Presgo is an AI-first ESG reporting solution designed by experts to support your organisation’s compliance with frameworks like CSRD. The platform does so using built-in modules and features that automate data collection, analysis, and emission calculation.

Supplier ESG

Collect emissions data and ESG performance metrics across the value chain to support scope 3 reporting and supply-chain transparency, both essential for CSRD compliance.

Disclosure Hub

Ensure ESG narratives and data align with CSRD and ESRS requirements using pre-configured templates, framework mapping, and embedded regulatory guidance.

Carbon Calculator

Automatically calculate scopes 1, 2, and 3 emissions using verified emission factors and transparent methodologies, which are critical for ESRS environmental disclosures and auditability.

Materiality Assessment

Conduct structured double materiality assessments aligned with CSRD by engaging stakeholders, analysing impacts and risks, and generating visual insights to prioritise key ESG topics.