Corporate Sustainable Reporting Directive (CSRD) – regulation memo

CSRD requires companies to digitally ‘tag’ reported sustainability information.


ESG Global Survey 2023

The Corporate Sustainable Reporting Directive (CSRD) will help:

  • Manufacturers of financial products that promote ESG characteristics to evaluate the sustainability performance of companies
  • Financial market participants, benchmark administrators and credit institutions to meet their own reporting obligation under the Sustainable Finance Disclosure Regulation (SFDR), the Benchmarks Regulation (BMR), and the Capital Requirements Regulation (CRR)

CSRD requires all large companies and all listed companies (except listed micro-enterprises) to disclose information on what they see as the risks and opportunities arising from social and environmental issues. CSRD also requires them to disclose what they see as the impact of their activities on people and the environment.

About the Corporate Sustainable Reporting Directive (CSRD)

CSRD broadens the scope of companies, currently defined under the Non-Financial Reporting Directive (NFRD), which must produce reporting on sustainability issues. Under CSRD, nearly 50,000 companies in the European Union will have to publish such reporting – an increase from the 11,000 companies that are subject to NFRD requirements.

CSRD amends the reporting rules introduced by NFRD by defining the content of sustainability reporting standards in a sufficiently precise and legally binding way.

CSRD reporting

Sustainability reporting under CSRD must provide information needed to understand:

  • How companies in scope undertake actions to ensure that their business models and strategies are compatible with the transition to a sustainable economy, the 1.5 °C limitation of global warming in line with the Paris Agreement and achieving climate neutrality by 2050;
  • Companies’ time-bound targets related to sustainability matters they set, including, where appropriate, absolute greenhouse gas emission reduction targets at least for 2030 and 2050, a description of the progress in-scope companies have made towards achieving those targets, and a specification of whether targets related to environmental matters are based on conclusive scientific evidence;
  • In-scope companies’ positive contribution or adverse impacts on environmental and social matters;
  • How sustainability matters affect in-scope companies’ development, performance and position.

CSRD also requires companies to digitally ‘tag’ reported sustainability information, which will be externally audited, so that it is machine-readable and feeds into the European Single Access Point (ESAP). The ESAP will provide a single point of access to public financial and sustainability-related data about EU enterprises and investment products.

On 31 July 2023 the European Commission adopted the Delegated Act on the first set of 12 European Sustainability Reporting Standards (ESRS) which apply regardless of the company’s sector of activity.

ESRS 2 (“General Disclosures”) specifies essential information to be disclosed irrespective of which sustainability matter is being considered. ESRS 2 is mandatory for all companies under the CSRD scope.

All the other standards (on the EU environmental objectives, social and governance issues) and the individual disclosure requirements and datapoints within them are subject to a materiality assessment by the company, which will report only relevant information and may omit the information in question that is not relevant (“material”) for its business model and activity.

Other standards need to be adopted by the Commission to complete the CSRD regulatory framework:

  • Standards both for listed SMEs and for other SMEs, the latter being for voluntary use
  • Sector standards
  • Standards for non-EU companies in scope of CSRD

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Scope of the Corporate Sustainable Reporting Directive (CSRD)

Companies in scope of CSRD are:

  • All large EU companies which meet at least 2 out of the following 3 criteria:
    • Have more than 250 employees
    • Have a turnover that exceeds EUR 40 million
    • Have a balance sheet that exceeds a total of EUR 20 million
  • All companies that are listed on EU regulated markets, including Small and Medium Enterprises (SMEs). SMEs will be subject to a lighter set of reporting standards.
  • Non-European companies that generate at its consolidate level or, if not applicable, at an individual level a net annual turnover of EUR 150 million in the EU and have at least one subsidiary or branch in the EU which has a net turnover of at least EUR 40 million in the EU.

Industry implications of CSRD

The European Sustainability Reporting Standards (ESRS) contain a series of clearly identified datapoints that correspond to specific information that financial market participants, benchmark administrators, and financial institutions need for their own reporting purposes, respectively under the Sustainable Finance Disclosure Regulation (SFDR), the Benchmarks Regulation (BMR), or the “pillar III” disclosure requirements under the Capital Requirements Regulation (CRR).

Datapoints under the European Sustainability Reporting Standards adopted on 31 July 2023 with regard to the EU environmental objectives, social and governance issues may be omitted if the information in question is not relevant (“material”) for the business model and activity of the reporting company.

While the Q&A published by the Commission has already clarified that financial market participants may assume that any indicator reported as non-material by an investee company does not contribute to the corresponding indicator of principal adverse impacts in the context of the SFDR disclosures, further clarifications are expected in the implementing texts of SFDR, BMR, and the CRR (pillar III).

Securities Services’ view

In addition to extending the scope of companies that have to publish reporting on how they manage environmental and social sustainability, one of the main contributions of CSRD is the standardisation of the information to be produced. Those standards cover environmental, social and governance issues to be disclosed by in-scope companies as well as sector-specific issues.

Key dates of the Corporate Sustainable Reporting Directive (CSRD)

  • 21 April 2021 – Publication of the European Commission’s proposal on CSRD
  • 28 November 2022 – Formal adoption of CSRD
  • 5 January 2023 – The Corporate Sustainability Reporting Directive (CSRD) entered into force
  • 31 July 2023 – Adoption of the delegated act on the first set of 12 EU sustainability reporting standards covering environmental social and governance issues to be disclosed by in-scope companies
  • 2024 – Expected adoption of the delegated act on sector-specific EU sustainability reporting standards and proportionate EU sustainability reporting standards for listed SMEs

In-scope companies must disclose standardised sustainability reporting from:

  • January 2025 (for year 2024) for companies already subject to NFRD
  • January 2026 (for year 2025) for non-NFRD companies
  • January 2027 (for year 2026) for listed SMEs, small non-complex credit institutions, and captive insurance. However, listed SMEs may decide to opt out of the reporting requirements for a further two years. The last possible date for a listed SME to start reporting is financial year 2028, with the first sustainability statement published in 2029.
  • January 2029 (for year 2028) for non-EU companies. Separate standards will be adopted specifically for this case.

This regulation memo was first published in March 2023. It was last updated in November 2023.