CsrD

CSRD stands for the Corporate Sustainability Reporting Directive, a European Union regulation designed to standardize and expand corporate sustainability reporting. It broadens the scope of reporting beyond the prior non-financial reporting directive to cover environmental, social, and governance topics in a more comparable and auditable form. The CSRD aims to improve transparency, accountability, and investor access to reliable sustainability data, reducing greenwashing and enabling better assessment of risks and opportunities related to sustainability.

Scope and coverage

The CSRD applies to all large companies operating in the EU and all companies listed on EU markets. It also extends to non-EU companies with substantial EU activity that meet specified thresholds. The directive tightens reporting requirements for both financial performance and sustainability impacts, covering governance, strategy, risk management, and a wide range of environmental and social topics, including human rights and supply chain due diligence. A double materiality concept is introduced, meaning disclosures consider both financial materiality and the broader environmental and social impacts.

Key requirements

Companies must report according to European Sustainability Reporting Standards (ESRS) developed by EFRAG and adopted by the European Commission. Reporting is designed to be digitally accessible and harmonized across the EU. The CSRD includes mandatory assurance (external audit) of reported sustainability information. It also requires alignment with other EU initiatives, such as the EU Taxonomy, and emphasizes climate-related disclosures consistent with recognized frameworks.

Implementation and impact

Adopted in 2022, the CSRD replaces the NFRD with a phased implementation, starting with larger, EU-listed entities and expanding to additional companies over time. The directive is expected to increase data quality, comparability, and investor reliance, while presenting compliance challenges and higher reporting costs for affected firms.