CSRD - Understanding the EU’s Updated Sustainability Reporting Requirements

So, the EU decided it was time for companies to stop just reporting their financials and start talking about how they affect the planet and people. Enter CSRD. Now, if you’re an investor wondering whether your portfolio is helping or hurting the environment (and your returns), this is your new best friend. But wait—what’s the big deal? And why should we care? Let’s break it down.

Key Takeaways

The CSRD is now in effect, transforming ESG reporting across Europe.
It replaces the NFRD and applies to over 50,000 companies.
Reporting must follow European Sustainability Reporting Standards (ESRS).
Reports must be audited, digitised, and integrated into financial disclosures.
It’s not just compliance—it’s a strategic shift toward sustainability accountability.

How it fits with the rest of the EU sustainability web

We are now in Article 7 of our CSRD & Sustainability Regulations series. If you missed the previous articles, check them out here:

The Global Standards (TCFD, ISSB, GRI) fits into the broader sustainability framework of EU regulations, as illustrated below:

EU Green Deal
│
├──→ EU Taxonomy
│
├──→ SFDR
│
├──→ NFRD → CSRD (📍 You are here) │ ├──→ ESRS
│ ├──→ Global Standards (TCFD, ISSB, GRI) │
├──→ CSDDD
│
└──→ Digital Tools & ESG Software

What Is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is the EU’s new framework that requires companies to report on their environmental and social performance with the same level of rigour as financial information.

The CSRD enforces a double materiality lens, meaning companies must disclose both how sustainability issues affect them—and how their operations affect people and planet.

“The time of vague sustainability claims is over. The CSRD ensures companies walk the talk.”
— European Commission, April 2024

It’s not just about ticking boxes. It’s about aligning corporate transparency with the EU’s broader goals for climate neutrality, biodiversity protection, and human rights in global value chains.

Who Has to Report—and When?

CSRD expands the reporting obligation from just 11,000 under the previous NFRD to more than 50,000 companies—including many non-EU firms that operate in Europe.

📅 Rollout Timeline

Group	Criteria	First Report Due
Large public-interest companies	Already under NFRD	FY2024 (report in 2025)
Other large EU companies	>250 employees, or €40M turnover, or €20M total assets	FY2025 (report in 2026)
Listed SMEs	Excluding microenterprises	FY2026 (report in 2027)
Non-EU companies	€150M+ EU turnover and at least one EU branch/subsidiary	FY2028 (report in 2029)

“Transparency in sustainability isn’t just good governance—it’s now a legal expectation.”
— EU Council Presidency, Dec 2022

What Must Be Disclosed?

CSRD reports must follow the European Sustainability Reporting Standards (ESRS), developed by EFRAG. These standards cover:

🌱 Environmental

Greenhouse gas emissions (Scope 1, 2, and 3)
Energy use and mix
Water, pollution, and circularity
Climate adaptation and resilience

Workforce treatment and diversity
Human rights across supply chains
Community impacts
Worker health, safety, and training

🏛 Governance

Board diversity and roles
Ethical behaviour and anti-corruption
Lobbying activities
ESG-linked executive pay

All reports must be machine-readable (XHTML/XBRL) and published alongside annual financial statements. They’ll also need to be externally audited to ensure accuracy.

“Reporting must be complete, comparable, and verifiable—not aspirational storytelling.”
— EFRAG Chair, 2023

The Power of Double Materiality

Double materiality is what truly sets CSRD apart. Companies must assess:

Financial materiality – risks to the business model from climate and social factors
Impact materiality – the company’s own impact on people and the planet

Both angles must be assessed across the full value chain, including suppliers and downstream partners. That’s a tall order—and many firms are investing in tools and methodologies to manage this shift internally.

“We want to reduce unnecessary red tape. Reporting should focus where it’s most impactful.”
— European Commission press release, Feb 2025

What Are the Risks of Non-Compliance?

Failure to comply with CSRD can result in:

Administrative penalties and fines
Legal exposure for ESG misstatements
Reputational damage
Exclusion from green public procurement or investor portfolios

Perhaps even more pressing: if you’re in a supply chain for a CSRD-covered company, expect pressure to disclose your own ESG data—whether you’re legally obliged to or not.

“The CSRD is already reshaping supply chain expectations across Europe.”
— Financial Times, March 2024

A Core Piece of a Larger Sustainability Puzzle

CSRD is the data backbone for a wide net of EU sustainability laws:

Law or Directive	Role
EU Green Deal	Net-zero goal by 2050
EU Taxonomy	Defines “sustainable” economic activities
SFDR	ESG transparency for financial market participants
CSDDD	Mandatory human rights and environmental due diligence

Together, they are reshaping how companies operate, invest, and grow—making sustainability not optional, but essential.

Strategic Upside: More Than Just Compliance

Yes, CSRD is demanding. But it’s also a chance to:

Build trust with investors and customers
Attract sustainable financing at better rates
Identify operational inefficiencies and climate risks early
Gain a first-mover advantage in green innovation

Some companies are quietly treating CSRD compliance as a dry run for future climate stress tests, ESG-linked bonds, or global expansion under tighter sustainability rules.

The Tech Layer (Briefly)

Most companies will require new infrastructure—data, teams, processes—to manage CSRD reporting. While many are turning to dedicated ESG software, what matters most is building a system that’s:

Cross-functional (finance, legal, HR, ops)
Transparent and traceable
Aligned to global frameworks (like GRI, TCFD, ISSB)

“Sustainability is now a data problem. The CSRD makes that painfully clear.”
— Sustainable Business Review, Jan 2025

The Investor Angle: Why CSRD Matters for Private Investors

For private investors, the CSRD provides a wealth of insights into the sustainability performance and risks of companies. Understanding how CSRD disclosures unfold can significantly improve decision-making, providing clarity on both financial and non-financial risks and opportunities.

1. Assessing Financial Risks and Opportunities

The CSRD places sustainability risks on par with traditional financial risks. By understanding how a company reports on its exposure to climate change, social issues, and governance practices, investors can better gauge the long-term viability of their investments.

Financial materiality in CSRD disclosures helps investors assess how ESG issues could affect company performance, from rising costs of carbon emissions to reputational damage from labor practices.
Scenario analysis and risk management disclosures, driven by frameworks like TCFD, help investors assess potential downside risks (e.g., supply chain disruptions due to environmental factors) and upside opportunities (e.g., transitioning to renewable energy to lower long-term operating costs).

2. Improved Comparability Across Companies

With CSRD making ESG disclosures mandatory and uniform, private investors can compare companies more effectively. This eliminates the problem of inconsistent reporting across different firms, especially when it comes to non-financial performance metrics such as carbon emissions, diversity practices, and human rights impacts.

Investors can benchmark companies against industry standards or track progress against global sustainability goals (e.g., Net Zero or the Paris Agreement).
The detailed, audited nature of CSRD reports ensures that investors are receiving accurate, trustworthy data, which supports more confident decision-making.

“By ensuring companies provide comparable and consistent ESG data, CSRD allows private investors to make smarter, more informed decisions.”
— Investor Insights Report, March 2025

3. Ethical and Impact Investing

For private investors focused on ethical or impact investing, CSRD disclosures provide in-depth insights into a company’s social and environmental practices. Whether it’s assessing a company’s impact on biodiversity, its workforce treatment, or its community engagement, CSRD reports will help investors align their portfolios with their values.

ESG investors can now access reliable data on human rights, diversity, and supply chain transparency, helping them avoid exposure to companies involved in unethical practices.
Social impact investors can ensure their capital is supporting companies that are driving positive change in areas like inclusive growth, sustainable agriculture, and clean energy.

4. Regulatory Compliance and Risk Management

The new regulatory landscape has far-reaching implications for investors. By understanding the CSRD requirements, private investors can assess whether companies in their portfolios are at risk of non-compliance, which could lead to fines, reputational damage, or investment losses.

Investors can also evaluate how a company is preparing for upcoming regulations, which might affect market positioning and future growth opportunities. Companies with robust ESG practices may be better positioned to weather regulatory pressures, while those lagging behind might face additional costs or public scrutiny.

The CSRD is not just another reporting rule—it’s the EU’s way of embedding sustainability into the DNA of business. For those ready to invest in transparency and act on their impact, it’s more than compliance—it’s a chance to lead.

Next up in the series:
SEC vs. CSRD: Transatlantic Comparison

This article was created with the assistance of AI and reviewed by sustainability and regulatory experts to ensure accuracy and clarity.