The Corporate Sustainability Reporting Directive – Latest insights

ESG reporting developments in the EU

On 21 April 2021, the European Commission (EC) adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), replacing the EU’s Non-Financial Reporting Directive (NFRD). The CSRD covers all relevant environmental, social and governance (ESG) elements, and aims to increase investments in truly sustainable activities across the European Union. Three-way discussions between the European Parliament, the European Council and the EC finalised the text, which was published on 21 June 2022. In this article, we discuss the most notable changes.

Key changes to the proposal for a Corporate Sustainability Reporting Directive


The final text of the directive includes a one-year delay compared to the original proposal. Companies subject to the CSRD will need to disclose from FY24 (i.e., reports published in 2025). This comes despite multiple stakeholders calling for immediate implementation, as any delay to the timetable would leave investors waiting longer for comparable data on corporate sustainability.

  • 1 January 2024 (reporting in 2025) for companies already subject to the NFRD (listed companies with over 500 employees);
  • 1 January 2025 (reporting in 2026) for companies that are not presently subject to the NFRD; and
  • 1 January 2026 (reporting in 2027) for listed SMEs, small and non-complex credit institutions and captive insurance undertakings.
Timeline of the CSRD

Changes to scope

The CSRD has changed quite significantly in scope compared to the original proposal. It now covers:

  • all listed companies with over 500 employees on EU-regulated markets; and
  • all large companies that fulfil two of these three criteria:
    • over 250 employees;
    • €40 million net revenue; and
    • ≥ €20 million on the balance sheet.

Meanwhile, global non-EU firms with a net turnover of €150 million and at least one significant subsidiary or branch in the EU are obliged to report on their ESG impacts, as defined in the CSRD.

Subsidiaries of global non-EU firms are only exempt from having to report when their non-financial information is included in the parent company’s consolidated management report. In this instance, the non-financial information must be disclosed separately in the consolidated report, or in line with EU sustainability reporting standards.

The directive also applies to listed SMEs, although until 2028, they will only be subject to simplified reporting standards. These simplified reporting standards also apply to subcontractors.

Content of disclosures

The European Parliament introduced additional reporting requirements that oblige companies to disclose their sustainability targets and transition plans, in line with the Paris climate agreement.

The latest text also includes provisions on the alignment of due diligence related disclosures with the UN Guiding Principles on Business and Human Rights, as well as a reference to the recent proposal for the EU Corporate Sustainability Due Diligence Directive. Under the proposal, companies must perform due diligence to identify, prevent, mitigate and account for external harm resulting from adverse human rights practices and environmental impacts. This applies to the company’s own operations, those of its subsidiaries, and along its value chain. Read more about the Corporate Due Diligence Directive here.

The general standards are set to be adopted by October 2022, with sector-specific standards following in October 2023. Sector-specific standards for high-risk industries will be a priority, however, and should be developed sooner.

The disclosure obligations must be integrated in the management report, and the report must be digital. This aims to lower reporting costs and improve the comparability and use of reported information. Companies must also ‘tag’ their reported sustainability information according to a digital categorisation system.


As soon as the CSRD comes into force (i.e., as of FY24), limited assurance on the reported information will be required. To ensure that companies comply with the rules, an independent auditor must certify that the sustainability information complies with the new standards. The reporting of non-European companies must also be certified, either by a European auditor or by one established in a third country.

Reasonable assurance is expected to be required six years after the CSRD enters into force – especially given the trend to link executive remuneration to sustainability performance indicators. Reasonable assurance standards are expected to be published before 1 January 2026.

Reporting standards

The European Financial Reporting Advisory Group (EFRAG) has published the first draft set of reporting standards, covering the full sustainability spectrum: environment, social and governance matters – both individually and collectively. The draft standards are open to public consultation, with the deadline of 8 August 2022. The draft standards can be found here.

The CSRD will be a big challenge for all companies impacted. Both from a quality perspective; how to receive the right information while relying on third parties, and a quantity perspective; the number of disclosure requirements will increase and require the company at large to step up in providing information. To make the reporting requirements attainable, the CSRD introduces the ‘rebuttable presumption’, meaning that all topics need to be disclosed, unless deemed non-material for the business. The non-materiality statement should be substantiated per reporting topic.

National implementation

As a European directive, the CSRD won’t become applicable until it has been implemented by individual member states. This means it could take a while before the CSRD has been converted to national law. In the Netherlands, the NFRD was implemented through the ‘Besluit bekendmaking NFI en Besluit bekendmaking diversiteit’ in November 2015 – a month before the EC’s implementation deadline. It is unlikely that the CSRD will be implemented any sooner than mandatory, but member states are nevertheless bound by the final implementation date. It is, in any case, key to start the data-gathering process now, to adhere to the forthcoming reporting requirements in time.

The link between the EU Taxonomy and the CSRD

The CSRD links to article 8 of the EU Taxonomy regulation, obliging subjects of the CSRD to report on alignment of their turnover, capital expenses, and operational expenses with all six environmental objectives, as soon as the CSRD applies to them.

On 30 March 2022, the Platform for Sustainable Finance issued a report containing the Technical Screening Criteria for the remaining four environmental objectives (water and marine resources; a circular economy; pollution prevention and control; and biodiversity and ecosystems), covering 10 different sectors. The European Commission will respond and take the report forward into Delegated Acts, expected to be published by the end of 2022.

The timeline for implementation and the first year of reporting are both set as FY22, but this might be extended to FY23. The extension still needs to be formally approved.

How can we help you prepare for the CSRD requirements?

Most organisations will need help in building a solid and transparent ESG report in preparation for the CSRD requirements. Our ESG Corporate Reporting Accelerator Programme can help, supporting you with expert advice and sector-specific knowledge on your journey towards a compliant, integrated annual report. 

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