The Corporate Sustainability Reporting Directive (CSRD) has extended mandatory ESG disclosures to thousands of European companies. Understanding what's required — and when — is the first step.
ESG is the framework used to measure and report on a company's impact and practices across three interconnected dimensions — each now subject to mandatory disclosure under CSRD.
The Environmental dimension examines how a company interacts with the natural world — from its direct carbon footprint to its exposure to climate-related risks and its impact on ecosystems and natural resources.
The Social dimension covers a company's relationships with people — its own employees, workers across its value chain, affected communities, and the consumers it serves. It addresses fairness, safety, and respect for human rights.
The Governance dimension looks at how a company is led and controlled — whether its leadership structures, decision-making processes, and business conduct meet the standards expected by regulators, investors, and society.
The Corporate Sustainability Reporting Directive (CSRD) replaced the previous Non-Financial Reporting Directive (NFRD) and dramatically expanded the scope of mandatory sustainability reporting in the European Union. Where the NFRD applied to roughly 11,000 large public-interest entities, CSRD extends obligations to an estimated 50,000 companies — including many mid-size businesses that had never previously been required to report on sustainability matters.
Under CSRD, in-scope companies must prepare an annual sustainability statement as part of their management report, aligned with the European Sustainability Reporting Standards (ESRS). This statement must cover material topics across environmental, social, and governance dimensions, be based on a double materiality assessment, and — crucially — be verified by an independent, accredited third party. Non-compliance exposes companies to member-state-level penalties and significant reputational risk.
The European Sustainability Reporting Standards (ESRS) define exactly what companies must disclose under CSRD. They are structured across cross-cutting, environmental, social, and governance themes.
Identify which ESRS topics are material to your business through a double materiality assessment — evaluating both your impact on sustainability matters and how sustainability matters create financial risks and opportunities for your company.
Gather quantitative and qualitative data across all material topics. This includes operational data, supply chain information, workforce metrics, and governance disclosures — often requiring new internal data processes and cross-department collaboration.
Engage meaningfully with affected stakeholders — employees, suppliers, communities, investors — to inform your materiality assessment and ensure your reporting reflects the perspectives of those impacted by your business activities.
Prepare the sustainability statement in accordance with ESRS format and disclosure requirements. The statement must be included in the management report and follow a structure that allows comparison across companies and over time.
Obtain limited assurance from an accredited independent verifier — typically a statutory auditor or audit firm. CSRD requires third-party verification of sustainability information, in contrast to the previous NFRD which did not mandate this.
Include the verified sustainability statement in the annual management report and file it in the European Single Electronic Format (ESEF). The information must be machine-readable and tagged in accordance with the ESRS digital taxonomy.
Take the free CSRD Readiness Assessment in 5 minutes, then go deeper with the Full ESRS Gap Analysis — covering all 10 topics, missing data points, and a phased disclosure roadmap.