The Corporate Sustainability Reporting Directive
The Corporate Sustainability Reporting Directive (CSRD), adopted as Directive 2022/2464/EU, is the EU's framework for mandatory environmental, social and governance (ESG) reporting. It entered into force in January 2023 and will apply to companies in phased waves between 2025 and 2029. At full rollout, CSRD is expected to cover approximately 50,000 companies operating in the EU, compared to roughly 11,000 under the previous Non-Financial Reporting Directive (NFRD) it replaces.
CSRD dramatically raises the bar for sustainability disclosure in two ways: scope and depth. In terms of scope, it extends mandatory reporting to all large companies and listed SMEs, not just large public-interest entities. In terms of depth, it requires reporting according to the detailed European Sustainability Reporting Standards (ESRS), developed by EFRAG, which specify precise data points, methodologies, and disclosure formats, rather than leaving companies to choose their own frameworks.
At the heart of CSRD is the concept of double materiality: companies must assess and report on both how sustainability issues affect the company (financial materiality), and how the company affects people and the environment (impact materiality). This dual perspective distinguishes CSRD from most existing voluntary frameworks, which focus primarily on investor-relevant financial risks.
Reports prepared under CSRD must be included in the company's annual management report, published in machine-readable format (iXBRL) under the European Single Electronic Format (ESEF), and subjected to limited third-party assurance, with the requirement likely to escalate to reasonable assurance in future years.
Scope & thresholds
From financial years starting 1 January 2027, CSRD mandatory scope, as amended by Directive (EU) 2026/470 (Omnibus I, in force 18 March 2026), requires EU undertakings to meet both of the following cumulative criteria:
| Criterion | Threshold | Notes |
|---|---|---|
| Employees | More than 1,000 (annual average) | Full-time equivalent across all subsidiaries |
| Net turnover | More than €450 million | Consolidated at group level |
| Test logic | BOTH must be met | Post-Omnibus I the pre-2026 "2 of 3" NFRD-style test (250 employees / €50M / €25M) no longer applies; Wave 1 PIEs >500 employees already reporting on FY2024 continue where they still meet the new threshold |
In addition, CSRD applies to:
- Large EU-listed companies that also meet the post-Omnibus I cumulative threshold (more than 1,000 employees and more than €450M net turnover). Listed SMEs have been removed from mandatory scope, voluntary reporting under the VSME standard only.
- Non-EU parent companies with net turnover exceeding €150 million in the EU for two consecutive years, if they have an EU subsidiary or branch meeting certain thresholds (from 2028)
- Value chain entities, even companies below the thresholds may face data requests from in-scope customers and suppliers reporting under CSRD
Six terms you need to know
Double Materiality
The requirement to assess both how ESG issues affect your company (financial materiality) and how your company's activities affect people and the planet (impact materiality). Both perspectives must be assessed and documented.
ESRS
European Sustainability Reporting Standards, the technical standards developed by EFRAG that specify exactly what must be disclosed under CSRD. There are 12 universal standards and forthcoming sector-specific standards.
Value Chain
CSRD requires companies to report on sustainability impacts, risks, and opportunities across their entire value chain, including upstream suppliers and downstream customers, not just their own direct operations.
DNSH Principle
Do No Significant Harm, a cross-cutting principle requiring that activities classified as sustainable must not significantly harm any of the EU Taxonomy's six environmental objectives.
Limited Assurance
CSRD requires sustainability information to be independently verified to a "limited assurance" standard initially, with plans to move to "reasonable assurance" in coming years as the market matures.
iXBRL / ESEF
Reports must be tagged in Inline XBRL (iXBRL) format under the European Single Electronic Format standard, making sustainability data machine-readable and comparable across companies and jurisdictions.
Phased implementation
Report 2025
Phase 1: Large PIEs already subject to NFRD
Large public-interest entities (PIEs) already subject to the NFRD, typically listed companies, banks, and insurers with 500+ employees, must report on FY2024 data in their 2025 annual reports. This group numbers approximately 11,000 companies.
Report 2028
Phase 2: Other large companies
Large EU undertakings meeting both post-Omnibus I thresholds (more than 1,000 employees AND more than €450M net turnover) must report on FY2027 data. The original Wave 2 "2-of-3" scope (250 employees / €50M / €25M) has been removed by Directive (EU) 2026/470, dramatically narrowing the population versus the pre-Omnibus design.
Report 2029
Phase 3: Listed SMEs (REMOVED by Omnibus I)
The original Phase 3 obligation on EU-listed SMEs has been removed by Directive (EU) 2026/470 (in force 18 March 2026). Listed SMEs are no longer in mandatory CSRD scope. They may report voluntarily using the Voluntary SME (VSME) standard developed by EFRAG.
Report 2029
Phase 4: Non-EU parent companies
Third-country (non-EU) companies with significant EU revenues (€150M+ net turnover in the EU for two consecutive years) must report at the consolidated group level, if they have qualifying EU subsidiaries or branches.
What CSRD requires you to do
- Conduct a double materiality assessment (DMA), systematically identify and assess all material sustainability impacts, risks, and opportunities across your business and value chain, considering both impact and financial perspectives.
- Report against applicable ESRS data points, prepare disclosures for each ESRS topic identified as material in your DMA, using the specific data points, metrics, and narrative disclosures prescribed by EFRAG.
- Obtain third-party assurance, engage an accredited assurance provider to verify your sustainability disclosures to at least limited assurance standard before publication.
- Include disclosures in the annual management report, CSRD sustainability information must be published as part of, not alongside, the annual management report, in a dedicated section.
- Tag data in iXBRL format, all CSRD disclosures must be digitally tagged using the ESRS taxonomy published by EFRAG, enabling machine-readable access under the ESEF reporting format.
Article-by-article requirements, sector implications & full compliance checklist
Everything you need to move from understanding to implementation.
Sources & primary legislation