The Corporate Sustainability Reporting Directive (CSRD) is an EU regulation requiring over 50,000 companies to disclose environmental, social, and governance (ESG) performance using the European Sustainability Reporting Standards (ESRS), with mandatory third-party assurance and digital tagging.
Quick Reference — CSRD at a Glance
| Fact | Detail |
|---|---|
| Full name | Directive (EU) 2022/2464 — Corporate Sustainability Reporting Directive |
| Entered into force | 5 January 2023 |
| Replaces | Non-Financial Reporting Directive (NFRD) |
| Companies in scope | ~50,000 EU companies + ~10,000 non-EU companies |
| Reporting standards | European Sustainability Reporting Standards (ESRS) — 12 topical standards |
| Core concept | Double materiality — impact on the world AND impact on the company |
| Assurance | Mandatory third-party assurance (limited → reasonable) |
| Format | Part of the management report, in XHTML with XBRL digital tagging |
Key Takeaways
- CSRD expands mandatory sustainability reporting from ~11,700 companies under NFRD to over 50,000 EU companies — a fourfold increase
- Reporting follows 12 ESRS standards covering environmental, social, and governance topics
- The double materiality concept requires companies to report both how they affect the world and how sustainability issues affect their finances
- Phase 1 companies (large public-interest entities) are already reporting; Phase 2 (all large companies) reports are due in 2026
- All sustainability reports require mandatory third-party assurance and must be digitally tagged
- Even companies not directly in scope may face indirect pressure from customers and investors requesting ESG data for their own CSRD reporting
Table of Contents
- What Is CSRD?
- What Is ESG and Why Does It Matter?
- Who Must Comply with CSRD?
- CSRD Timeline: Four Phases of Implementation
- ESRS Standards: What and How to Report
- Double Materiality: The Core Concept
- What Must Be Disclosed
- Understanding Scope 1, 2, and 3 Emissions
- Report Format and Assurance Requirements
- CSRD and Other EU Regulations
- How to Prepare: 8-Step Roadmap
- Common Challenges and Solutions
- Penalties for Non-Compliance
- Frequently Asked Questions
What Is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) — Directive (EU) 2022/2464 — is the EU regulation that mandates comprehensive sustainability reporting for companies operating within the European Union. Adopted on 14 December 2022, it entered into force on 5 January 2023 and is being phased in from 2024 to 2029.
CSRD replaces and dramatically expands the previous Non-Financial Reporting Directive (NFRD), which has been in effect since 2014. Where NFRD covered approximately 11,700 companies, CSRD extends the obligation to over 50,000 EU companies plus an estimated 10,000 non-EU companies with significant EU operations.
CSRD is a cornerstone of the European Green Deal — the EU's comprehensive strategy to achieve climate neutrality by 2050.
Why CSRD Was Introduced
| Problem Under NFRD | How CSRD Addresses It |
|---|---|
| Limited scope — only ~11,700 large public-interest entities | Expanded to ~50,000+ companies including all large companies and listed SMEs |
| No standardised reporting framework — companies reported inconsistently | Mandatory ESRS standards ensure comparability |
| No assurance requirement — reported data was often unverified | Mandatory third-party assurance (limited, moving to reasonable) |
| No digital format — data was not machine-readable | XHTML format with XBRL digital tagging |
| Inadequate coverage — gaps in environmental, social, and governance topics | 12 comprehensive ESRS topical standards covering E, S, and G |
| Investor data gap — insufficient ESG data for investment decisions | Detailed, comparable data enables sustainable investment allocation |
CSRD's Four Objectives
- Comparability — Standardised ESRS standards enable stakeholders to compare sustainability performance across companies and sectors
- Reliability — Mandatory third-party assurance ensures reported information is accurate and trustworthy
- Accessibility — Digital tagging makes sustainability data machine-readable and easily analysable
- Capital redirection — Quality ESG data helps investors, banks, and funds allocate capital to sustainable activities
What Is ESG and Why Does It Matter?
ESG stands for Environmental, Social, and Governance — three pillars that define sustainable business practices:
| Pillar | Focus | Key Metrics |
|---|---|---|
| E — Environmental | Impact on the natural world | GHG emissions (Scope 1, 2, 3), energy consumption, water usage, waste management, biodiversity impact, circular economy practices |
| S — Social | Impact on people | Worker rights, diversity and inclusion, health and safety, community impact, data privacy, supply chain labour conditions |
| G — Governance | How the company is managed | Business ethics, anti-corruption policies, board diversity, executive compensation, whistleblower protection, lobbying disclosure |
Why ESG Reporting Is Now Business-Critical
ESG reporting has moved from a voluntary corporate communications exercise to a regulated compliance obligation with direct business consequences:
| Stakeholder | Why They Require ESG Data |
|---|---|
| Investors and funds | ESG data drives investment decisions; many EU funds require ESG disclosures under SFDR |
| Banks and lenders | ESG risk assessment increasingly influences lending decisions and credit terms |
| Customers (B2B) | Large companies need supplier ESG data for their own CSRD Scope 3 and value chain reporting |
| Regulators | CSRD compliance is now a legal obligation with enforcement consequences |
| Employees | Talent increasingly evaluates employers on sustainability commitments |
| Insurance companies | ESG risk data influences underwriting and premiums |
The ripple effect: Even if your company is not directly in CSRD scope, your large customers or partners may require your ESG data for their own value chain reporting (ESRS S2). Indirect pressure on smaller companies is already a reality across many sectors.
Who Must Comply with CSRD?
CSRD significantly expands the universe of companies required to report on sustainability.
Large EU Companies
A company is classified as "large" if it exceeds at least two of three thresholds:
| Criterion | Threshold |
|---|---|
| Average number of employees | More than 250 |
| Net turnover | More than EUR 50 million |
| Total assets | More than EUR 25 million |
Listed Companies
All companies listed on EU-regulated markets must comply, including listed SMEs (with simplified requirements and later deadlines).
Non-EU Companies
Non-EU parent companies must report if they meet all of the following:
| Criterion | Threshold |
|---|---|
| Net EU turnover | Exceeding EUR 150 million for two consecutive financial years |
| EU presence | At least one EU subsidiary meeting large company thresholds, OR an EU branch with net turnover exceeding EUR 40 million |
Companies NOT in Scope
| Category | Status |
|---|---|
| Micro-enterprises (fewer than 10 employees AND under EUR 2M turnover/assets) | Exempt (unless listed) |
| Non-listed SMEs | Exempt (voluntary reporting available using simplified ESRS) |
| Subsidiaries included in consolidated group reporting | May be exempt (with conditions and disclosure requirements) |
Scope Summary by Numbers
| NFRD (Previous) | CSRD (Current) |
|---|---|
| ~11,700 companies | ~50,000+ EU companies |
| Large public-interest entities only | All large companies + listed SMEs + qualifying non-EU companies |
| No standardised framework | Mandatory ESRS standards |
| No assurance | Mandatory assurance |
CSRD Timeline: Four Phases of Implementation
CSRD is phased in over several years, with different company types beginning at different times:
| Phase | Reporting Period | First Report Due | Who Must Comply |
|---|---|---|---|
| Phase 1 | FY 2024 | 2025 | Large public-interest entities with more than 500 employees (previously under NFRD) — banks, listed companies, insurance companies |
| Phase 2 | FY 2025 | 2026 | All other large companies meeting at least 2 of 3 size thresholds — regardless of listing or public-interest status |
| Phase 3 | FY 2026 | 2027 | Listed SMEs, small and non-complex credit institutions, captive insurance undertakings (opt-out available until FY 2028 / reports due 2029) |
| Phase 4 | FY 2028 | 2029 | Non-EU companies meeting the EUR 150 million EU turnover threshold with qualifying EU subsidiaries or branches |
Critical for Phase 2 companies: Your first report is due in 2026 covering financial year 2025. Data collection must be underway now — retroactively establishing ESG metrics and baselines is extremely difficult and expensive.
Assurance Timeline
| Period | Required Assurance Level |
|---|---|
| 2024–2027 | Limited assurance (lower standard, similar to a review) |
| From 2028 onwards | Reasonable assurance (higher standard, similar to a financial audit) — subject to Commission feasibility assessment |
ESRS Standards: What and How to Report
CSRD reporting must follow the European Sustainability Reporting Standards (ESRS), developed by EFRAG (European Financial Reporting Advisory Group) and adopted by the European Commission. The first set of 12 standards was adopted on 31 July 2023.
Complete ESRS Framework
| Standard | Topic | Mandatory? |
|---|---|---|
| ESRS 1 | General Requirements | Yes — for all companies |
| ESRS 2 | General Disclosures | Yes — for all companies |
| ESRS E1 | Climate Change | Presumed material (must report unless documented as immaterial) |
| ESRS E2 | Pollution | Subject to materiality assessment |
| ESRS E3 | Water and Marine Resources | Subject to materiality assessment |
| ESRS E4 | Biodiversity and Ecosystems | Subject to materiality assessment |
| ESRS E5 | Resource Use and Circular Economy | Subject to materiality assessment |
| ESRS S1 | Own Workforce | Subject to materiality assessment |
| ESRS S2 | Workers in the Value Chain | Subject to materiality assessment |
| ESRS S3 | Affected Communities | Subject to materiality assessment |
| ESRS S4 | Consumers and End-Users | Subject to materiality assessment |
| ESRS G1 | Business Conduct | Subject to materiality assessment |
How Materiality Works for ESRS
- ESRS 1 and ESRS 2 are always mandatory — every company must report these regardless of materiality
- ESRS E1 (Climate Change) is presumed material — you must report on climate unless you can document why it is not material to your business (which is difficult to justify in practice)
- All other topical standards (E2–E5, S1–S4, G1) are reported only if material based on your double materiality assessment
- If a topic is assessed as not material, you must explain why in your report
Sector-Specific Standards
EFRAG is also developing sector-specific ESRS for industries with particular sustainability characteristics (e.g., oil and gas, mining, agriculture, financial services). These will supplement the cross-cutting standards with industry-specific disclosure requirements.
Double Materiality: The Core Concept
Double materiality is the foundational concept that distinguishes CSRD from previous reporting frameworks. It requires companies to assess sustainability matters from two perspectives simultaneously:
Impact Materiality (Inside-Out)
Question: How does the company affect people and the environment?
| Assessment Factor | What to Consider |
|---|---|
| Actual impacts | Current positive and negative effects on people and the environment |
| Potential impacts | Possible future effects based on business activities and plans |
| Value chain scope | Impacts across the full value chain — upstream (suppliers) and downstream (customers, end-of-life) |
| Time horizon | Short-term (0-1 year), medium-term (1-5 years), and long-term (5+ years) |
| Severity | Scale (how serious), scope (how widespread), and irremediability (how reversible) |
| Likelihood | Probability of potential impacts occurring |
Financial Materiality (Outside-In)
Question: How do sustainability matters affect the company's financial position and performance?
| Assessment Factor | What to Consider |
|---|---|
| Financial risks | Sustainability-related risks to revenue, costs, assets, and liabilities |
| Financial opportunities | Potential for new revenue, cost savings, or competitive advantage from sustainability |
| Dependencies | Reliance on natural resources, human capital, or social licence to operate |
| Access to finance | Impact on cost of capital, access to loans, and investor appetite |
| Time horizon | Short-term, medium-term, and long-term financial effects |
When Is a Topic Material?
A sustainability topic is material if it meets either threshold:
| Scenario | Material? |
|---|---|
| Impact materiality only (significant effect on people/environment) | Yes |
| Financial materiality only (significant effect on the company) | Yes |
| Both impact and financial materiality | Yes |
| Neither | No — explain why in the report |
Practical tip: The double materiality assessment is the most critical step in CSRD preparation. It determines the entire scope of your reporting. Document your methodology, stakeholder engagement, and conclusions thoroughly — auditors will review this process.
What Must Be Disclosed
Mandatory Disclosures (ESRS 2) — All Companies
Every company in CSRD scope must disclose the following, regardless of materiality assessment results:
| Disclosure Area | Key Requirements |
|---|---|
| Basis for preparation | Methodology, reporting scope, boundaries, and limitations |
| Governance | Role of the management body and supervisory board in sustainability matters; sustainability expertise on the board; incentive structures |
| Strategy | Business model description, sustainability strategy, transition plan (if applicable) |
| Impact, risk, and opportunity management | Processes for identifying, assessing, and managing sustainability-related impacts, risks, and opportunities |
| Metrics and targets | Measurable targets, deadlines, progress tracking, and performance indicators |
Topical Disclosures — Based on Materiality
Environmental (E):
- Greenhouse gas emissions (Scope 1, 2, and 3)
- Energy consumption and energy efficiency measures
- Climate transition plan and carbon reduction targets
- Water consumption, discharge, and marine ecosystem impacts
- Pollution of air, water, and soil; substances of concern
- Biodiversity impacts and ecosystem dependencies
- Resource use, waste generation, and circular economy practices
Social (S):
- Workforce diversity, inclusion, and equal treatment
- Working conditions, wages, and collective bargaining
- Occupational health and safety metrics and incidents
- Training and skills development investment
- Human rights in the supply chain
- Community impacts and engagement
- Consumer and end-user safety and privacy
Governance (G):
- Anti-corruption and anti-bribery policies and incidents
- Political engagement and lobbying activities
- Supplier relationship management and payment practices
- Whistleblower protection mechanisms
Understanding Scope 1, 2, and 3 Emissions
GHG emissions reporting is central to ESRS E1 (Climate Change) and one of the most scrutinised aspects of CSRD reporting:
| Scope | Definition | Examples | Measurement Difficulty |
|---|---|---|---|
| Scope 1 | Direct emissions from owned or controlled sources | Company vehicles, on-site fuel combustion, manufacturing processes, refrigerant leaks | Moderate — direct measurement possible |
| Scope 2 | Indirect emissions from purchased energy | Electricity, heating, cooling, steam purchased from external providers | Moderate — based on energy consumption data and emission factors |
| Scope 3 | All other indirect emissions across the value chain | Purchased goods and services, business travel, employee commuting, transportation and distribution, use of sold products, end-of-life treatment of products, investments | High — requires data from suppliers, customers, and estimates |
Scope 3: The Biggest Challenge
Scope 3 emissions typically represent 70–80 % of a company's total carbon footprint, yet they are the hardest to measure because the data comes from third parties across the value chain.
| Scope 3 Category | Description |
|---|---|
| Purchased goods and services | Emissions from production of goods and services the company buys |
| Capital goods | Emissions from production of capital equipment |
| Fuel and energy-related activities | Upstream emissions from fuel and energy procurement |
| Transportation and distribution | Upstream and downstream logistics emissions |
| Waste generated in operations | Emissions from waste treatment |
| Business travel | Emissions from employee travel |
| Employee commuting | Emissions from employees travelling to/from work |
| Leased assets | Emissions from leased assets not in Scope 1 or 2 |
| Processing of sold products | Emissions from downstream processing |
| Use of sold products | Emissions from customer use of products |
| End-of-life treatment | Emissions from disposal of sold products |
| Investments | Emissions from the company's investment portfolio |
Expert advice: Start with Scope 1 and 2, which are within your direct control and easier to measure. For Scope 3, use industry average emission factors and supplier surveys initially, then progressively improve data quality over time. Document your methodology and limitations — assurance providers understand that Scope 3 data quality improves iteratively.
Report Format and Assurance Requirements
Where Sustainability Information Goes
CSRD sustainability information must be included in the management report (directors' report), in a clearly identifiable dedicated section. It cannot be published as a separate standalone sustainability report.
| Requirement | Details |
|---|---|
| Location | Dedicated section within the annual management report |
| Format | XHTML (European Single Electronic Format — ESEF) |
| Digital tagging | XBRL tagging for machine-readability and automated data extraction |
| Language | In the official language(s) required by the member state |
| Publication | Publicly available along with the annual report |
Assurance Providers
Sustainability reports must undergo independent third-party assurance. Assurance can be provided by:
- Statutory auditors (the company's financial auditor or a separate firm)
- Independent assurance service providers (where permitted by member state law)
- Accredited sustainability assurance firms
Consolidation and Exemptions
Group reporting is permitted under certain conditions:
| Situation | Exemption Available? |
|---|---|
| Subsidiary included in parent's consolidated CSRD report | Yes — subsidiary may be exempt from individual reporting (with disclosure requirements) |
| EU subsidiary of non-EU parent reporting under equivalent standards | Possible — subject to Commission assessment of equivalence |
| Listed subsidiary | No — listed companies must always report individually |
CSRD and Other EU Regulations
CSRD does not operate in isolation — it is part of a broader EU sustainable finance regulatory ecosystem:
| Regulation | Relationship with CSRD |
|---|---|
| EU Taxonomy (Regulation 2020/852) | Companies must disclose what proportion of turnover, CapEx, and OpEx comes from Taxonomy-aligned activities; CSRD is the vehicle for this disclosure |
| SFDR (Sustainable Finance Disclosure Regulation) | Fund managers and financial advisers use CSRD data from investee companies to meet their own SFDR disclosure obligations |
| CSDDD (Corporate Sustainability Due Diligence Directive) | Requires companies to actively identify, prevent, and mitigate human rights and environmental impacts in their value chain; CSRD reporting provides the data foundation |
| GDPR | GDPR requirements apply to the processing of personal data collected for ESG reporting (employee data, supply chain data) |
| NIS2 | NIS2 cybersecurity requirements may overlap with CSRD governance disclosures on ICT risk management |
| Benchmarks Regulation | EU climate benchmarks use CSRD-reported data for construction and rebalancing |
Relationship with International Frameworks
| Framework | Relationship with ESRS |
|---|---|
| GRI Standards | High degree of interoperability — ESRS were developed in cooperation with GRI; companies already reporting under GRI have a strong foundation |
| TCFD | Climate disclosures under ESRS E1 are aligned with TCFD's governance, strategy, risk management, and metrics/targets structure |
| ISSB Standards (IFRS S1 and S2) | Shared conceptual foundations but different scope — ISSB focuses on investor-oriented financial materiality; ESRS uses double materiality. EFRAG has published interoperability guidance |
| CDP | CDP questionnaires align significantly with ESRS E1 and E2 requirements |
| UN SDGs | ESRS disclosures can be mapped to relevant UN Sustainable Development Goals |
How to Prepare: 8-Step Roadmap
Step 1: Determine Applicability and Timeline (Weeks 1-2)
- Review your company's employee count, net turnover, and total assets against CSRD thresholds
- Identify which phase applies to your organisation
- Determine your first reporting year and report publication deadline
- Assess group reporting options (consolidation, subsidiary exemptions)
- Identify whether any sector-specific ESRS will apply
Step 2: Establish Governance Structure (Weeks 2-6)
- Assign board-level responsibility for sustainability reporting
- Create a cross-functional CSRD working group with representatives from sustainability, finance, legal, operations, HR, and procurement
- Define clear roles, responsibilities, and reporting lines
- Integrate sustainability oversight into existing governance committees
- Allocate budget and resources for multi-year compliance
Step 3: Conduct Double Materiality Assessment (Weeks 4-12)
This is the most critical step — it determines the entire scope of your reporting.
| Sub-Step | Activities |
|---|---|
| Identify topics | Map all potentially material sustainability matters using the ESRS topic list |
| Engage stakeholders | Consult with investors, employees, customers, suppliers, communities, and NGOs |
| Assess impact materiality | Evaluate the severity and likelihood of your company's impacts on people and environment |
| Assess financial materiality | Evaluate how sustainability matters create financial risks and opportunities |
| Document conclusions | Record methodology, data sources, stakeholder input, and rationale for each materiality determination |
| Validate | Review and approve conclusions with management and/or the board |
Step 4: Perform Gap Analysis (Weeks 8-14)
- Map existing disclosures and data against ESRS requirements for your material topics
- Identify which data points are currently collected vs. missing
- Assess the quality and reliability of existing data
- Determine system and process gaps
- Estimate the resources, systems, and time needed to close gaps
- Prioritise gaps by regulatory urgency and data availability
Step 5: Build Data Collection Infrastructure (Weeks 10-20)
- Define data owners for each ESRS topic and data point
- Create standardised data collection templates and procedures
- Implement or upgrade sustainability data management systems
- Establish data validation and quality controls (internal controls over sustainability reporting)
- Set up value chain data collection — supplier questionnaires, customer surveys, industry databases
- Create audit trails documenting data sources and calculation methodologies
Step 6: Develop Metrics, Targets, and Policies (Weeks 14-22)
- Establish baselines for all material metrics (using the earliest available data)
- Set measurable targets with clear deadlines for material sustainability topics
- Develop or update sustainability policies aligned with ESRS requirements
- Create action plans describing what the company is doing to achieve its targets
- Align ESG strategy with overall business strategy to demonstrate integration
Step 7: Prepare for Assurance (Weeks 18-26)
- Engage with assurance providers early — capacity is limited, especially for Phase 1 and 2
- Ensure all data has clear documentation and audit trails
- Implement internal controls over sustainability reporting (similar rigour to financial reporting controls)
- Conduct dry-run assurance procedures — test your data and processes before the formal engagement
- Address assurance provider feedback from preliminary reviews
Step 8: Build and Test Reporting Capability (Weeks 22-30)
- Draft the sustainability section of the management report following ESRS structure
- Implement XBRL digital tagging capabilities
- Integrate sustainability reporting into the annual reporting cycle and timeline
- Train staff on CSRD requirements, data collection procedures, and ongoing responsibilities
- Establish a continuous improvement process for data quality and reporting maturity
Common Challenges and Solutions
Challenge 1: Scope 3 Data Availability
Problem: Scope 3 emissions (value chain) typically represent 70–80 % of total emissions but depend on data from suppliers and customers that may not be available.
Solution: Start with industry average emission factors from recognised databases (e.g., DEFRA, ecoinvent). Progressively improve by engaging key suppliers through questionnaires. Document your methodology, data sources, and limitations. Assurance providers understand that Scope 3 data quality improves over time.
Challenge 2: Double Materiality Complexity
Problem: The double materiality assessment requires significant judgement, stakeholder engagement, and resources — and there is no single "correct" methodology.
Solution: Use the structured guidance in ESRS 1 and EFRAG's implementation guidance. Engage stakeholders systematically and document the rationale for every materiality determination. Consider external support for the first assessment cycle.
Challenge 3: Value Chain Information
Problem: ESRS S2 (Workers in the Value Chain) and Scope 3 reporting require sustainability information from suppliers and downstream partners that may be difficult to obtain.
Solution: Prioritise data collection from material suppliers (those representing the largest sustainability impacts). Include sustainability data requirements in procurement contracts. Use industry databases and sector estimates for less significant relationships.
Challenge 4: Resource Constraints
Problem: CSRD compliance requires significant investment in time, expertise, systems, and external support.
Solution: Start early and phase your preparation across multiple reporting cycles. Leverage existing frameworks (GRI, CDP) where aligned with ESRS. Build internal capability progressively while using external support for initial setup and complex topics. For data on how much organisations across the EU are spending on compliance programmes and where budgets are growing fastest, see our EU Compliance Statistics 2026 report.
Challenge 5: Evolving Requirements
Problem: ESRS standards, sector-specific standards, and implementation guidance continue to develop.
Solution: Monitor EFRAG publications and European Commission updates. Build flexibility into reporting processes. Engage with industry groups, professional bodies, and specialist advisers to stay informed.
Challenge 6: Data Quality and Assurance Readiness
Problem: Sustainability data often lacks the rigour and controls applied to financial data, making assurance readiness difficult.
Solution: Apply financial reporting discipline to sustainability data: establish internal controls, segregation of duties, review procedures, and documentation standards. Invest in data management systems that provide audit trails from the start.
Penalties for Non-Compliance
Member states are required to establish penalties for CSRD non-compliance. While specific penalties vary by country, the consequences extend beyond fines:
| Category | Potential Consequences |
|---|---|
| Regulatory penalties | Financial fines proportionate to the breach; personal liability for management body members; temporary bans from management positions |
| Capital market access | Investors and banks increasingly require ESG data — non-compliant companies risk exclusion from investment portfolios and higher financing costs |
| Reputational damage | Public disclosure of non-compliance; negative media coverage; loss of stakeholder trust |
| Business relationships | Exclusion from public procurement tenders that require ESG disclosures; loss of contracts with partners who require supply chain ESG data |
| Greenwashing risk | Inconsistent or incomplete reporting may be challenged as greenwashing under the EU's Green Claims Directive |
| Assurance failures | If the assurance provider identifies material misstatements or cannot provide assurance, this is publicly disclosed |
Frequently Asked Questions
Does CSRD apply to my company if we have fewer than 250 employees?
If you are not listed on an EU-regulated market and do not meet two of the three large company thresholds, you are not a direct CSRD obligor. However, your large customers or partners may request your ESG data for their own CSRD value chain reporting (ESRS S2, Scope 3). Voluntary reporting using simplified ESRS for SMEs is available.
Do we have to report on all 12 ESRS topics?
No. ESRS 1 and ESRS 2 are always mandatory. ESRS E1 (Climate Change) is presumed material — you must report unless you document why climate is not material to your business. All other topics (E2–E5, S1–S4, G1) are reported only if material based on your double materiality assessment. You must explain why non-material topics were excluded.
Who must assure the sustainability report?
An independent third-party assurance provider — either the company's statutory auditor, a separate audit firm, or an accredited sustainability assurance provider (where permitted by member state law). Until 2028, limited assurance is required; reasonable assurance is planned from 2028 onwards.
Can we publish a separate sustainability report instead of including it in the management report?
No. CSRD requires sustainability information to be included in a dedicated section of the management report (annual report). It cannot be a standalone document. This ensures sustainability disclosures receive the same governance, board approval, and assurance rigour as financial reporting.
What is the relationship between CSRD and the EU Taxonomy?
The EU Taxonomy defines which economic activities are environmentally sustainable. CSRD is the vehicle for Taxonomy disclosures — companies must report what proportion of their turnover, capital expenditure, and operating expenditure is associated with Taxonomy-aligned activities. This disclosure is part of the CSRD management report.
How does CSRD relate to GRI reporting?
ESRS standards were developed in cooperation with GRI, and there is high interoperability between the two frameworks. Companies already reporting under GRI have a strong foundation for CSRD compliance, though some ESRS-specific disclosures (notably double materiality and certain quantitative metrics) go beyond GRI requirements.
What is Scope 3 and do we have to measure it?
Scope 3 covers all indirect emissions across your value chain — from purchased goods and services to the use and disposal of your products. Yes, ESRS E1 requires Scope 3 disclosure. You can use industry average emission factors initially and progressively improve data quality. Document your methodology and limitations.
Can listed SMEs defer CSRD reporting?
Yes. Listed SMEs may opt out of CSRD reporting until financial year 2028 (with reports due in 2029). They must disclose the opt-out decision in their management report. When they do begin reporting, simplified ESRS standards for SMEs will apply.
Related Articles
- GDPR Compliance Guide — Data protection requirements that apply to ESG data collection
- NIS2 Compliance Checklist — Cybersecurity requirements that overlap with CSRD governance disclosures
- DORA Compliance Guide — Financial sector digital resilience requirements
- ISO 27001 Implementation Guide — Information security framework supporting ESG governance
Get Expert Help with CSRD Compliance
Need support with sustainability reporting? Vision Compliance helps organisations across the EU navigate CSRD requirements — from double materiality assessments and gap analysis through to assurance-ready reporting.
- Regulatory Advisory Services — CSRD, ESG compliance, and sustainability reporting support
- Schedule a Free Consultation — Discuss your CSRD compliance needs with our team
Robert Lozo, mag. iur., is a Partner at Vision Compliance specializing in EU regulatory compliance. He advises organizations on GDPR, NIS2, AI Act, and financial regulation, delivering audit-ready documentation and compliance roadmaps across regulated industries.