What Is the Corporate Sustainability Reporting Directive (CSRD)?

In 2022, the European Union adopted a new set of standards governing the way that certain companies report on environmental, social and governance (ESG) concerns. This standard, called the Corporate Sustainability Reporting Directive (CSRD), is a significant expansion of earlier guidelines.

Previous standards, specifically the Non-Financial Reporting Directive, had what the EU perceived was critical flaws in execution. The NFRD, which was created in 2014, required companies to provide non-financial details about how they were approaching concerns related to ESG. Topics might have included attention to labor rights or the organization’s commitment to sustainability.

The chief criticism of this directive was that it did not go far enough. A lack of direction led to some confusion at first, for which the EU provided some clarification in 2018. The fact that the NFRD did not require ESG-related financial disclosures felt, to officials, to be missing a big piece of the puzzle.

As such, the European Parliament passed the CSRD as an expansion and clarification that replaces the NFRD. The CSRD is designed to improve transparency, standardize sustainability reporting, support EU climate objectives and combat greenwashing.

The CSRD represents one of the most significant ESG regulatory expansions, with global impacts. Many companies with operations in the EU must be prepared to meet each reporting requirement. With this guide, company stakeholders will understand “What is CSRD?” and how it applies to their businesses.

Who Must Comply With CSRD?

The first key to determining CSRD requirements starts with a discussion of which companies need to comply with the standards. Generally, the CSRD applies to large companies operating in the EU. Initially, requirements involved any organization with securities listed on regulated markets in the EU, as well as non-listed large companies with significant revenue in the EU. This requirement has temporarily been limited to certain large businesses, as part of the European Commission’s 2025 Omnibus I package, finalized in 2026, which decreased the number of companies required to file.

Reporting requirements for companies depend on whether the entity meets the EU’s definition of a large company. Under the Omnibus package, these businesses must meet certain criteria to trigger the reporting requirement:

• At least 1,000 employees
• Net turnover of €450 million

Non-EU companies may be subject to the directive, even if most of their operations and revenue occur outside the region. Specifically, companies with at least €200 million in EU revenue, at least €450 million in global revenue and one EU subsidiary or branch may need to report under the CSRD. These criteria were updated in 2025.

This change in EU sustainability reporting standards dramatically increased the number of companies required to submit regular reporting. Under the NFRD, approximately 11,000 companies were required to file ESG-related disclosures. Under the CSRD, that number increased to about 50,000, per initial estimates by the EC.

CSRD Disclosure Requirements

Since the CSRD is a significant expansion of EU sustainability reporting, companies may need to make more detailed disclosures than they do for other reporting guidelines. A CSRD readiness checklist would involve these topics:

• Environmental impacts of the company’s operating processes
• Social factors relating to employees, consumers or end-users
• Changes to governance that increase sustainability risks or improve adherence to sustainability goals
• Climate risks that impact the company
• Social controls that impact human rights for employees and others in the community
• Company efforts to improve the sustainability of its supply chain
• Transition plans that allow the company to meet standards

At the heart of the directive lies a unique approach, called double materiality. This premise requires companies to report how sustainability risks impact their financial performance, as well as how their actions affect society and the environment. For example, organizations would not just be required to outline how extreme weather or climate change affects their financial performance. They would also have to report how their responses to these and other challenges impacted the environment. This requirement represents an extension of the traditional financial materiality that companies may be obligated to disclose.

Overview of the ESRS (European Sustainability Reporting Standards)

To provide detailed clarification on reporting guidelines required to comply with the CSRD, the European Financial Reporting Advisory Group (EFRAG) created a set of standards. These standards, called the European Sustainability Reporting Standards (ESRS), outline 12 types of disclosures in two broad categories. These categories include:

• Cross-Cutting: General requirements and disclosures
• Topical Standards: Disclosures related to environmental, social and governance concerns

There was a third category relating to sector-specific standards that was removed by the EC omnibus package in 2025.

The first two sets of disclosures cover various concerns that are not subject-specific. This part of the ESRS discusses the importance of meeting the double materiality requirement, rules governing due diligence and other matters. The remaining 10 disclosures relate to these issues in particular:

• Climate Change
• Pollution
• Water and Marine Resources
• Biodiversity
• Resource Use and Circular Economy
• Own Workforce
• Workers in the Value Chain
• Affected Communities
• Consumers and End-Users
• Business Conduct

Each section requires significant detail, with individual subsections. Some may have additional obligations, such as an explanation of how the company’s actions in one topic may affect others.

In order to comply with the CSRD, companies must provide disclosures under each of these topics. The disclosures have to meet specific standards for formatting, with XBRL-style digital tagging.

CSRD Reporting Timeline

The reporting timeline for the CSRD has phased implementation dates depending on the type of business. The first companies required to report under the CSRD were obligated to submit disclosures in 2025, for fiscal data from 2024. Some entities may be able to delay CSRD reporting until 2029. The reports must be digitally-tagged and included in annual management reports.

Assurance Requirements Under CSRD

While the CSRD requires the company to create a number of disclosures related to its actions, financial or otherwise, it does not allow organizations to self-certify the accuracy of those disclosures. That aspect of the CSRD is a job for assurance.

Essentially, assurance is some guarantee that an assessment is accurate and not misleading about its function or intent. Assurance is a key element of financial reporting and corporate sustainability because some businesses are not transparent or honest about their operations and decision-making processes. When it comes to corporate sustainability reporting, investors and regulators may view a lack of assurance as the company trying to present itself as better than it actually is. In sustainability terms, this action is called greenwashing.

In an effort to increase transparency related to ESG reporting, the CSRD sets several assurance standards that companies may have to follow. Specifically, businesses that must file reports under this European sustainability reporting standard have to request independent verification of their disclosures. The entities that can serve as independent auditors depend on the rules set by the member states.

At present, companies may rely on limited assurance principles. These principles represent a moderate check of the organization’s claims and data. Eventually, the CSRD may require companies to go through reasonable assurance, which involves more scrutiny but is not a complete financial analysis. This assurance increases requirements for internal controls and governance oversight, similar to the certifications and assurances required for Sarbanes-Oxley (SOX) Act disclosures.

The Strategic Opportunity Behind CSRD

While CSRD compliance expands the types and detail of disclosures that companies must make regarding their operations and decisions, it also presents a number of strategic opportunities. In markets with increasing complexity and reporting standards, transparency is a key advantage. Investors expect to receive greater detail about what companies are doing to improve the organization, not just financially but under ESG concerns. Demonstrating a dedication to corporate sustainability by committing to accurate and complete CSRD filings can:

• Increase investor trust as part of investor relations
• Strengthen the business’s credibility on ESG issues, which is a critical aspect of positive branding and market growth
• Improve visibility of ESG-related risks, so that the company is more resilient to change
• Align the organization’s long-term strategies with its financial and environmental reality
• Put the business in a good position to leverage sustainable finance opportunities

It is true that providing sustainability information can dramatically increase a company’s reporting responsibilities. The types of internal controls required to meet the level of detail outlined by the CSRD may obligate an organization to significantly re-negotiate policies and procedures, taking months or even years to implement and integrate with existing systems.

It is also true that this level of reporting requirement is becoming increasingly mainstream. Companies that resist voluntarily improving their reporting processes because they perceive it is too complicated are more likely to run into hard limits that force them to act much faster to comply with changing regulations. Staying current with requirements gives businesses critical time to implement effective processes that will help them remain compliant over time.

How Technology Supports CSRD Compliance

Preparing for such detailed reporting as the CSRD requires significant process updates and systems in place. Those who attempt to file these disclosures manually increase the risk of inaccurate or incomplete reporting. Digital tools can streamline CSRD reporting, with the following advantages:

• Centralized data management
• Automated tagging to meet digital formatting standards
• Version controls
• Audit trails
• Secure workflows for collaboration across teams
• Integration with existing financial reporting systems
• Consistency with global reporting requirements

DFIN’s ESG & sustainability reporting software provides convenient tools for companies to reduce the complication and time needed to complete accurate and timely reports. Our digital reporting platform integrates XBRL and tagging for standardized reporting. We help businesses to align their regulatory obligations with business objectives. As an expert in global regulatory compliance, we can assist companies in streamlining their reporting obligations, from SOX disclosures to SEC filing and CSRD.