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Corporate Sustainability Reporting Directive (CSRD): A comprehensive guide

February 22, 2024

The Corporate Sustainability Reporting Directive (CSRD) marks a turning point in the development of corporate reporting in Europe. With the introduction of the CSRD, the European Union (EU) is expanding the requirements for sustainability reporting and creating uniform standards to ensure transparency and comparability. This guide provides a detailed overview of the CSRD, its requirements and the impact on companies.

1 What is the Corporate Sustainability Reporting Directive (CSRD)?

The CSRD is an EU directive that came into force on January 5, 2023. It obliges large companies and listed SMEs (small and medium-sized enterprises) to report regularly on their environmental and social activities and thus make the sustainability performance of companies transparent. The CSRD builds on the previous Non-Financial Reporting Directive (NFRD) and significantly expands its scope and reporting obligations.

2 Differences between NFRD and CSRD

The main differences between the NFRD and the CSRD lie in the expansion of the scope of application, the introduction of uniform reporting standards and the obligation to verify sustainability information. While the NFRD mainly concerned large, publicly interested companies with more than 500 employees, the CSRD applies to all large companies and all listed companies with the exception of micro-enterprises.

3 Who must comply with the CSRD requirements?

The CSRD applies to large companies - defined as companies with more than 250 employees and more than 50 million euros in turnover and/or more than 25 million euros in total assets - and all listed companies, with the exception of micro-enterprises. In total, around 49,000 companies in the EU will be affected by the CSRD.

4 What information must be disclosed?

The CSRD extends the reporting obligations of the NFRD and requires companies to publish information on the following aspects:

- Environmental protection
- Social responsibility and employee matters
- human rights
- Anti-corruption and bribery
- Diversity in management positions

In addition, the CSRD requires companies to provide more detailed information, including

- Double materiality: reporting on sustainability risks that affect the company and on the company's impact on society and the environment.
- Forward-looking information on targets and progress.
- Information on intangible assets such as social, human and intellectual capital.
- Reporting in accordance with the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation.

5 Next steps and timetable

Following the adoption of the CSRD by the EU Council and its entry into force in January 2023, Member States will have 18 months to transpose the Directive into national law. From January 2024, the first companies already covered by the NFRD will have to report in accordance with the CSRD. Other companies will follow in the subsequent years.

6 Sanctions for non-compliance

Although the exact sanctions have not yet been determined, it can be assumed that violations of the CSRD may be punished with considerable penalties. The type and level of sanctions will be determined by the individual member states.

7 Impact of the CSRD on companies

The CSRD requires companies to take a proactive approach to sustainability reporting. Companies must review their internal processes and ensure that they have the necessary data and can record it reliably. The involvement of specialist consultants can provide important support in this regard.