CSRD: a new era for corporate sustainability reporting

Since January 1, 2024, the Corporate Sustainability Reporting Directive (CSRD) has been in force. In 2025, the European Commission's Omnibus package fundamentally reshaped its scope: the employee threshold for mandatory compliance rose from 250 to 1,000, reducing the number of affected companies from 50,000 to approximately 10,000. This is the single most searched piece of information by CFOs and CEOs of mid-sized groups in 2026.

This guide covers everything you need to know: who is affected, on what timeline, which ESRS standards apply, how to prepare, and what penalties to expect for non-compliance.

Updated April 2026. Based on Directive (EU) 2022/2464, the Omnibus Law of December 16, 2025, and the Stop-the-clock Directive (EU) 2025/794.

Table of Contents

• From NFRD to CSRD: what actually changes
• What is the CSRD?
• The 2025 Omnibus Package: the simplification that changes everything
• Application timeline 2024-2029
• Who is affected? The exact criteria
• The 12 ESRS standards explained
• Double materiality: definition and assessment process
• CSRD vs NFRD/DPEF: the concrete differences
• Link with the EU Green Taxonomy
• Sanctions by country
• 5 steps to prepare
• FAQ : Frequently asked questions about CSRD
• Conclusion

From NFRD to CSRD: what actually changes

Since 2014, large European companies were required to publish a non-financial statement in their annual management report under the NFRD (Non-Financial Reporting Directive). In France, this obligation became the DPEF : Déclaration de Performance Extra-Financière : transposed into national law in 2017.

The NFRD's track record was poor: reports were inconsistent across companies, formats were entirely discretionary, and independent verification was rarely required. According to EFRAG, fewer than 40% of reports published under the NFRD contained quantitative data on greenhouse gas emissions.

The CSRD corrects these shortcomings across four dimensions:

• Standardization: 12 ESRS standards replace the free-form approaches permitted under the NFRD
• Mandatory verification: every sustainability report must be audited by a statutory auditor or an independent third-party organization
• Double materiality: companies must report both their impact on the environment AND the environment's impact on their business
• Expanded scope: non-European subsidiaries of groups generating more than €150 million in annual EU revenue are also covered

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a European directive adopted on December 14, 2022 (Directive 2022/2464/EU). It requires covered companies to publish an annual sustainability report, integrated within their management report, covering ESG performance : Environmental, Social, and Governance.

The CSRD is a central pillar of the European Green Deal, the EU's roadmap to achieve carbon neutrality by 2050 in accordance with the Paris Agreement.

The sustainability report must cover:

• Greenhouse gas emissions (Scope 1, 2, and Scope 3 where material)
• Energy consumption and share of renewable energy sources
• Water use and waste management
• Biodiversity and ecosystem impacts
• Working conditions, health and safety for employees
• Diversity, equality and inclusion
• Corporate governance, business ethics and anti-corruption
• Climate change risk management (physical and transition risks)

The 2025 Omnibus Package: the simplification that changes everything

This is the most significant regulatory development for European companies in 2025-2026. The Omnibus package, presented by the European Commission in February 2025 and definitively adopted by the European Parliament on December 16, 2025, reshaped the CSRD on three key dimensions:

1. Raising the employee threshold

The employee criterion rises from 250 to 1,000 employees. Around 40,000 companies that would have had to comply with the CSRD are now exempt. The mandatory scope shrinks from 50,000 to approximately 10,000 companies across the EU.

2. Simplifying ESRS standards

EFRAG (European Financial Reporting Advisory Group) received a mandate to revise the ESRS standards. Key changes:

• Reduction of mandatory data points by approximately 70% for non-material topics
• Abandonment of sector-specific ESRS standards (originally planned for 2024-2025)
• Focus on key quantitative indicators rather than narrative descriptions

3. Limiting value chain scope

The Omnibus Law restricts the obligation to collect data from suppliers and subcontractors. The cascading regulatory effect on SME suppliers is mitigated: large companies can no longer impose on their small suppliers the same reporting requirements that apply to themselves.

The Stop-the-clock Directive

In parallel, Directive (EU) 2025/794 : the "Stop-the-clock" directive : adopted in April 2025, granted a two-year extension for waves 2 and 3 of the original CSRD timetable. This extension gives affected companies time to adapt their information systems and internal processes before the deadlines hit.

Application timeline 2024-2029

Key note: Wave 1 companies (>500 employees, PIE) have already published their first report in 2025 covering FY 2024. No extension applies to them.

Who is affected? The exact criteria

Large companies (wave 2 : post-Omnibus)

A company is subject to the CSRD if it meets two of the following three criteria:

• More than 1,000 employees (threshold raised from 250 to 1,000 by the Omnibus Law)
• Net turnover above €50 million
• Total balance sheet above €25 million

Listed SMEs (wave 3)

SMEs admitted to trading on a regulated European market are covered if they meet two of three criteria:

• More than 10 employees
• Net turnover above €900,000
• Total balance sheet above €450,000

Micro-enterprises (fewer than 10 employees) are explicitly excluded.

Non-EU companies (wave 4)

Any company headquartered outside the EU but generating more than €150 million in annual EU revenue for two consecutive financial years is covered, provided it has a significant subsidiary or branch within the Union.

Excluded but encouraged companies

Companies with fewer than 1,000 employees that are not listed are now exempt from mandatory CSRD. They are nevertheless strongly encouraged to adopt the voluntary VSME standard (Voluntary SME Standard), developed by EFRAG. This simplified standard allows them to respond to data requests from large enterprise clients and meet their banks' ESG requirements : without the full reporting burden.

The 12 ESRS standards explained

The European Sustainability Reporting Standards (ESRS) are the 12 standards that CSRD-covered companies must use to structure their sustainability report. Developed by EFRAG, they cover the full range of ESG topics.

Cross-cutting standards (mandatory for all)

These two standards are mandatory for all covered companies, regardless of materiality assessment.

Environmental standards (E)

ESRS E1 is the most demanding standard. It requires calculating Scope 3 emissions when climate change is identified as material : which is the case for virtually all industrial, distribution and services companies.

Social standards (S)

Governance standard (G)

The materiality principle

Except for ESRS 1 and ESRS 2, a company may omit a standard if the corresponding topic is not material for its activities. The double materiality assessment determines which standards actually apply in practice.

Double materiality: definition and assessment process

Double materiality is the central concept of the CSRD. It requires assessing each sustainability topic along two complementary dimensions:

The two dimensions

Impact materiality (inside-out): the company measures its own impact on the environment and society. Examples: CO2 emissions, impact on biodiversity, working conditions in the supply chain.

Financial materiality (outside-in): the company assesses how sustainability factors affect its financial situation, cash flows, and long-term value. Examples: physical climate risk on industrial sites, regulatory transition risk on certain assets.

A topic is material if it is significant according to one OR both of these dimensions.

The assessment process in practice

• Identifying topics: list all potential ESG topics from the ESRS standards and sector analysis
• Stakeholder consultation: integrate perspectives from employees, customers, suppliers, investors and local communities
• Scoring each topic: assess impact severity (scale, scope, irreversibility) and likelihood across both dimensions
• Board-level validation: the materiality matrix must be approved at board level
• Documentation: describe the process in the report (ESRS 2 requires full transparency on methodology)
• Annual review: the matrix must be updated each year to reflect evolving context

With the Omnibus Law, double materiality also becomes a simplification tool: non-material topics do not need to be reported, allowing companies to focus effort on what genuinely matters to their business and stakeholders.

CSRD vs NFRD/DPEF: the concrete differences

The DPEF applied to French companies with more than 500 employees since 2017. The CSRD progressively replaces it. Here are the practical differences:

In practice, companies already subject to the DPEF with more than 1,000 employees migrate to CSRD. Those with 500-1,000 employees are no longer legally required to comply, but may maintain a voluntary VSME approach.

Link with the EU Green Taxonomy

The EU Green Taxonomy (Regulation EU 2020/852) is a classification system for sustainable economic activities. It sets precise technical criteria to determine whether an activity substantially contributes to one of the EU's six environmental objectives (climate change mitigation, adaptation, water, circular economy, pollution, biodiversity).

The link with the CSRD is direct and mandatory:

• ESRS E1 requires disclosing the share of turnover, capital expenditure (Capex) and operating expenditure (Opex) aligned with the taxonomy
• Companies must calculate their taxonomy ratios: share of eligible AND aligned activities
• The taxonomy provides a framework for identifying sustainable investments to include in the transition strategy

A critical distinction: being eligible for the taxonomy (the activity is covered by a criterion) does not mean being aligned (the activity meets the technical thresholds and minimum social safeguards). The two concepts are frequently conflated in corporate reports.

Sanctions by country

The CSRD is a directive: each EU member state has transposed its own sanctions regime. In France, transposition was published in the Official Journal on December 7, 2023.

Penalties in France

Sanctions apply to covered companies (more than 1,000 employees after Omnibus) and remain unchanged:

• Failure to publish or partial publication of the sustainability report: fine of €3,750
• Exclusion from public procurement: major commercial risk, applicable without a financial penalty cap
• Failure to have the report audited: up to €30,000 fine and 2 years' imprisonment
• Obstructing the audit: up to €75,000 fine and 5 years' imprisonment

Who can audit?

The sustainability report must be verified by:

• A statutory auditor (CAC) qualified for sustainability assurance
• An independent third-party organization (OTI) accredited by COFRAC in France

In the initial years, verification can be performed as limited assurance (less demanding than reasonable assurance, which is the standard for financial statements). The long-term objective is to reach reasonable assurance equivalence.

Penalties in other EU member states

Other EU countries have adopted different regimes. Germany provides for fines of up to €10 million for listed companies. The Netherlands has introduced direct criminal penalties for executives. The divergence in transposition approaches is one reason why harmonization discussions are ongoing at European level.

5 steps to prepare

Step 1 : Gap analysis and maturity assessment

Start by mapping the gap between your current state and CSRD requirements. This means inventorying what ESG data already exists, assessing its traceability and quality, and identifying white spots : missing or unreliable data.

Step 2 : Conduct the double materiality assessment

This is the structuring step. Without a validated materiality matrix, it is impossible to know which ESRS standards actually apply. This step requires involving the executive team, operational functions (procurement, HR, production) and external stakeholders.

Step 3 : Build the data collection system

ESRS data comes from multiple sources: carbon accounting (Scope 1, 2, 3), HR data, procurement data, site-level environmental data. A dedicated information system : or adaptation of existing ERP/systems : is needed to automate collection, ensure traceability, and facilitate audit.

Kabaun specifically covers carbon data collection and calculation (Scopes 1, 2 and 3), with CSRD/ESRS E1-compliant reports built in natively.

Step 4 : Select and brief your auditor

The choice of auditor (statutory or third-party) should happen early enough to allow them to accompany the implementation process : not just review it after the fact. Sustainability auditing requires specific skills distinct from traditional financial audit.

Step 5 : Draft and publish the report

The sustainability report must be integrated within the annual management report or published as a separate document. It must comply with ESRS formats and be available in tagged electronic format (XHTML + iXBRL for listed companies, per the delegated regulation on digital taxonomy).

FAQ : Frequently asked questions about CSRD

Does the CSRD apply to my 800-employee company?

No. Since the Omnibus Law of December 2025, the mandatory threshold is 1,000 employees. A company with 800 employees is no longer legally required to comply with the CSRD. It can however adopt the voluntary VSME standard to meet data requests from its large enterprise clients and financial partners.

When do I need to publish my first CSRD report?

This depends on your category. Wave 1 companies (PIEs, former NFRD entities, >500 employees) already published in 2025 covering FY 2024. Large companies in Wave 2 (>1,000 employees, post-Omnibus) will publish in 2029 covering FY 2028. Listed SMEs will publish in 2030 covering FY 2029.

Who can audit my CSRD sustainability report?

Only a qualified statutory auditor (CAC) or an independent third-party organization (OTI) accredited by COFRAC in France. The auditor must have specific sustainability competencies. In the initial years, limited assurance is accepted (less stringent than the reasonable assurance applied to financial statements).

Are my non-EU subsidiaries affected?

If your group generates more than €150 million in annual EU revenue over two consecutive financial years and has a significant subsidiary or branch in the EU, that EU entity is covered. It must produce a report covering at minimum its own activities within the EU.

Does the CSRD require Scope 3 calculation?

Yes, if climate change is identified as material in your double materiality assessment : which applies to virtually all industrial, distribution and service companies. ESRS E1 then requires Scope 3 calculation following the GHG Protocol, covering the relevant categories for your sector.

What is the difference between CSRD and CSDDD?

The CSRD concerns sustainability reporting (publishing information). The CSDDD (Corporate Sustainability Due Diligence Directive), adopted in 2024, concerns due diligence (actively taking measures to prevent negative impacts on human rights and the environment throughout the value chain). The two directives are complementary but distinct. The CSDDD targets very large companies (>1,000 employees, >€450M turnover).

Does the Omnibus package eliminate CSRD for SMEs?

It eliminates the legal obligation for unlisted companies with fewer than 1,000 employees. Listed SMEs on regulated markets remain covered (Wave 3, from 2030 onwards). And SME suppliers of large covered companies will continue to receive data requests, even though value chain requirements have been eased.

How does the CSRD align with the EU Green Taxonomy?

ESRS E1 requires disclosing the share of revenue, Capex and Opex aligned with the European taxonomy. Companies must therefore run the CSRD materiality analysis and taxonomy ratio calculations in parallel. The two exercises reinforce each other: activities identified as taxonomy-eligible must be covered by more detailed ESRS E1 reporting.

Conclusion

The CSRD : even as reshaped by the Omnibus package : remains the most ambitious non-financial reporting regulation in the world. For groups and mid-sized companies with more than 1,000 employees, the 2029 deadline may seem distant. In practice, full compliance requires 18 to 24 months of structured preparation.

Three immediate priorities: conduct the double materiality assessment in 2026, implement a carbon data collection system compliant with ESRS E1, and select a sustainability auditor before 2027.

Kabaun supports industrial groups and mid-sized companies in their CSRD compliance, from Scope 1-2-3 data collection to ESRS E1 report generation. Contact our team at [kabaun.com/contact](https://kabaun.com/contact).