CSRD: a new era for corporate sustainability reporting

Since January 1, 2024, the Corporate Sustainability Reporting Directive (CSRD) has officially entered into force, marking a monumental shift in the way European businesses disclose their environmental and social footprints. This ambitious regulation moves beyond simple transparency, demanding clear, comprehensive, and standardized data from across the corporate landscape. However, the regulatory environment is rapidly evolving.

Following the final adoption of the Omnibus Law on December 16, 2025, the legal scope has been significantly tightened to focus primarily on Europe’s largest economic players. More than just a compliance hurdle or a bureaucratic requirement, the CSRD acts as a strategic catalyst, urging companies to fundamentally rethink their business models and embrace a genuine, integrated culture of sustainability.

From NFRD to CSRD: setting the record straight

The journey toward mandatory transparency did not start today. Since 2014, large European companies have been required to include a non-financial statement in their annual management reports under the NFRD (Non-Financial Reporting Directive). The primary objective of the NFRD was to keep the public and various stakeholders informed about the impact of corporate activities on the environment, anti-corruption efforts, and the respect for human rights. In France, this directive was transposed into national law in 2017 with the creation of the DPEF (Déclaration de Performance Extra-Financière).

However, as the years passed, the limitations of these early frameworks became increasingly apparent. The reports produced under the NFRD and DPEF were often criticized for being unreliable, fragmented, and notoriously difficult to compare between different companies or sectors. They simply did not match the scale of Europe’s climate and social ambitions. To address these shortcomings, the CSRD was designed to replace the NFRD.

While the initial vision for the CSRD was to massively expand the number of companies subject to reporting, the strategic revision of late 2025 through the Omnibus Law operated a major pivot. It refocused high-precision reporting requirements on larger entities, specifically those exceeding the 1,000-employee threshold, to ensure data quality over quantity.

What exactly is the CSRD?

The Corporate Sustainability Reporting Directive establishes a new set of transparency standards regarding how companies interact with the world around them. As a central pillar of the European Green Deal, the directive is a key tool in the European Union’s mission to achieve carbon neutrality by 2050 and to limit global temperature rise to 1.5°C, in accordance with the Paris Agreement.

Under the CSRD, companies are mandated to publish exhaustive sustainability reports that cover their ESG (Environmental, Social, and Governance) performance in detail. These reports are expected to provide deep insights into:

• Greenhouse gas emissions, including the complex calculation of Scope 3 emissions whenever climate change is identified as a material risk or impact.

• Energy consumption and efficiency, detailing the transition toward renewable energy sources.

• Social factors, such as working conditions, employee health and safety, diversity, and inclusion within the workforce.

• Governance and ethics, including anti-corruption measures and the management of sustainability risks within the executive suite.

By standardizing these criteria, the directive seeks to dismantle the practice of greenwashing and provide investors with the tools to compare the sustainable performance of companies as easily as they compare financial results. The ultimate goal is to shift the economic paradigm so that a company’s ethical and environmental impact carries the same weight as its bottom line.

Where do we stand with implementation?

While the CSRD officially took effect in 2024, the landscape was significantly updated on December 16, 2025, when the European Parliament validated a revised text. Throughout 2025, EFRAG (the European Financial Reporting Advisory Group) worked to simplify the ESRS (European Sustainability Reporting Standards). This was done to reduce the overwhelming number of data points initially requested, focusing instead on the most impactful quantitative indicators.

The timeline for application has also been extended for many businesses. The "Stop-the-clock" Directive (EU) 2025/794, adopted in April 2025, introduced a two-year delay for several waves of reporting. For instance, reports for Wave 2 (large companies) and Wave 3 (listed SMEs) have been pushed back to 2028 and 2029, respectively. This additional time is intended to allow companies to strengthen their internal data collection processes and ensure the information they eventually publish is accurate and verifiable.

Which companies are subject to the CSRD?

The 2025 Omnibus Law significantly raised the thresholds for mandatory compliance, exempting thousands of smaller firms from the full burden of the law. Currently, the CSRD applies to large companies (whether listed on the stock exchange or not) that meet at least two of the following three conditions:

• A workforce of more than 1,000 employees (a major increase from the original 250-employee threshold).

• A net turnover exceeding €50 million.

• A total balance sheet of more than €25 million.

Companies that fall below the 1,000-employee mark are no longer legally required to produce a full, audited CSRD report. However, these firms are strongly encouraged to adopt the Voluntary Simplified Standard (VSME). This "light" version of the framework allows SMEs to remain competitive and transparent when dealing with banks or large corporate clients who may still require sustainability data for their own value chain reporting.

For listed SMEs (excluding micro-enterprises), reporting remains necessary if they meet two of these three specific criteria:

• Over 10 employees.

• Net turnover over €900,000.

• Total balance sheet over €450,000.

For these entities, the reporting deadline is now set for 2029, based on data collected throughout the year 2028. Furthermore, non-European companies with a significant presence in the EU (turnover exceeding €150 million) are also within the scope of these regulations.

Penalties for non-compliance

It is vital to remember that the CSRD is a European directive, meaning it must be transposed into the national law of each member state. In France, this was finalized and published in the Journal Officiel in December 2023. Even with the simplified thresholds of the Omnibus Law, the penalties for those who remain subject to the law (1,000+ employees) are significant:

• A fine of €3,750 for failing to publish the sustainability report or for providing inaccurate or incomplete information.

• Exclusion from public procurement tenders, which can represent a catastrophic commercial risk for many industries.

• Fines up to €30,000 and 2 years of imprisonment if the report is not audited.

• Fines up to €75,000 and 5 years of imprisonment for obstructing the work of auditors.

To ensure the "sincerity" of the data, the law requires that every sustainability report be verified by a statutory auditor or an independent third-party assurance provider.

What are the ESRS standards and how do they work?

The 12 ESRS standards serve as the technical backbone of the CSRD. These standards define exactly what must be reported and how. Throughout 2025, EFRAG received a specific mandate to simplify these standards, which included pausing the development of complex sector-specific norms in favor of a more streamlined approach.

The ESRS are built on the principle of "double materiality." This requires companies to report not only on how sustainability issues (like climate change or resource scarcity) affect their business performance but also on how the company’s own operations affect people and the planet. Within this framework, the calculation of Scope 3 (indirect emissions) remains a vital pillar. If a company identifies climate change as a "material" issue, it must account for the carbon footprint of its entire value chain, from suppliers to product end-of-life.

How will the CSRD impact your business strategy?

The regulatory adjustments of late 2025 shifted the number of directly affected companies from 50,000 down to approximately 10,000. While fewer companies are legally bound, the level of data reliability expected from those 10,000 firms is now much higher. Double materiality remains the heart of the reporting process, determining exactly which information is relevant and which is not.

A major change introduced by the Omnibus Law is the simplification of "value chain" reporting. The law now limits the mandatory scope of data collection to reduce the burden on small suppliers who were being overwhelmed by requests from their larger clients. Nevertheless, for high-emission industries, precise data on Scope 3 will still be necessary to drive a successful and credible decarbonization strategy.

What is "double materiality"?

The concept of double materiality is the foundation of modern sustainability reporting. It requires a two-way assessment:

• Financial materiality ("outside-in"): Evaluating how environmental or social shifts—such as a carbon tax or a natural disaster—could impact the company’s financial health and future value.

• Impact materiality ("inside-out"): Measuring the external footprint of the company’s activities on the environment, local communities, and the global climate.

The 2025 Omnibus Law reinforced double materiality as the primary tool for simplification. It allows companies to skip reporting on indicators that are not "material" to their specific business, provided they can justify the decision, while maintaining total transparency on their most significant impacts.

How can your company prepare to the CSRD?

Preparation is the key to turning a regulatory obligation into a competitive advantage. Even for companies that are now excluded from the legal mandate (those with fewer than 1,000 employees), taking proactive steps is highly recommended:

• Assess current ESG performance against established indicators to identify gaps in data and strategy.

• Conduct a comprehensive carbon footprint analysis, covering Scopes 1, 2, and 3, to identify the most effective levers for emission reduction.

• Adopt the VSME voluntary standard to be ready for inquiries from banks, investors, or major corporate partners.

• Engage in transparent stakeholder dialogue to align the company’s sustainability goals with the expectations of the market and society.

How does the CSDDD complement the CSRD?

Beyond the CSRD, the European Union also finalized the Corporate Sustainability Due Diligence Directive (CSDDD) in 2024. This directive goes a step further by requiring very large companies to take concrete action to identify, prevent, and mitigate negative impacts on human rights and the environment. While both the CSRD and CSDDD saw their thresholds simplified in late 2025 to maintain market consistency, they remain the two essential pillars of European corporate responsibility.

Conclusion

The CSRD represents a definitive leap forward in corporate accountability. Despite the narrowed scope introduced by the 2025 Omnibus Law, the directive imposes rigorous and high-quality standards on the world's most influential companies. For these organizations, the CSRD should not be viewed as a mere constraint, but as a strategic lever for innovation. By improving transparency and data quality, companies can enhance their reputation, attract sustainable investment, and play a leading role in the transition toward a more responsible and resilient global economy.