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CSRD: A guide to the Corporate Sustainability Reporting Directive

Updated: Nov 29

In 2022, the European Commission, the European Council and the European Parliament reached an agreement on a new directive, the Corporate Sustainability Reporting Directive (CSRD), on the publication of non-financial information by companies: a proposal that aims to more transparency in environmental and societal sustainability of companies. A review of the history of non-financial reporting leading up to this recent directive can provide a better understanding of the issues at stake.

Extra-financial reporting, NFRD, CSRD: an update on the subject

Extra-financial reporting, also known as non-financial reporting, refers to the practice of disclosing information about a company's social, environmental, and ethical performance. This type of reporting is becoming increasingly important as consumers, investors, and other stakeholders demand greater transparency and accountability from companies.

Since 2014, European companies are required to include a non-financial statement in their annual management reports. This reporting obligation, the NFRD (Non Financial Reporting Directive), aims to inform the public and various stakeholders about the impact of the company's activities on the environment, the fight against corruption and the respect of human rights. French law transposed this European directive in 2017, with the introduction of the DPEF, extra-financial performance declaration. However, the extra-financial reporting provided as a result of these measures has revealed the shortcomings of the first directives: unreliable and difficult to compare, they do not meet Europe's ambitions in terms of environmental and social responsibility. It is these shortcomings that the new 2022 directive aims to address. The CSRD (Corporate Sustainability Reporting Directive), a new reporting tool that follows on from the NFRD, extending its scope and strengthening its requirements.

Overall, extra-financial reporting is an important area of focus for companies operating in the EU, as they seek to meet the growing demand for transparency and accountability.

What is the Corporate Sustainability Reporting Directive (CSRD)?

The corporate sustainability reporting directive is a directive issued by the European Commission that requires certain companies operating in the European Union to disclose information about their environmental and social impacts, as well as their efforts to address any adverse impacts. The goal of the directive is to promote greater transparency and accountability in the corporate sector, and to encourage companies to take a more proactive approach to sustainability, avoiding greenwashing. By providing investors and other stakeholders with information about a company's sustainability performance, the directive aims to help drive the transition towards a more sustainable and socially responsible economy.

Which companies will be subject to the CSRD?

The CSRD extends the obligation of extra-financial reporting to new companies: the new requirements will thus apply to large companies, whether listed or not, that meet two of the following three conditions:

  • More than 250 employees

  • Net turnover total exceeding 50 million euros

  • Total balance sheet exceeding 25 million euros

Listed SMEs - Small and medium-sized enterprises - (excluding micro-companies with less than 10 employees) are also concerned by the publication of sustainability information, as long as they meet two of the following three conditions:

  • More than 10 employees

  • Net turnover total exceeding 900,000 euros

  • Total balance sheet exceeding 450,000 euros

However, the European Commission is considering a simplified reporting obligation for listed SMEs.

In addition, the reporting rules set by the new directive will also apply to non-EU companies operating within the EU. If a non-European company has a subsidiary or a branch in the EU with an annual turnover of more than 150 million euros, the company will have to provide information on its socio-environmental impacts.

Regulations and application of the CSRD: where do we stand?

In December 2022, the European Council provided its final approval to the CSRD. Members’ countries now have 18 months to implement the new rules.

The implementation of the CSRD is scheduled for 2024. The exact modalities for the presentation of information by companies have not yet been determined. The new non-financial standards are being developed by EFRAG (European Financial Reporting Advisory Group), the advisory group that has been advising the European Commission on the development and adoption of International Financial Reporting Standards (IFRS) for the past 20 years.

The CSRD implementation schedule also provides for a later application of the new reporting obligations for listed European SMEs. The reference year is set at 2026, which may be postponed to 2028 if justified in the reporting.


On November 10, 2022, the European Parliament adopted by a large majority the text concerning the implementation of the CSRD. The EU Council also gave its final approval to the directive at the end of November 2022.

What are the ESRS (European Sustainability Reporting Standards)?

The CSRD directive envisions the establishment of European standards, known as the European Sustainability Reporting Standards (ESRS), which constitute a set of 12 norms that companies will use to report their sustainability-related information. The ESRS were developed by the European Financial Reporting Advisory Group (EFRAG). These standards were proposed in November 2022 and were subjected to a public consultation.

Currently in the project phase, the ESRS are designed to ensure that sustainability information complies with the CSRD, by providing a standardized format that facilitates the comparison of companies' performance across various sectors of activity. These standards encompass all information that might be relevant to companies, regardless of the sector in which they operate.


The EFRAG website provides all the necessary information, including explanatory videos for each of the 12 disclosure requirements.

What impact will the CSRD have on companies?

In the long term, approximately 50,000 companies will be required to inform the public and stakeholders (shareholders, partners, and consumers) about the impact of their activities on the planet and human rights (compared to 11,700 with the current European legislation). The development of common standards will enhance the reliability and evaluation of non-financial information. Increased transparency can be demanded from subsidiaries that implement different processes from others, particularly in the case of high carbon emitters or companies with a risky raw materials procurement policy. More precise data may be necessary for certification in such cases. The concept of "double materiality", which encompasses both the company's impacts on the environment and society and the external risks and opportunities related to sustainability, will be a key aspect of reporting.

The systematization of independent auditing is one of the most notable changes for companies, as they will be compelled to demonstrate greater rigor in their reporting and a higher level of sincerity in their CSR commitments.

What does the principle of "double materiality" mean in the context of the CSRD?

The concept of double materiality is an approach aimed at expanding the scope of non-financial reporting by considering both the impacts of a company's activities on sustainable development issues and the repercussions of these issues on the company itself.

Double materiality requires a comprehensive assessment of the impact of deteriorating societal and environmental conditions on a company's operations, while also measuring the company's impact on these same conditions. This involves a cause-and-effect relationship, where companies need to account for not only the impact of their activities on sustainable development issues (the "outside-in" perspective) but also the negative and positive impacts on society and the environment (the "inside-out" perspective).

By emphasizing double materiality, the CSRD encourages companies to consider both their internal interests and the external issues surrounding them. This enables them to gain a more comprehensive understanding of their organization, activities, and role in a broader context. By holistically evaluating environmental, social, and financial risks, opportunities, and impacts, companies can better manage their sustainable performance and enhance their legitimacy with stakeholders.

Strengthened obligations and new directives to come

After the 2022 CSRD directive on extra-financial reporting, the European authorities are working on a directive on corporate sustainability due diligence, which should complete the arsenal put in place to mitigate the negative impact of economic activities on human rights (exploitation of workers, child labor) and on the environment (loss of biodiversity, pollution, etc).

In conclusion

The CSRD thus marks a turning point in the climate commitment of many companies by expanding the existing Non-Financial Reporting Directive (NFRD). The CSRD will strengthen the transparency and accountability requirements for companies in the area of sustainability, requiring them to publish more detailed information on their environmental, social and governance (ESG) performance and to provide consistent, comparable and verifiable data.

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