CSRD overview
Introduced: April 2021 (European Green Deal)
Effective from: January 2023
Last modified: April 2025 (scope revisions & timeline updates pending final adoption)
Region(s): European Union, applicable also to qualifying non-EU companies
About the CSRD
The Corporate Sustainability Reporting Directive (CSRD) mandates comprehensive sustainability reporting from EU-based companies and certain non-EU companies operating significantly within the EU. It introduces the “double materiality” concept, requiring businesses to report both how sustainability impacts their financial health and how their activities affect society and the environment.
The CSRD aims to standardize and improve transparency in sustainability disclosures, providing investors, regulators, and the public with reliable ESG information essential for meeting the EU’s goal of climate neutrality by 2050.
Criteria for compliance
EU companies
Must meet at least two of the following three criteria:
- Over 250 employees
- Net turnover exceeding €50 million
- Total assets above €25 million
Non-EU companies
Applicable if they generate over €150 million in annual turnover within the EU and have either:
- A large EU-based subsidiary, or
- An EU branch office with turnover exceeding €40 million
Note: Proposed April 2025 revisions may limit compliance primarily to companies with over 1,000 employees and increase turnover thresholds for non-EU entities.
Compliance timelines
FY 2024 (reporting in 2025)
Companies previously subject to NFRD (typically large listed companies, banks, insurers)
FY 2027 (reporting in 2028)
Other large EU companies not covered by NFRD
FY 2028 (reporting in 2029)
Listed SMEs and small financial institutions
FY 2028 (reporting in 2029)
Non-EU companies meeting turnover and presence criteria
Disclosure requirements
The European Sustainability Reporting Standards (ESRS) provide detailed guidance for sustainability disclosures under the CSRD. Key standards include:
General Standards (ESRS 1 & 2)
Governance, strategy, business model, risk management, metrics
Environmental (ESRS E1–E5)
- Climate change (Scope 1, 2, and 3 GHG emissions)
- Pollution, water management, biodiversity, circular economy
- Transition plans for achieving net-zero emissions
Social (ESRS S1–S4)
Workforce conditions, diversity, human rights in value chains, community engagement, consumer protection
Governance (ESRS G1)
Business ethics, anti-corruption measures, board diversity
Additional obligations
- Conduct double materiality assessments
- Integrate ESG disclosures into annual management reports (machine-readable digital format)
- Report annually on sustainability targets, metrics, progress, and climate-related risk management
Third-party auditing
- Limited assurance mandatory from the first reporting year
- Reasonable assurance anticipated in subsequent phases
- Assurance validates ESRS compliance, materiality assessments, and data integrity
Penalties for noncompliance
Each EU Member State determines specific penalties, typically including:
- Substantial fines based on company size or turnover
- Public disclosure of noncompliance
- Potential legal and reputational consequences
