Is your business ready for CSRD?

January 27, 2022

What is the CSRD and how will it affect your business?

With the new EU Corporate Sustainability Reporting Directive (CSRD), carbon data becomes a crucial reporting element: More businesses will be required to report more comprehensive and detailed information on sustainability. Learn what businesses should consider for their management reports and company activities from 2023 onwards.

A Climate Action Insights by Björn Bröskamp and Sibylle Simon

The Corporate Sustainability Reporting Directive is the EU´s new reporting guideline, set to replace the current Non-Financial Reporting Directive (NFRD). It was proposed by the EU Commission already last year and is expected to be applicable for the first time for the reporting of fiscal years beginning on or after 1 January 2023.

The new directive aims to significantly increase transparency in the field of sustainability. With it, more detailed reporting requirements will come into effect, making the CSRD an important element to be considered within a company´s management reporting and business activities: It is stricter in guidance and broader in scope, applying to four times more companies across the EU than the current NFRD. So, will your business also be bound to comply?

Who should be prepared for the new reporting?

The widened scope of the CSRD means that instead of around 11,600 entities that currently report their non-financial data, the new directive will ask nearly 50,000 businesses to report, with around 15,000 in Germany alone. Companies that fulfil at least two of the following three conditions will have to comply with CSRD:

CP Facts

Not only EU-based companies have to be aware. The CSRD conditions are also applicable for non-EU-based companies with subsidiaries in the EU and for companies that are not established in the EU but have securities on EU-regulated markets. This allows the directive to cover all respective business activities that take place within the EU.

However, the proposal does not impose new requirements on small and medium-sized enterprises (SMEs), except SMEs listed on EU regulated markets. For those, the Commission will adopt separate sustainability reporting standards. SMEs do not have to start reporting until three years after the effective date (i.e., 1 January 2026). They will be given a so-called “phasing-in-period" to consider the limited capacities and resources of the SMEs concerned and to allow them sufficient time to prepare for the first-time application of the requirements.

How to publish sustainability information

With the new CSRD in place, sustainability reporting will be a mandatory part of the management report – with a separate sustainability report no longer being option as with the NFRD now. This means: Sustainability is seen as a strategic element of a company´s business activities. This approach is greatly welcomed since it gives all sustainability topics the same platform as the financial reporting and no longer treats sustainability KPIs as measurements of a second class.

All relevant company information including information on sustainability activities will have to be published in the management report and must also be disclosed and accessible in a digital, machine-readable format.

CSRD reporting applies to all companies that fulfil the criteria mentioned before. A company is exempted from its publishing obligation only when it is party of a parent holding company and can refer to the holding’s report instead, provided that the holding’s report is in accordance with the EU reporting requirements. In that case, the exempted subsidiary company is required to publish the consolidated management report of the parent company reporting at group level. Also, it is required to include a reference in its own management report to the fact that the company in question is exempted from the requirements of the Directive. For all reporting companies, an external audit will be mandatory to provide assurance of the report.

What information needs to be disclosed

The current version of the CSRD only provides an overview of the topics that will need to be reported. A detailed version of the planned standards is currently under development of the European Financial Reporting Advisory Group (EFRAG). The goal is to include international reporting standards and existing sustainability reporting standards such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the CDP (former Carbon Disclosure Project) and multiple others in the development of the standard. Some of them also refer to the Greenhouse Gas Protocol. EFRAG plans to publish these reporting standards in October 2022, aligning it with other ongoing EU reporting initiatives such as the EU taxonomy.

The CSRD proposal wants the following ESG aspects to be considered in the development of the standards:

Table ESG

Although the aspects shown above cover a wide spectrum of general sustainability reporting topics, a focus on carbon accounting as part of the climate action criteria can be expected, as the published working paper “climate standard prototype” describes. The level of detail and KPIs that will be requested on these topics are currently being developed within the reporting guidelines.

Another new requirement of the CSRD is the principle of double materiality. This principle asks companies to report from two different perspectives: It needs to be reported how each sustainability aspect affects the company (the ‘outside-in’ perspective) and how each reporting aspect of the company affects people, stakeholder and the environment (the ‘inside-out’ perspective). With that, the comply-or-explain approach of the current NFRD will no longer be applicable.


As of early 2022, the CSRD is still a proposal. It has not been approved by the EU commission yet and has not been transformed into the jurisdiction of the EU countries. The EU timeline plans this transformation until December 2022. Also, the EU Sustainability Reporting Standards don’t exist yet and are estimated to be passed by October 2022. This all leads to the first reporting year of 2023 and a first CSRD compliant report in the year 2024.

However, the outlook is clear: Climate action and transparent reporting on any corporate measures will become mandatory elements of a company´s business. Additionally, it will help to drive climate action, increase trust and create a positive stimulus for all companies that want to take responsibility. As an element of several other regulative initiatives, CSRD also adds to clarity and increased recognition of a company´s commitment to climate action.

How to get support

Companies that fall under the CSRD reporting requirements can seek support with external reporting experts such as ClimatePartner for guidance on how to best comply. As carbon accounting is very likely to be a focus for the reporting, expertise in carbon data comes in handy. The various carbon footprint calculations for companies, products and services and their respective reports will be of use for the CSRD reporting. Developing a climate action strategy including goal setting for net-zero and/or science-based targets road mapping is important as strategies developed can also be embedded into CSRD-compliant sustainability reports. Moreover, we expect that the social impacts generated in  carbon offsetting projects can be leveraged for CSRD compliant reporting.