Already partially in force since January, It’s been the subject of discussion for some months now. But what exactly is CSRD? Above all, what does it really mean for the 50,000 European companies affected?

The Corporate Sustainability Reporting Directive (CSRD) is one of the texts emerging from Europe’s Green Deal relating to finance alongside the Taxonomy and SFDR Regulations plus the CSDDD(1), inter alia. It offers a structured analysis framework based on common standardised language in order to enhance company transparency in matters of sustainability covering every aspect: environment, climate, social and governance.

New standards and obligations have been set for non-financial reporting (see box). Based on three levels of information (cross-cutting, sectoral and corporate standards (2)), the data collected should allow better evaluation of the environmental impact of a company and its activities. This information must be certified by an independently accredited auditor or third party.

The European Sustainability Reporting Standards (ESRS)

Companies subject to the CSRD should perform their reporting in accordance with the standards drawn up by EFRAG, the European Financial Reporting Advisory Group. The 12 applicable standards include 2 cross-cutting standards (main principles and general information), 5 environmental standards (climate change, pollution, aquatic and marine resources, biodiversity & ecosystems, utilisation of resources & circular economy), 4 social standards (company employees, value chain workers, communities affected, consumers & end users) and one standard on the conduct of business (information on anti-corruption arrangements, ethics, supplier payment practice). Each company evaluates itself against the sustainability questions raised by these standards which are relevant to its own situation and value chain. For Pascal Durand, European Parliament Deputy Rapporteur for the Directive, it comes down to “real standards that apply to all”. We are therefore facing “a reporting rigour comparable with that for financial reporting.”

Please note: initially planned for June 2024, the adoption of sectoral standards is postponed to June 2026 with application to third-country companies by 2028 (decision passed by the European Parliament on 10 April). The sectoral standards are targeted at the following sectors: agriculture, livestock, fishing; coal and mines; energy and public services; food and drink; petroleum and gas; textiles, accessories, jewellery, shoes; motorised vehicles; road transport.


Harmonising European non-financial reporting practices

Overall, the CSRD aims to harmonise European non-financial reporting practices to make available reliable and comparable information on companies’ non-financial performance, resulting in a common framework with 1,200 entry points addressing the different impacts, risks and opportunities (IRO). Companies’ sustainability performance will then be clearly visible to investors as well as to civil society organisations, consumers and other stakeholders.


CSRD goes much further than the 2014 Transparency Directive, known as the NFRD (Non-Financial Reporting Directive), which has been in force since 2017. Companies cannot simply provide a statement describing their non-financial performance in their management reporting, but must clearly demonstrate how they are delivering it and what results are being achieved. On climate for example, they must set out their roadmap and the investments planned for each of the measures taken. This is a move away from simple declaration and a transformation in how performance is evaluated.


Double materiality, a core concept of CSRD

As well as more stringent reporting requirements and broader reach (now almost 50,000 companies, as against the mere 11,000 affected by NFRD, the Non-financial Reporting Directive), the CSRD rests on the principle of double materiality. Companies must properly evaluate how environmental and social issues affect their financial performance, as well as the impact of their activities on society and the environment. This is commonly referred to as financial materiality and impact materiality.


Two key points to take into account: the whole value chain…

CSRD aims to verify how human, societal and environmental rights are respected throughout a company’s entire value chain. The extent of policies implemented and of the different impacts on the company should therefore affect the entire company’s whole ecosystem and that of its suppliers.

… and the degree of stakeholder involvement

One indispensable condition is the need to actively involve the different stakeholders, including at the highest levels of the company: management board, executive committee, audit committee etc. This isn’t just wishful thinking, because the strategic framework is of great importance in this reporting.

Currently, companies often choose to take either a financial or a CSR direction to handle CSRD, but a combination of the two seems more appropriate given their complementary nature. This also helps foster a shared culture across all the company objectives.


Pathways to success

Undertaking a CSRD approach demands true project management. According to consultancy Des Enjeux et des Hommes (DEDH)(3) this requires a detailed needs analysis to be carried out at the start, which then allows the value chain to be understood, and ultimately the double materiality to be performed.

Management of a CSRD project goes through a fundamental needs an analysis stage: audit of the state of play (scope, CSR maturity, those to be involved, project aspirations etc.), training (administrators, executive committee, key personnel, contributors etc.), data collection (from whom?/ any existing tools etc.? (4)), human resources and available financing. Here, DEDH stresses the importance of having a leader with real influence and a cross-cutting and collaborative vision.

The phase of getting to grips with the value chain requires clear identification of the company’s activities, stakeholders and representative professions. Properly connecting the duty of care, risk mapping and double materiality is also a must. Note that if there is extensive responsibility for the value chain, this work should all be spread out over time (3 years), so allowing a progressive approach to be taken.

Finally, in terms of undertaking the double materiality, DEDH suggests taking an objective view, de-siloing and fleshing-out (cf. list of issues, scoring grid and appropriate threshold values, identification of impacts, risks and opportunities, consultation and scoring of these IRO, reporting). It recommends proceeding incrementally based on subject knowledge, emphasising the essential role of experts and stakeholders.


A chance for the company to change its model

Many view CSRD as a constraint. For those initiating the project however, the fact that it allows for work on organisational performance and resilience, and that it is based on double materiality, which simultaneously challenges today’s and tomorrow’s company, means that it presents an opportunity for businesses to adapt in order to respond to ever more strategic sustainability challenges and so ensure their long-term future. A sunset clause is scheduled for 2028.



1) European regulation (EU) 2019/2088 known as the Sustainable Finance Disclosure (SFDR) concerns the publication of sustainability-related information in the financial services sector. It was published in November 2019 and has been applicable since March 2021. Its standards came into force in January 2023. Regulation EU 2020/852 on Taxonomy established a unique classification system aimed at transparently distinguishing “green” investments from other investments. It was published in November 2020 and came into force the following March. It applies as from 1st January 2022. The CSDDD or CS3D Directive (Corporate Sustainability Due Diligence Directive) obligates large European companies to respect human, social and environmental rights throughout their value chain. Adopted by the European Parliament on 24 April 2024, it will come into force in 2027.

2) Those affected by the application of the CSRD in 2024 are large and listed companies, to be followed in 2025 by all companies. In 2026 this will affect listed SMEs, credit institutions and captive insurance companies (i.e. belonging to an industrial or commercial company whose own activity is not insurance), and in 2028 non-European companies with subsidiaries.

3) Cf. webinar “CSRD: toward transformation of strategic directions” organised in mid-April with Comité 21.

4) By way of example, the Watershed company developed software enabling companies to collect and manage their ESG data. This Watershed for CSRD encompasses over 1,100 Directive indicators.

To find out more:

On 15 May, the Global Reporting Initiative (GRI), Pascal Durand MEP and CSRD rapporteur, and Groupe Lefebvre – Sarrut published the ‘CSRD Essentials’ guide, which simplifies the key aspects of the new directive. Aimed at political decision-makers and journalists specialising in sustainable development, the guide comprises eleven main briefings explaining the CSRD in an accessible way.


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