Corporate Sustainability Reporting Directive (CSRD)

According to this proposal, the CSRD obligation applies to companies with more than 1,000 employees and either a turnover of more than EUR 50 million or a balance sheet total of more than EUR 25 million.

The so-called "stop-the-clock" regulation postpones the entry into force of the reporting obligations for companies in the 2nd and 3rd waves, which would have to report for the 2025 and 2026 financial years according to the current CSRD, by two years.

The ESRS reporting standards are to be revised in such a way that the number of data points is to be reduced, unclear provisions are to be clarified and coherence with other legal provisions is to be improved.

Companies that are no longer required to report can voluntarily report based on simplified reporting standards that are yet to be developed – namely the standards for VSME developed by EFRAG. These standards also serve as a so-called "value chain cap": companies within the scope of the CSRD may only request this information from their suppliers.

In addition, the sector-specific standards and the transition in the level of auditing – from limited to reasonable assurance – will be deleted.

The Corporate Sustainability Reporting Directive (CSRD) replaces the previously valid Non-Financial Reporting Directive (NFRD) and expands the existing reporting obligation for non-financial reporting. It requires more detailed and comprehensive data with standardized key figures so that companies can publicly disclose clear and comparable information about the impacts, risks and opportunities associated with sustainability aspects. This information on sustainability must be published as part of the annual report. The CSRD thus puts the sustainability report on a par with the management report.

So far, the CSRD has been implemented by most EU member states.

Disclosure is based on the principle of double materiality and covers the areas of environment, social affairs and governance.
In addition to the previous content requirements of the NFRD's sustainability reporting, the following information must be included:

	Description of the business model and strategy in relation to sustainability aspects and stakeholder interests
	Process for selecting material topics (double materiality)
	Report on key sustainability issues including targets, planned measures and potential risks
	Extension of the system boundaries to the upstream and downstream value chain

The principle of double materiality is based on the consideration and categorization of sustainability aspects from two perspectives: the ecological and social perspective (impact of business activities on people and environment; inside-out perspective) and the financial perspective (importance of environmental issues for the company; outside-in perspective).
The rating as "essential" is based on a scale as part of a materiality analysis. The sustainability report according to CSRD must report on all topics that turn out to be significant in at least one of the two dimensions. Instead of just using the intersection of the two perspectives, as was done under the NFRD, the group of topics classified as essential is enlarged and provides more information. 

Investors and lenders will rely even more heavily on data from sustainability reports to make decisions in the future. Other stakeholders such as society, customers, and employees are also increasingly influencing the sustainable management of companies.

The CSRD requires the analysis, disclosure, and effective communication of material business activities and strategic backgrounds. Identifying and assessing sustainability-related impacts, risks, and opportunities provides an opportunity to capture their strategic importance, understand value drivers, and identify risks. Starting early lays the foundation for future developments, enables long-term resource planning, and allows for continuous feedback and improvement through stakeholder dialogue. The CSRD provides clear guidelines that can serve as a guide for a concrete action plan.