Corporate Sustainability Reporting Directive (CSRD) explained

The Corporate Sustainability Reporting Directive has fundamentally changed what large organisations are expected to disclose. Where sustainability reporting was once voluntary and framework-dependent, the CSRD introduces mandatory, standardised corporate sustainability reporting for a growing group of companies, backed by external assurance requirements.

For many finance and sustainability teams, the question is no longer whether to comply, but how to do it consistently, efficiently and in a way that holds up under scrutiny.

THE IMPORTANCE OF CSRD

The CSRD replaces the current Non-Financial Reporting Directive (NFRD) and is part of the EU’s Sustainable Finance Action Plan, which aims to promote sustainable investment and ensure that capital flows towards sustainable activities. All large EU-listed companies are required to report on ESG in accordance with the Corporate Sustainability Reporting Directive as of 1 January 2024. Large companies have to comply from 2025 and from 2026, small and medium-sized EU-listed companies will have to adhere to the directive.

CSRD AND EFRAG’S ESRS

The CSRD requires the use of the European Sustainability Reporting Standards as a reporting system for sustainability reporting. The ESRS will be prepared by the European Financial Reporting Advisory Group (EFRAG).

The following six concepts have been defined by EFRAG to realise sustainability reporting operationalised through conceptual guidelines.

Double materiality. This provides criteria for determining which sustainability information should be included in the company’s report. “Double” refers to both the potential financial impact on the company as a result of sustainability risks and opportunities (outside in or financial materiality), and the impact of the company on people and the planet (inside out or impact materiality);
Quality of information: Defines the necessary characteristics of reported sustainability information, namely: (i) relevance, (ii) faithful representation, (iii) comparability, (iv) understandability and (v)reliability/verifiability;
Levels and boundaries of reporting: Double materiality should be applied to different levels of reporting. The financial materiality of a sustainability matter is not constrained to matters that are within the control of the reporting entity. Likewise, the materiality of an entity’s impact on a sustainability matter is not limited to matters within the direct control of a reporting entity;
Connectivity. All dimensions of corporate reporting (sustainability and financial) need to be connected under an integrated approach;
Retrospective and forward-looking information: Assessing sustainability targets and indicators and progress towards achieving them;
Public good: Providing the required standards for alignment and consistency between EU reporting standards and public policy agreements, goals, frameworks and regulations.

THE ARCHITECTURE OF SUSTAINABILITY REPORTING

The sustainability reporting architecture is based on:

Three layers of reporting: sector-agnostic, sector-specific and entity-specific;
Three reporting areas: strategy, implementation and performance measurement;
Three topics: Environmental, Social and Governance.

ESRS GUIDELINES

The ESRS drafts the following sustainability topics to report on:

Cross-cutting standards:

Draft ESRS 1 General requirements
Draft ESRS 2 General disclosures

Topical standards:

Environment:

Draft ESRS E1 Climate change
Draft ESRS E2 Pollution
Draft ESRS E3 Water and marine resources
Draft ESRS E4 Biodiversity and ecosystems
Draft ESRS E5 Resources and circular economy

Social:

Draft ESRS S1 Own workforce
Draft ESRS S2 Workers in the value chain
Draft ESRS S3 Affected communities
Draft ESRS S4 Customers and end-users

Governance:

Draft ESRS G1 Business conduct

HOW TO REPORT UNDER CSRD?

The CSRD requires companies to prepare their report in XHTML format (ESEF Regulation), as the reported information must be easily accessible to investors and other stakeholders in the European Single Access Point (ESAP) database. Companies are therefore required to tag their reported sustainability information according to a new digital categorisation system.

ESG must be reported on in the management report rather than in a separate sustainability report. As a result, financial and sustainability information will be disclosed at the same time.

PREPARING FOR CSRD COMPLIANCE

The CSRD requires limited assurance to be provided on the ESG information reported. This makes CSRD audit readiness a practical priority — not just a year-end concern. To ensure corporate sustainability reporting is accurate and on time, the following steps are essential:

Understand the requirements. Analyse the CSRD guidelines and identify areas where additional data or disclosures may be required for your specific organisation.

Conduct an ESG materiality assessment. Identify the sustainability issues most relevant to your business and stakeholders, following the double materiality principle.

Set up an ESG information system. Collect environmental data on the products you purchase and feed this into your own measurements. All reporting and data collection needs to be robust, transparent and verifiable.

Establish internal reporting systems. Build systems that generate accurate and reliable data in a consistent format, with appropriate controls for data privacy and security.

Engage with stakeholders. Understand their expectations and gather feedback on your sustainability performance to inform what is included in your annual report.

Develop reporting protocols. Create processes for gathering, validating and reporting data, as well as procedures for meeting reporting deadlines and other regulatory requirements.

Set up CSRD documentation. A structured ESG manual provides guidance and instructions for the collection, analysis and reporting of ESG data. It ensures the process is consistent, transparent and ready for CSRD audit review. Employees are informed of requirements and can be held accountable.

Monitor and report on progress. Report on your sustainability strategy, governance and risk management, as well as performance against relevant sustainability metrics and targets.

HOW FIDUGIUS SUPPORTS CSRD COMPLIANCE

Getting CSRD documentation in order is one of the most practical steps an organisation can take to prepare for corporate sustainability reporting at scale. That means moving beyond scattered spreadsheets and policies, towards a structured, searchable knowledge environment where everyone involved in ESG data collection works from the same definitions, methodologies and responsibilities.

The Fidugius ESG Reporting Manual is built specifically for this purpose. It centralises your CSRD guidelines, KPI definitions, accounting treatments and reporting responsibilities in one platform, structured to support consistent reporting across entities and ready for external CSRD audit review.

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