Your top questions about the CSRD regulation, answered

Nicole Lambert

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December 14, 2023

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4 min read

In July 2023, the European Commission officially adopted the first set of disclosure standards to be used by companies that fall under Corporate Sustainability Reporting Directive (CSRD) regulation. So what is the CSRD? Does your company have to comply? If so, when? We have the answers to your frequently asked questions.

What is the CSRD?

The Corporate Sustainability Reporting Directive, or CSRD, is a set of sustainability reporting requirements adopted by the European Commision officially in July 2023. The legislation includes requirements and guidance on:

Disclosure: Required and voluntary reporting on general set of environmental, social and governance topics
Materiality: double materiality approaches that consider financial and broader impact on people, the environment, and the economy (learn more in our recent double materiality FAQ)
Reporting scope and boundaries: Upstream and downstream value chain (including direct and indirect relationships)
Sustainability due diligence: Description of company’s due diligence process regarding sustainability (to be separately negotiated and detailed by the EU)
Assurance: Limited assurance (e.g., assurance of the processes to ensure compliance with disclosure requirements), with reasonable assurance to follow, possibly as early as 2028
Climate mitigation: climate neutrality by 2050 strategy, science-based targets (SBTs) and progress toward targets

My company isn’t based in the EU. Will we still have to comply with the CSRD?

Maybe. At least 10,000 companies outside of the EU are expected to be required to report in alignment with CSRD regulations (including approximately 3,000 US-based companies). For companies based outside of the EU, factors like having EU-based subsidiaries or employees, or being listed on an EU-regulated market will necessitate reporting. Ultimately, your legal team will need to carefully review the scope of the CSRD legislation and determine if it applies to your company, and if so, which phase of implementation applies to you.

‍When will companies be required to report?

CSRD requirements are phased in over several years for EU and non-EU companies. Companies will need to meet general required disclosures over the next five years. Currently, there are proposals to delay sector-specific Standards and reporting of some non-EU companies by at least two years.

2025 (FY 2024 data)	2026 (FY 2025 data)	2027 (FY 2026 data)	2028 (FY 2027 data)
EU companies already subject to Non-Financial Reporting Directive (NFRD) Large, public interest, EU listed companies with at least 500 employees	Large EU listed and EU subsidiaries meeting at least 2 out of 3 criteria: ≥ 250 employees > €20m balance sheet > €40m turnover in EU	SME (Small & Medium Enterprises) EU listed subsidiaries	Non-EU parent & group companies with: > €150m net turnover generated in EU in each of last 2 FY and At least one subsidiary in the scope of CSRD (e.g., €40m net turnover large or listed EU subsidiary or branch)

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‍I have been hearing a lot about the ESRS, too. What is that and how does it relate to CSRD?

The European Sustainability Reporting Standards (ESRS) are a robust set of disclosures covering various environmental, social, and governance topics that companies required to report under CSRD will need to disclose in their sustainability reporting. There are two general, cross-cutting disclosures: ESRS 1 (general requirements on how to disclose) and ESRS 2 (general required disclosures). The disclosures are aligned under three broad pillars. See the table below for more information:

Pillar	Disclosure	Description
Environment	ESRS E1: Climate change ESRS E2: Pollution ESRS E3: Water and marine resources ESRS E4: Biodiversity and ecosystems ESRS E5: Resource use and the circular economy	- Scopes 1, 2, and 3 emissions - Energy use - Water consumption and withdrawal - Rates of recyclable content in product(s) and packaging - Policies, actions, and resources related to climate change, pollution, biodiversity, etc….
Social	ESRS S1: Own workforce ESRS S2: Workers in the value chain ESRS S3: Affected communities ESRS S4: Consumers and end users	- Workplace health and safety metrics (e.g., TRIR) - Employee turnover rates - Policies and actions related to human rights, non-discrimination, customer safety, etc…
Governance	ESRS G1: Business conduct	- Number of training hours on ethical business conduct - Political contributions - Policies, actions, and resources related to whistleblowers, anti-corruption, etc…

*Note: this is not an exhaustive list of all required disclosures; it is meant to provide a summary of key required disclosures.

Is there any overlap with other reporting frameworks that we might already be using (e.g., GRI, SASB, TCFD)? Are they all required? ‍

Yes. The environmental disclosures for ESRS share similarities with GRI, SASB, and TCFD. If you are already reporting your emissions and climate mitigation efforts in alignment with TCFD, GRI, or SASB, you are in a good position to start reporting on climate-related disclosures for ESRS. Similarly, the social and governance pillars of ESRS share a lot in common with the GRI Standards, including discussing actual and potential impacts of the business on people and being more transparent about human rights, workforce data (e.g., employee turnover, work-related injuries), and policies and training to ensure anti-corruption and ethical business practices.

Some disclosures are also voluntary (e.g., biodiversity transition plans, non-employee data, disclosures on non-material topics) and some disclosures will be phased in (e.g., anticipated financial effects and select data points from the “Own Workforce” disclosures may be omitted in the first reporting year).

For any other CSRD or reporting questions, reach out to us. We’re happy to help!

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