As of January 1, 2024, the European Union’s CSRD has introduced a new era of formalized sustainability reporting, requiring thousands of companies — including many based in the U.S. — to disclose their climate and sustainability impacts under the European Sustainability Reporting Standards (ESRS). With independent assurance now a key requirement, companies must adapt quickly to meet these robust demands.

However, the regulatory landscape is shifting again. The European Commission has proposed amendments to the CSRD, aiming to reduce the reporting burden on companies and extend compliance timelines. While these changes are not yet law, they signal a likely shift in the months ahead.

In this comprehensive guide, we’ll break down what CSRD means, who it applies to, and how companies can turn compliance into an opportunity for growth and leadership in sustainability.

What is CSRD?

CSRD is a regulatory framework designed to standardize and strengthen sustainability reporting across the EU. Building on its predecessor, the Non-Financial Reporting Directive (NFRD), CSRD applies to more companies, introduces stricter disclosure requirements, and mandates independent assurance.

Key elements of CSRD include:

• Scope and timing: The recent proposal narrows the scope, applying CSRD only to EU companies with more than 1,000 employees, while the previous financial thresholds continue to apply. As a result, around 80% of companies initially expected to be in scope will now be excluded.
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• Delayed reporting timelines: For companies not classified as public-interest entities, the Commission proposes a two-year delay in reporting obligations. This means wave 2 and 3 companies (those originally set to report in 2026 and 2027) would now have until 2028 and 2029, respectively.
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• Increased threshold for non-EU companies: Non-EU companies will only need to report if they generate €450M or more in EU turnover (up from €150M), starting in 2029.
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• Double materiality: Companies must still assess and disclose how sustainability topics impact their business (financial materiality) and how their business impacts people, the environment, and the economy (impact materiality), although simplified materiality guidance is expected.
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• Assurance: Limited assurance remains the requirement moving forward. The proposal removes the previous plan to increase this to reasonable assurance by 2028.
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• Climate mitigation goals: Companies must outline strategies for achieving climate neutrality by 2050, including science-based targets and progress tracking.

Read more: How to get CSRD ready today

Does CSRD apply to your company?

The CSRD’s scope is far-reaching. It affects not only EU-based companies but also non-EU organizations that meet certain criteria. At least 10,000 companies outside the EU, including approximately 3,000 U.S.-based companies, are expected to fall under its requirements.

You may need to comply with CSRD if your company:

• Has EU subsidiaries with more than 1,000 employees (previous financial thresholds still apply).
• Generates more than €450M in EU turnover (up from €150M) and has at least one EU subsidiary or branch meeting certain criteria.
• Is listed on an EU-regulated market.

To determine applicability, consult with your legal team to assess your company’s status and the relevant implementation phase.

‍Reporting Timelines

The CSRD requirements will roll out in phases, but the proposed amendments delay the compliance timeline for many companies.

Updated CSRD timeline based on the proposal:

• 2025 (FY 2024): EU companies already subject to NFRD.
• 2026 (FY 2025): Large EU companies and subsidiaries meeting size criteria.
• 2028 (FY 2027): Wave 2 companies (large, non-public-interest companies) originally scheduled for 2026.
• 2029 (FY 2028): Wave 3 companies (small and medium-sized enterprises and EU-listed entities) originally scheduled for 2027.
• 2029 (FY 2028): Non-EU companies with €450M+ in EU turnover (threshold raised from €150M).

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What are ESRS, and how do they relate to CSRD?

The European Sustainability Reporting Standards (ESRS) form the backbone of CSRD reporting. These standards are categorized under three pillars: Environment, Social, and Governance. The proposed amendments aim to reduce the number of mandatory data points and simplify the reporting process. Sector-specific ESRS will no longer be introduced.

Key disclosures under ESRS

• Environment: Covers climate change (e.g., Scope 1, 2, and 3 emissions), resource use, biodiversity, and circular economy practices.
  
  
• Social: Includes workforce metrics (e.g., employee turnover, health and safety) and community impacts.
  
  
• Governance: Focuses on ethical business conduct, anti-corruption, and governance structures.

For companies already using frameworks like GRI, SASB, or TCFD, ESRS aligns closely, making it easier to adapt existing reporting practices.

How does double materiality shape reporting?

Double materiality is a cornerstone of CSRD, requiring companies to assess sustainability topics from two perspectives:

1. Impact on business: Financial risks and opportunities arising from ESG issues.
   
   
2. Impact of business: The organization’s effect on stakeholders, the environment, and the economy.

While the double materiality assessment (DMA) remains, the Commission plans to simplify the process by providing clearer instructions on applying the materiality principle. This is intended to prevent over-reporting and unnecessary data collection.

‍Read more: Your top questions about double-materiality, answered 

Preparing for CSRD compliance

The shift to CSRD reporting demands significant organizational effort, but it also presents an opportunity to enhance transparency, build trust, and position your company as a sustainability leader.

Steps to get started

1. Engage leadership: Secure buy-in from executives and key stakeholders.
   
   
2. Conduct a double materiality assessment: Identify and prioritize sustainability topics based on financial and impact materiality.
   
   
3. Develop a reporting strategy: Align with frameworks like TCFD and GRI to streamline reporting processes.
   
   
4. Invest in data management: Ensure data is accurate, traceable, and reliable, particularly for climate disclosures.
   
   
5. Collaborate across functions: Build a cross-functional team to integrate reporting into broader business strategies.

‍Consequences of Non-Compliance

The consequences of non-compliance remain within the remit of member states. Fines, penalties, and exclusion from public contracts are still possible under national laws.

• France, for example, has introduced monetary fines, exclusion from public contracts, and criminal penalties for obstructing audits or failing to appoint an independent assurance provider.
• Germany enforces fines of up to €10M or 5% of annual revenue.

Climate risks and opportunities

While CSRD covers a wide range of ESG topics, climate change is a critical focus area. Companies must disclose their climate risks and opportunities, transition plans, and emissions data across all scopes. Reliable, assured data will be crucial for meeting these requirements.

Key actions for climate reporting

• Calculate Scope 1, 2, and 3 emissions.
  
  
• Develop science-based targets and transition plans.
  
  
• Establish internal carbon pricing mechanisms.

Why U.S.-based companies should prepare now

Even if your company isn’t directly subject to CSRD, the ripple effects will still impact you. EU-based customers may require emissions data or sustainability information as part of their own reporting obligations. Being proactive now can help you stay ahead of customer demands and future regulations.

Benefits of early preparation

• Competitive advantage: Meet customer and investor expectations with robust ESG strategies.
  
  
• Operational efficiency: Streamline data collection and reporting processes before they become mandatory.
  
  
• Reputation management: Demonstrate leadership in sustainability, fostering trust and loyalty.

Beyond compliance: turning CSRD into an opportunity

CSRD is more than a compliance exercise — it’s a chance to showcase your company’s commitment to sustainability. By aligning your strategy with the directive, you can drive meaningful change and unlock new opportunities.

‍How thinkPARALLAX Can Help

At thinkPARALLAX, we specialize in integrating sustainability strategy, reporting, and communications. Our team can help you:

• Conduct double materiality assessments.
  
  
• Align with frameworks like TCFD and GRI.
  
  
• Build robust data management systems.
  
  
• Develop compelling sustainability narratives.

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The Corporate Sustainability Reporting Directive marks a new chapter in corporate accountability. By acting now, companies can not only meet regulatory requirements but also lead the way in building a more sustainable future. Even with the proposed changes, companies that act early will be better positioned to meet evolving regulations and gain a competitive advantage. Whether you’re just beginning your CSRD journey or looking to refine your approach, thinkPARALLAX is here to guide you every step of the way.

‍Ready to get started? Contact us to learn how we can help your company navigate CSRD compliance and amplify your sustainability impact.

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