The Corporate Sustainability Reporting Directive (CSRD) is transforming how companies approach sustainability reporting. Introduced by the European Union, the CSRD sets a new standard for transparency and accountability in corporate environmental, social, and governance (ESG) disclosures. This blog will walk you through the key aspects of the CSRD report, its requirements, and how to approach compliance efficiently with 5 actionable tips.
The CSRD is a European Union directive aimed at enhancing and standardizing sustainability reporting across member states. It builds on the Non-Financial Reporting Directive (NFRD) but expands its scope, requiring more companies to report on their sustainability efforts in greater detail.
The goal is, for companies, to standardise ESG reporting towards stakeholders, including investors, regulators, and the public, with more reliability and easier comparability.
The CSRD applies to a wide range of organizations, including large companies, listed SMEs, and even some non-EU firms with significant operations in the EU.
In addition to the companies already subject to the NFRD, most will be classified as "large companies." A large company is defined as meeting at least two of the following three criteria:
Non-EU companies with a significant business in the EU will also need to report.
Under the CSRD, companies must publish an annual sustainability report alongside their financial statements. A key feature of the directive is the requirement to digitally tag the report in a machine-readable format, which will come into effect as of FY25 with reports published in 2026.
The scope of the report is vast, encompassing approximately 1,200 data points. Notably, 70% of these are qualitative, with some considered optional during the first phase of implementation. The Double Materiality Assessment (DMA) will help narrow the scope of required data points for reporting.
The cost of non-compliance can be steep, leading to penalties, reputational damage, and strained relationships with investors and regulators.
The scope of the CSRD report is vast, covering around 1,200 data points, with approximately 70% being qualitative.
Discover 5 best practices to better prepare for your CSRD journey.
A core requirement of the CSRD is the Double Materiality Assessment (DMA). It's the process used to determine the reporting scope for mandatory ESG disclosures across 10 topical standards. These 10 chapters are only required for reporting if deemed material through the DMA process. The DMA assists companies in identifying impacts, risks, and opportunities (IROs) related to these topics, evaluating them from both an outside-in and inside-out perspective.
The DMA ensures that companies focus on the issues most relevant to their business and stakeholders. By identifying material impacts, risks and opportunities, businesses can align their sustainability efforts with their overall strategy, thus making their reporting not just a compliance exercise but a strategic advantage.
Learn more on how to conduct your DMA with our guide to pragmatic Double Materiality Assessment.
One common misconception is that the CSRD creates a long checklist of new requirements. In reality, most companies already have much of the necessary information, albeit in different formats.
Many companies already have much of the necessary policies, actions, and targets required for their CSRD report, especially those that have previously reported under frameworks like GRI, CDP, EcoVadis, or other sustainability reporting standards. These past efforts provide a strong foundation for CSRD compliance. The key is to collect all relevant environmental, social, and governance-related plans, actions, and targets you've already established. By organizing this information, you can create a coherent narrative of your sustainability journey.
Scope of Disclosure
Start with the minimum disclosure requirements based on your materiality assessment. This allows you to focus on the most critical issues and avoid overwhelming your team with unnecessary data collection.
The CSRD introduces a phase-in period and optional reporting requirements to help companies gradually implement the new reporting standards. Larger companies will report first, followed by smaller ones. Companies can choose which information to report and may be exempt under certain circumstances. This approach aims to reduce the initial burden on companies and ensure a smooth transition to the new reporting regime.
Structured Data-Point Reporting
Avoid jumping straight into writing a full narrative as if drafting chapters for an annual report. Instead, organize your information according to the data points outlined by the European Sustainability Reporting Standard (ESRS), the CSRD’s reporting framework. This structured approach will make future updates and audits much more efficient.
Be sure to clearly indicate which requirements have been fully or partially met, and explain any data points where information is missing or incomplete, as you’ll need to report on all of this.
It’s essential to understand that no organization will be able to address every requirement immediately, and that’s okay. Prioritize gaps based on their strategic importance to your business and your stakeholders. Some gaps may require immediate attention, while others can be tackled over time.
You can also use insights from your DMA and stakeholder feedback to prioritize which gaps to address first. For any data points you are not currently covering and won’t be reporting on yet, be sure to mention this in the report and provide a timeline for when you expect to include them.
Ensuring compliance with the CSRD is not just about meeting the reporting deadlines—it’s about establishing a robust internal framework that supports sustainability reporting long-term.
Independent Assurance
Work closely with your auditor to obtain independent assurance on your sustainability data. Auditors will focus on different aspects than your internal team, so early collaboration will help streamline the audit process.
Ensure that audit efforts are well-managed, as the CSRD requires limited assurance from your auditor. However, this does not mean the same level of scrutiny as a financial audit is needed. We recommend engaging in open dialogue with your auditor to avoid unnecessary work and fees.
Internal Controls and Governance
Incorporating CSRD requirements into your reporting cycle will require careful planning, as it will likely add 100-200 pages to your report. Engage different teams, including senior management, early in the process to ensure sufficient time and resources are allocated for publishing the report alongside the financials. This early involvement will help ensure smooth coordination and timely completion.
Staying Updated on CSRD Developments
CSRD requirements are expected to evolve over time, so staying informed about regulatory changes is essential. Establish an internal team or designate a compliance officer to monitor these developments.
Want to know how to ensure compliance for your CSRD report? Watch our previous webinar.
Navigating the CSRD can be challenging, but with the right strategies in place, it becomes an opportunity to showcase your company’s sustainability leadership. By conducting a thorough DMA, leveraging existing data, prioritizing gaps, and embracing technology, businesses can turn compliance into a strategic advantage.
Keep in mind that CSRD reporting is a journey, and it’s okay not to have all the answers right away—what matters most is committing to continuous improvement and transparency.
ESG managers are facing a daunting challenge: navigating the complex landscape of climate urgency and stringent EU regulations like the CSRD. While the stakes are higher than ever, these professionals are often overwhelmed by compliance tasks, limiting their ability to drive meaningful ESG impact.
Karomia addresses these challenges by empowering managers to fast-track CSRD reporting without a large reporting team. With the latest evolutions in AI and large-language models, clients complete each ESRS topic in 5 days using the platform, compared to 30+ days with other methods. By significantly reducing administrative burdens, Karomia enables businesses to focus on driving real sustainable impact.
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