What is the CSRD? Your Guide to Corporate Sustainability Reporting Directive
CONTENTS
- Introduction: What is the CSRD?
- Who does the CSRD impact?
- What exactly needs to be reported under the CSRD?
- What are the key CSRD dates to be aware of?
- How to get ready for the CSRD
- How is the CSRD beneficial to businesses?
- What does this mean for carbon accounting?
- View The Standards Here
The new Corporate Sustainability Reporting Directive (CSRD) is a game-changer for businesses across Europe, setting a clear path toward greater transparency in sustainability efforts. Its aim is simple: to ensure companies report on their environmental and social impacts with the same rigour they apply to financial reporting.
By requiring businesses to disclose detailed information on their sustainability practices, the CSRD helps investors, customers, and stakeholders better understand a company’s impact on the world. This move towards transparency isn't just about ticking boxes; it’s about providing stakeholders with a holistic view of the risks and opportunities facing the business, allowing for robust decision making.
So, who does the CSRD actually impact?
Starting in 2025, companies not currently covered by the Non-Financial Reporting Directive (NFRD), but meet two out of three criteria - over 250 employees, €36 million in turnover, or €19 million in total assets - will need to follow the CSRD. This means they’ll be required to report their 2025 emissions in 2026.
The regulation also applies to companies listed on the stock exchange, and non-EU businesses generating more than €150 million in annual revenue within the EU. These companies will need to step up and meet the same reporting requirements.
What are the key CSRD dates to be aware of?
On January 1, 2025, larger companies not previously covered by the NFRD will start their reporting. SMEs will join the ranks on January 1, 2026, followed by third-country firms, who will be brought under the CSRD starting January 1, 2028.
What exactly needs to be reported under the CSRD?
Under the CSRD, companies will need to provide a more detailed and consistent look at their sustainability efforts. This includes reporting on key areas like environmental impact - covering things like greenhouse gas emissions, water use, and biodiversity. On the social side of business, it involves transparency around human rights, labour practices, and diversity. Governance measures are also in focus, with reporting on anti-corruption policies, board diversity, and executive pay.
Here’s a detailed breakdown of what businesses need to report under the CSRD:
- Greenhouse Gas Emissions:
- Scope 1: Direct emissions from company operations.
- Scope 2: Indirect emissions from energy use.
- Scope 3: Indirect emissions from the company’s supply chain and product lifecycle.
- Environmental Data:
- Impact on biodiversity, water use, pollution levels, and resource consumption.
- Social Factors:
- Workforce diversity, labour practices, and human rights policies.
- Governance Metrics:
- Business ethics, anti-corruption measures, and internal sustainability policies.
- Transition Plans:
- Emissions reduction goals and climate resilience strategies.
The CSRD, like the NFRD, also introduces the concept of “double materiality.” This means businesses will need to report both on how climate risks could impact them, and on how their activities affect the climate and society as a whole.
In the context of the CSRD, double materiality requires companies to assess and report in two key ways:
- Financial Materiality: Companies must disclose how sustainability issues, such as climate change or resource scarcity, impact their financial performance. This perspective is critical for investors and other financial stakeholders.
- Environmental and Social Materiality: Businesses must also report how their activities affect the environment and society. This encompasses emissions, biodiversity, human rights, and more, giving a clear view of the company’s impact on external stakeholders.
The importance of double materiality lies in its balanced approach, ensuring both financial and societal accountability. It pushes companies to consider not only risks to their business but also their broader responsibilities, offering transparency to all stakeholders, from investors to the public. This wider scope helps businesses align their operations with sustainability goals, making their strategies more resilient to future regulatory and environmental shifts.
How to get ready for the CSRD
To align with the new CSRD guidelines, companies need to establish a comprehensive emissions baseline covering Scope 1, 2, and 3 emissions. This baseline serves as a foundation for future decarbonisation efforts, allowing businesses to measure and manage their direct and indirect environmental impacts.
By tracking Scope 1 (direct emissions from company activities), Scope 2 (indirect emissions from purchased energy), and Scope 3 (all other indirect emissions, like those from supply chains), businesses gain a full view of their carbon footprint. Sumday’s carbon accounting software simplifies this essential process, guiding companies in setting accurate baselines that help meet regulatory standards and establish a roadmap for meaningful emissions reduction. Starting with this baseline enables businesses to track their progress year-over-year and stay CSRD-ready with ease.
Getting ready for the CSRD involves taking a few key steps to ensure your business is set up for compliance. Here’s a breakdown of what’s needed:
Governance
First, make sure your leadership team - board members, senior managers, and relevant committees - fully understand their responsibilities when it comes to CSRD compliance. This is especially important in areas like RSE (Responsibility, Sustainability, and Ethics), finance, and internal controls. It’s also a good idea to provide your team with training sessions to cover the basics of CSRD and how it applies to your industry.
Processes
Establish systems to gather and analyse key sustainability metrics such as greenhouse gas emissions, energy use, and water consumption. Be sure to update your processes to include Scope 3 emissions, ensuring you’re gathering data across the entire organisation, including affiliates. It’s essential to have strong internal controls in place to guarantee your data’s accuracy and reliability, potentially with the help of third-party audits.
Systems and Data
Create a solid strategy for sourcing sustainability data from across your business, and adapt it as needed as data quality improves. Make sure this data is integrated into your current systems - both for company-wide operations and ESG-specific reporting. Wherever possible, automate your data collection and reporting processes using climate tools to streamline the effort.
By preparing in these areas, your company will not only comply with the CSRD but also strengthen its sustainability efforts for long-term success.
Need help getting ready?
Sumday swims in its accounting and reporting lane, and we do it right. The CSRD will require more information than what you will produce in Sumday, we’ll nail your carbon accounting but we don’t pretend to do everything (that’s never a good idea). Happily our partners do - check out our advisor directory here for advisors who can assist you with preparing for the CSRD or let us know where your gaps are, we’ll help you cover them!
How is the CSRD beneficial to businesses?
Firstly, it will help companies simplify and make sustainability reporting more transparent, reducing their risk of greenwashing. Providing clearer sustainability data, it will assist with building trust with investors, customers and stakeholders.
CSRD reporting can also act in boosting your company’s credibility - by making climate reporting a part of business, it will push companies to adopt more sustainable practices, take real climate change action, and track progress towards in-house targets.
What does this mean for carbon accounting?
The CSRD is set to transform the way businesses approach carbon accounting. With sustainability no longer just a buzzword, but a regulatory necessity, companies will now be required to disclose not only their CO2 emissions, but their entire greenhouse gas (GHG) footprint using CO2 equivalents. This means capturing and reporting on a broader spectrum of emissions - across Scope 1, 2 and 3 - giving a more comprehensive view of the environmental impact of a company. For many companies, this will be their first time they fully dive into the full scope of their emissions.
With the concept of “double materiality” being introduced, it also means carbon accounting actually becomes an essential aspect of the CSRD. Carbon accounting will provide the data needed to make these assessments, and by using the Greenhouse Gas Protocol, companies can measure and report on emissions in a way that aligns with reporting requirements.
The CSRD is a major step forward for businesses, bringing much-needed transparency and accountability to sustainability reporting. It’s not just about ticking boxes—it’s about showing the world how your company is addressing the pressing challenges of climate change and social responsibility. With stricter reporting standards, businesses will need to provide a clearer picture of their environmental and social impact, from carbon emissions to human rights practices.
