,The EU adopted the Corporate Sustainability Reporting Directive (CSRD) in November 2022. It will replace the Non-Financial Reporting Directive (NFRD) and changes the way companies must publicly disclose adequate information about the risks, opportunities and impacts of their activities on people and the environment (also known as ESG data).

All large and medium companies will be accountable for their impact on societies, people and the environment throughout their value-chains. ESG data quality, consistency and credibility will be improved, allowing capital flow into sustainable projects.

The Purpose

The CSRD aims to ensure that companies publicly disclose adequate information about the risks, opportunities and impacts of their activities on people and the environment, (i.e. principle of double materiality, including impact and financial materiality), taking responsibility for their value-chains.

What is new

  • Depth & width and control of non- financial reporting
  • Double materiality is now becoming the basis for sustainability disclosures; refers to a company’s main sustainability risks, impact on the people affected, surrounding societies, and the environment, as well as financial impact.
  • Forward-looking information — including sustainability goals, KPIs and incentives on managerial personnel
  • Information relating to their governance including the management of principle ESG (Environment, Social, Governance) risks
  • Digital database reporting with tagged ESG data


All companies where at least 2 of the below-mentioned are applicable must comply by FY 2024

  • Revenue > 40m€
  • Total Assets > 20m €
  • > 250 Employees

All companies with listed securities on EU regulated markets (except micro undertakings).

Listed SMEs (10-250 employees)

Non-EU companies listed on the EU regulated markets

Exemption for subsidiaries when (non) EU parent undertaking complies with the obligation

Potential risks if failing to comply with CSRD after 2025:

  • Qualified audit report
  • Impaired credit rating
  • Not meeting criteria for Green nor Social Bonds
  • Not meeting the demand for being listed/Delisting from regulated market
  • Non-eligible party to tender, especially apparent for large cost- intensive project where external/institutional capital, like banks, public bonds are potentially investing.
  • Denied submitting tenders to state, municipalities, and county councils
  • Fines

European Union Sustainability Reporting Standards (ESRS)


The Corporate Sustainability Reporting Directive (CSRD) extends the scope and reporting requirements of the already existing Non-Financial Reporting Directive, a regulatory framework that requires sizeable public interest entities to report on their sustainability performance since 2018. In addition to CSRD there is also the European Union Sustainability Reporting Standards (ESRS). The ESRS are designed to make corporate sustainability and environmental social governance (ESG) reporting within the EU more accurate, common, consistent, comparable, and standardised, just like financial accounting and reporting.

The ESRS, a key provision of the EU Corporate Sustainability Reporting Directive (CSRD), will apply to all companies where at least 2 of the below-mentioned are applicable:

  • More than 250 employees
  • More than €40M in annual revenue
  • More than €20M in total assets
  • Publicly-listed equities and more than 10 employees or €20M in revenue

Any EU company that meets these criteria is required to file an annual report using the final ESRS guidelines, including disclosure of how sustainability influences their business, as well as the company’s impact on people and the environment. The first annual report will be due in the beginning of 2025, reporting on the previous year starting from the 1st of January 2024.

The new directive brings sustainability reporting on par with financial reporting, and it amends four existing pieces of legislation: 

  • The Accounting Directive
  • The Transparency Directive
  • The Audit Directive
  • The Audit Regulation

All sustainability information that is reported must be verified by a third party. However, within the first few years limited assurance will be deemed sufficient. 

The ESRS are divided into four parts: 

  1. Cross-cutting standards ESRS 1 and ESRS 2 covering general principles, governance and materiality assessment disclosure requirements
  2. Environment
  3. Social
  4. Governance. 

Each part contains clear requirements on how and what to report regarding governance, strategy, targets, resource allocation, follow-up procedures and control mechanisms. This is all to be assessed and disclosed using double materiality.

The double materiality means that the undertaking company must investigate and disclose what impact the undertaker’s business have throughout the whole value chain in regards to material, both upstream and downstream. Companies also need to disclose the impact that different sustainable aspects have on their own business. Risk and opportunity mapping shall be done throughout the value chain. This is something all companies must legally conform to. 

Reporting in compliance with ESRS

The CSRD implies big changes within corporate reporting, but also within the overall business world. Companies, regulators, standard-setters, and auditors will all need to devote a significant amount of time and resources to increase their overall knowledge and prepare for the implementation of the directive — all within a very short timeframe. There will be certain expectations from businesses, including:

  • Disclosing more sustainability-related information about their business models, strategy, and value-chains (upstream and downstream)
  • Providing comparable information for investors to evaluate companies’ sustainability performance, using a harmonised standard
  • Visualise the relation between capital flow and sustainability performance
  • An overall transformation of the approach to the decision-making processes and how they communicate and secure involvement with their stakeholders

ESRS reports must cover environmental, social, and governance matters, including management commentary and data on a company’s:

  • Strategy and business model in relation to sustainability (Social and Environmental)
  • Governance and organisation in relation to sustainability
  • Materiality assessment process to select material ESG themes, topics, risks, and opportunities, including a description of the process to identify sustainability impacts, risks and opportunities and assess which ones are material
  • Sustainability and ESG performance implementation measures, covering policies, targets, actions and action plans, and allocation of resources
  • Performance metrics

Important to keep in mind when presenting the data:

  • The information shall display what impacts the undertaking has on the matters and how they affect the undertaking’s development, performance and position.
  • The term “impacts” refers to both the positive and negative sustainability-related effects that are connected with the undertaking’s business (this is identified through an impact materiality process).
  • The term “risks and opportunities” refers to the undertaking’s sustainability-related financial risks and opportunities (this is identified through a financial materiality assessment process).

Digital data and tagging

Companies must prepare their financial statements and management statement in XHTML format in accordance with the ESEF regulations and the EU sustainability taxonomy, then digitally ‘tag’ their reported sustainability information according to a digital categorisation system specified by the ESRS Regulation.

Third party assurance

Organisations reporting under ESRS will also be required to seek assurance of the sustainability information they disclose from a neutral, reliable and experienced third party who reviews the data. ’Limited’ assurance for the first three years and then ‘reasonable’ assurance after that point, which is more detailed. ’Limited’ assurance is less strict than a financial audit, but still requires working with a sustainability reporting partner organisation.

Similar to IFRS financial reporting standards

ESRS requires reported information to meet certain quality standards:

  • Relevance — Information must be topical and capable of making a difference to investor’s or reviewer’s decision-making under a double materiality approach
  • Faithful representation — Sustainability information should provide a complete, neutral, and accurate depiction of the information it’s intended to represent, including appropriate descriptions and explanations. Information should be presented as a neutral depiction without bias
  • Comparability — Sustainability information must be comparable to disclosures from other companies, as well as with the company’s prior reporting periods so that it can be compared over time
  • Verifiability — Sustainability information is verifiable if it is possible to corroborate the information itself or the data
  • Understandability — Sustainability information is understandable if it is clear and concise, while enabling all (knowledgeable) intended users to readily comprehend the information being communicated

ESRS also notes that, in some cases, companies may need to go above and beyond ESRS’s required disclosures to meet stakeholders’ needs or fully present the material aspects of a company’s business.

Suggested step by step approach

Devote significant time and resources to prepare for implementation of the directive.

  1. Management and appointed responsible internal stakeholders to increase CSRD knowledge, and adapt processes and competence
  2. Conduct a materiality assessment applying the principle of double materiality – including an impact and financial materiality process – to select material ESG themes, topics, risks, and opportunities, including a description of the process to identify sustainability impacts, risks, and opportunities.
  3. Data collection processes to be set by 31st December 2023, automated where possible and quality assured.


Anna och Johanna Weiner Jiffer 
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