What is the CSRD? Everything you need to know.
The Corporate Sustainability Reporting Directive (CSRD) raises the bar on environmental reporting by European Union (EU) businesses. It's landmark legislation adopted by the EU that was originally set to impact nearly 50,000 companies – yikes! – though the EU's 2026 "Omnibus" simplification package has since narrowed it to the largest companies.
It isn't a bad thing, though – the CSRD aims to raise the standard of mandatory sustainability reporting and push for greater transparency, and it's stricter than its predecessor.
In this article, we'll explain: What is corporate sustainability reporting, who it impacts, what the requirements are and how it may help EU countries and the world align with the Paris Agreement.
What is the CSRD?
Simply put, the CSRD is EU legislation that requires EU-based companies, or non-EU companies with subsidiaries and operations in the bloc, to disclose information regarding their environmental and social impact and how their initiatives affect the business.
It mandates environmental, social, and governance (ESG) reporting for large companies based on the CSRD framework. The regulation is based on double materiality in that it requires disclosure of the business's impact on the environment and people, and any ESG-related activities' impact on the company's performance.
The CSRD was adopted in late 2022 and began taking effect in phases from 2024, replacing the non-financial reporting directive (NFRD), which was limited in scope and application. As we'll see below, the 2026 "Omnibus" package later reshaped both the rollout and the range of companies that have to comply.
Which companies do the CSRD impact?
When it was first adopted, the CSRD was estimated to target nearly 50,000 EU and non-EU companies. The EU's 2026 "Omnibus" simplification package changed that significantly, raising the size thresholds so that only the largest companies have to report – and removing the large majority of them from scope in the process.
Under the rules as they now stand (applying to financial years beginning on or after 1 January 2027), the CSRD applies to:
EU companies
EU-based companies, listed or not, that exceed both of these:
- More than 1,000 employees, and
- A net turnover above €450 million
Both limbs, not one or the other – and there's no balance-sheet alternative. Being listed on an EU regulated market is no longer a trigger by itself: a listed company below those thresholds is out of scope.
Non-EU companies
Non-EU companies that:
- Generate more than €450 million in net turnover in the EU, and
- Have at least one EU subsidiary or branch with more than €200 million in turnover
Listed small and medium-sized enterprises (SMEs) and pure financial holding companies, which the original directive would have captured, are now exempt.
What needs to be reported under CSRD?
CSRD mandates and encourages a wide range of disclosures. It requires companies to disclose their business activities' direct and indirect impact. In other words, CSRD also targets Scope 3 emissions (value chain emissions) both downstream and upstream, which are difficult to calculate and often make up the better part of a company's carbon footprint.
In addition, companies are supposed to form and share policies regarding sustainability and disclose transition plans regarding how they plan to reduce their emissions and address any social or governance issues. Similarly, they should also report on sustainability risks associated with their activities and investments.
.webp)
CSRD timeline: When does it go into effect?
The CSRD was designed to take effect in phases, but the 2026 "Omnibus" package reshaped the rollout – delaying some deadlines and removing many companies from scope altogether. Here's where things stand:
- Already reporting: The largest companies, which were already covered by the NFRD, began reporting for the 2024 fiscal year (first reports published in 2025). Some of these now fall below the new thresholds, and their member state can choose to let them off for the interim years. Denmark chose quickly – a ministerial order in force from 26 February 2026 exempts those companies for financial years 2025 and 2026
- Removed or reset: Other large companies and listed SMEs were originally due to start reporting in 2025 and 2026. That phased rollout no longer exists – Omnibus I ended the wave system rather than postponing it. The two-year postponement that came before it is a separate thing, and it's been overtaken. Listed SMEs are out of scope entirely, and everyone else either meets the new thresholds and reports for the 2027 fiscal year (first reports in 2028), or doesn't and reports nothing
- Non-EU companies: In-scope non-EU groups will report for financial years beginning on or after 1 January 2028 (first reports in 2029)
In short, the reporting requirement applies following each fiscal year – so a company affected for the 2027 fiscal year, for example, would publish its first report in 2028.
The route from the original 2022 directive to where things stand now took three separate changes in eighteen months. We've set them out in order.
What else changed in 2026
Three things beyond scope, and they're easy to miss.
- Assurance stays light. Reports still need limited assurance, but the plan to move everyone up to reasonable assurance has been dropped. The deadline for adopting limited assurance standards moved to July 2027
- Sector-specific standards are gone. The Commission can no longer adopt binding reporting standards for individual sectors – real estate among them – and will issue non-binding guidance instead. If you've been waiting for a real estate ESRS, it isn't coming
- There's a ceiling on what you can ask your value chain. Companies in scope can't require sustainability information from businesses with fewer than 1,000 employees beyond what the voluntary SME standard (VSME) covers. For a landlord, that's a limit on what you can ask a tenant – and for a smaller supplier, it's a shield
ESRS – the CSRD reporting standard
The European Sustainability Reporting Standards (ESRS) outline the reporting framework and detail the CSRD requirements. The European Financial Reporting Advisory Group (EFRAG) drafts the ESRS, and the European Commission adopts them. These standards are divided into four distinct groups and are as follows:
- Cross-Cutting: General requirements and general disclosures (ESRS 1 and 2)
- Environmental: Climate, pollution, water and marine resources, biodiversity and ecosystems, resource use, and circular economy (ESRS E1 to E5)
- Social: Own workforce, workers in the value chain, affected communities, and consumers and end users (ESRS S1 to S4)
- Governance: Business conduct (ESRS G1)
Cross-cutting reporting is mandatory for all companies in the scope of CSRD. However, the remaining standards are subject to materiality assessment. Companies will only be required to report data relevant to their business, so don't worry – you might not need to do them all.
These standards essentially provide guidelines on what needs to be reported and how. So, ESRS is the blueprint for sustainability reporting under the CSRD. As part of the 2026 Omnibus changes, the ESRS have been simplified – cutting mandatory data points by more than 60% and total data points by more than 70%, and leaning more heavily on materiality. The Commission adopted the revised standards on 3 July 2026, but they haven't been published in the Official Journal yet, so they aren't in force. They're expected to apply from the 2027 financial year, with early application possible for 2026.
CSRD's potential impact (and why sustainability reporting is important)
The CSRD aims to offer transparency to all stakeholders, including investors and consumers. After the 2026 changes it does that through the largest companies only – medium-sized companies, listed ones included, sit outside it.
This directive is the first of its kind to expand the reporting requirements to value chain emissions for many companies. Companies have largely been optionally reporting these emissions. Even when reported, they were based on estimates and rife with inaccuracies.
In short, the CSRD will increase accountability and encourage companies to set sustainability goals that ultimately help them go net zero.
Preparing for changes in ESG reporting
Far fewer companies have to file a CSRD report than anyone expected in 2023 – but the questions the directive was built to answer haven't gone anywhere.If you're in scope, the job is the same as it always was: work out where the data lives, and get your suppliers and tenants into the process early enough that the first report isn't a scramble.If you're out of scope, you're still in somebody else's value chain. Your tenants are asked about the energy their space uses. Your lenders are asked about the energy performance of their collateral, which is your building. And the EPBD's minimum energy performance standards apply to individual buildings regardless of how many people you employ – here's what makes one high-risk.The reporting duty got smaller. The data question didn't.
FAQs
What does CSRD stand for?
The CSRD stands for Corporate Sustainability Reporting Directive. The legislation requires EU and certain non-EU companies to disclose ESG data and performance.
What is the aim of CSRD?
CSRD aims to expand ESG reporting requirements to large EU and non-EU companies. It also requires companies to report their value chain emissions, bringing more transparency into business operations and their environmental impact.
How to write a CSRD report?
The ESRS standards provide guidelines on what companies impacted by the CSRD need to report. They offer guidelines on materiality assessment, a prerequisite to reporting, and details on metrics that must be reported. EFRAG publishes the standards and its implementation guidance.
