Corporate Sustainability Reporting Directive (CSRD): everything you need to know

What is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive, known as CSRD, is a European Union initiative aimed at harmonizing and standardizing the non-financial information companies disclose in their sustainability reports. Its goal is to enhance transparency and comparability, enabling investors and other stakeholders to more effectively assess companies' sustainability performance.

Who does the CSRD affect?

The CSRD applies to all large companies, whether publicly listed or not, that meet at least two of the following criteria:

• More than 250 employees.
• A turnover of more than €40 million.
• A balance sheet total exceeding €20 million.

It also applies to all companies listed on regulated EU markets, except micro-enterprises.

Although SMEs are not initially required to comply with the CSRD, specific requirements for them are expected in the future. SMEs are encouraged to familiarize themselves with the directive’s requirements as sustainability information will increasingly impact financing access, talent attraction, and reputation.

Information required in CSRD sustainability reports

The CSRD outlines mandatory reporting requirements based on the concept of "double materiality," which considers both financial and social-environmental materiality.

What is double materiality?

Double materiality is a core principle of the CSRD, recognizing the interdependence between financial and non-financial aspects of business performance:

• Financial materiality: The impact sustainability issues may have on a company’s financial situation.
• Social and environmental materiality: The impact of a company’s operations on the environment and society.

By adopting this approach, companies can better identify and manage sustainability-related risks and opportunities, creating long-term value for shareholders and society.

ESG information requirements

The CSRD requires companies to report on various environmental, social, and governance (ESG) topics, including:

• Environmental information: Impacts on the environment, such as greenhouse gas emissions, water and energy consumption, waste management, and biodiversity. It emphasizes climate-related disclosures aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
• Social information: Impacts on people, including human rights, working conditions, health and safety, diversity and inclusion, and relationships with local communities.
• Governance information: How the company is managed sustainably, including board composition and operations, risk management, business ethics, and anti-corruption measures.

Reported information must be:

• Relevant: Addressing the company’s material impacts, risks, and opportunities.
• Comprehensive: Covering all relevant aspects of the company’s strategy and business model.
• Accurate: Based on reliable and verifiable data.
• Balanced: Reflecting both positive and negative aspects of the company’s performance.

Reference standards for the CSRD

The CSRD mandates that sustainability information be prepared following European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG). These standards provide detailed guidelines to ensure consistency and comparability.

Companies can also use other internationally recognized frameworks, such as the Global Reporting Initiative (GRI) Standards or the Sustainability Accounting Standards Board (SASB), to supplement the information provided.

Integration with other frameworks: GRI, SASB, and TCFD

The CSRD aligns with other sustainability frameworks, facilitating integration and reducing administrative burdens:

• GRI: Globally the most widely used framework for sustainability reporting, covering economic, environmental, and social impacts.
• SASB: Focuses on sector-specific, financially material sustainability information.
• TCFD: Provides a framework for disclosing climate-related risks and opportunities.

Risk and opportunity assessment under the CSRD

The CSRD requires companies to identify, assess, and manage sustainability-related risks and opportunities, both short-term and long-term:

Types of risks:

• Physical risks: Related to climate impacts like sea-level rise, extreme weather events, or resource scarcity.
• Transition risks: Arising from shifts toward a low-carbon economy, including regulatory changes, disruptive technologies, or evolving consumer preferences.
• Reputational risks: Linked to negative societal or environmental impacts, such as pollution, human rights violations, or corruption.

Identifying opportunities:

Companies must also recognize opportunities to create long-term value through sustainability:

• Developing sustainable products and services: Meeting growing demand for environmentally and socially responsible offerings.
• Improving operational efficiency: Reducing resource consumption, emissions, and waste, leading to cost savings and competitiveness.
• Accessing new financing sources: Securing green funding or attracting socially responsible investors.

Data collection methodologies in the CSRD

Although the CSRD does not prescribe specific methodologies for data collection, it requires information to be accurate, reliable, and verifiable.

Digital tools can help companies efficiently manage sustainability data:

• Automated data collection: Integrates data from systems like ERP, energy management platforms, or supplier databases.
• Real-time analytics: Monitors sustainability performance and identifies improvement areas.
• Customized report generation: Creates reports tailored to different stakeholders’ needs.

Manglai: your ally in CSRD compliance

Manglai provides an all-in-one solution for carbon footprint measurement and management, simplifying CSRD reporting requirements. Our features include:

• Scope 1, 2, and 3 emissions calculation: Covering all emission sources across the company’s value chain.
• Data analysis and personalized recommendations: Identifying improvement areas and proposing emission reduction measures.
• Auditable report generation: Compliant with international sustainability reporting standards.

With Manglai, companies can confidently navigate sustainability reporting challenges, turning obligations into opportunities to drive innovation, efficiency, and long-term value creation.