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

The Corporate Sustainability Reporting Directive (CSRD) marks a turning point in the way European companies are required to report sustainability-related information.

Since the original publication of this article, the regulatory framework has evolved significantly, particularly following the Omnibus proposals of February 2025 and the updated implementation timeline.

In this article, you will find the key updates, which companies are affected, and how to prepare to comply with the CSRD under the new timeline, with a specific focus on companies that will be required to report for the first time for the 2027 financial year.

What is the Corporate Sustainability Reporting Directive (CSRD)?

The CSRD expands and strengthens the former Non-Financial Reporting Directive (NFRD) with a clear objective: to improve the quality, comparability, and reliability of the ESG information disclosed by companies.

Unlike the previous framework, the CSRD:

• Integrates sustainability into the management report alongside financial information.
• Introduces external assurance requirements.
• Requires the use of common standards (ESRS).
• Mandates the application of the double materiality principle.

Sustainability therefore ceases to be a narrative exercise and becomes a structured reporting system, with strategic, financial, and operational implications.

Which companies are required to report under the CSRD?

New timeline and the concept of “waves”

Following the approval of the so-called stop-the-clock directive, the CSRD implementation timeline has been adjusted:

• Wave 1: Large companies already subject to the NFRD, publishing their first CSRD report in 2025 (for financial year 2024).
• Wave 2: Large companies not previously covered by the NFRD.
  • They were initially required to report in 2026.
  • With the approved delay, they will report in 2028, covering the 2027 financial year.
• Wave 3: Listed SMEs and other entities, also subject to a two-year delay.

New proposed thresholds

According to the Omnibus proposal (still pending final approval at EU level), the CSRD scope would include companies that meet:

• More than 1,000 employees, and
• At least one of the following financial criteria:
  • More than €50 million in turnover, or
  • More than €25 million in total assets (balance sheet).

This adjustment significantly reduces the number of companies required to comply, but it does not remove the obligation for large organizations.

The Omnibus proposal of February 2025: what really changes

In February 2025, the European Commission presented two legislative proposals with a clear objective: to simplify the CSRD without stripping it of substance.

The most relevant changes are:

1. Two-year delay in implementation: Companies in wave 2 and wave 3 are granted additional time to prepare. This is not a strategic postponement, but an opportunity to build robust systems.

2. Reduction in scope and reporting burden: The proposed revisions to the ESRS include:

• Up to a 57% reduction in mandatory data points.
• A 68% reduction in total disclosures.
• Removal of all voluntary disclosures (“may disclosures”).

The focus shifts toward information that is truly material, verifiable, and decision-useful.

3. Sector-specific standards postponed: Sector-specific ESRS have been set aside for the time being, reinforcing the role of double materiality as the primary filtering mechanism.

4. EU Taxonomy partially optional: For companies with turnover below €450 million, alignment with the EU Green Taxonomy becomes voluntary.

5. Level of assurance: The requirement for “reasonable assurance” may be removed. Instead, a level of “limited assurance” would remain, at least in the short to medium term.

Information required in CSRD sustainability reports

The CSRD establishes a set of mandatory disclosure requirements that companies must include in their sustainability reports. These requirements are based on the concept of “double materiality,” which entails considering both financial materiality and social and 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 stipulates that sustainability information must be prepared in accordance with the European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). These standards provide detailed guidance on how to apply the requirements of the Directive, ensuring consistency and comparability of the information.

In addition to the ESRS, companies may use other internationally recognized standards and frameworks, such as the Global Reporting Initiative (GRI) Standards or the Sustainability Accounting Standards Board (SASB) Standards, to complement the information disclosed.

Integration with other frameworks: GRI, SASB, and TCFD

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

- GRI: GRI standards are the most widely used worldwide for sustainability reporting. They focus on companies’ economic, environmental, and social impacts, providing a comprehensive framework for disclosure.‍

- SASB: SASB standards focus on financially material sustainability-related information, providing a set of sector-specific metrics.

- TCFD: TCFD recommendations provide a framework for disclosing information related to climate change–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. This includes both short-term risks and opportunities and those that may arise over the long term.

For this reason, companies must identify sustainability-related risks that could affect their ability to create long-term value. These risks may include:

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.

How to prepare to comply with the CSRD in 2027

Although the first report may seem far off, experience shows that CSRD compliance requires years of preparation.

The key steps are:

• Carry out the double materiality assessment as early as possible.
• Perform a gap analysis against the applicable ESRS.
• Define an ESG data governance model comparable to financial data governance.
• Involve key functions: finance, legal, HR, procurement, and operations.
• Engage the value chain, especially for Scope 3 data.
• Rely on ESG technology to automate, validate, and audit information.
• Prepare for external assurance from the early stages.

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.