CSRD and ESRS: An Introduction to the New Sustainability Reporting Guidelines

The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) form the new standard for sustainability reporting within the EU. But what exactly do these guidelines entail? Why were they introduced, and which companies fall under the CSRD obligation? In this article you’ll get a full overview of CSRD and ESRS, including the key requirements and benefits.

What is CSRD? – Explanation of the Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is a European directive that requires companies to report more transparently on their impact on the environment, society, and governance (ESG factors).

CSRD replaces the NFRD

The CSRD replaces the Non-Financial Reporting Directive (NFRD) and sets stricter requirements on how companies report. Whereas the NFRD only applied to a limited number of large companies, the CSRD applies to a much broader group of enterprises.

Purpose of the CSRD

The directive is part of the European Green Deal, with the goal of making Europe climate-neutral by 2050. By requiring companies to provide extensive sustainability reporting, investors, consumers, and other stakeholders can make better-informed decisions.

Why was the CSRD directive introduced and what does it mean for companies?

The introduction of CSRD aims to:

• More transparency: Companies must report both their positive and negative impact on people and the environment.
• Better comparability: Standardized reporting allows stakeholders to compare companies more easily.
• Stimulus for sustainability: Mandatory disclosure encourages companies to address sustainability risks and set ESG goals.

The main goals of CSRD: Transparency, Double Materiality, and Harmonization

Increased transparency

Companies must provide detailed information about their environmental and social impact, as well as their governance processes.

Double materiality

The CSRD introduces the concept of double materiality, meaning that companies must report on both:

• Impact materiality: How does the company affect people and the environment?
• Financial materiality: How do sustainability factors affect the company’s financial performance?

CSRD legislation: What does the new EU directive on sustainability reporting entail?

The CSRD legislation is laid down in Directive (EU) 2022/2464, adopted in December 2022. This legislation:

• Expands the existing NFRD with stricter reporting requirements.
• Requires companies to follow ESRS standards in sustainability reporting.
• Defines the size criteria for companies falling under CSRD.

What are the ESRS? – European Sustainability Reporting Standards explained

The European Sustainability Reporting Standards (ESRS) form the basis for CSRD reporting. These standards are divided into three main themes:

General requirements

• ESRS 1 – General principles
• ESRS 2 – General disclosures

Environment (E)

• E1 – Climate change
• E2 – Pollution
• E3 – Water and marine resources
• E4 – Biodiversity and ecosystems
• E5 – Resource use and circular economy

Social (S)

• S1 – Own workforce
• S2 – Workers in the value chain
• S3 – Affected communities
• S4 – Consumers and end users

Governance (G)

• G1 – Business conduct and transparency

What does a disclosure mean in CSRD reporting?

A disclosure within CSRD refers to the mandatory publication of ESG information. This must include both qualitative and quantitative data and is structured according to ESRS guidelines. Minimum Disclosure Requirements (MDR) define which core information is mandatory, regardless of the materiality analysis.

The role of stakeholders in CSRD: Influence of investors, governments, and consumers

Various stakeholders play a role in CSRD implementation:

• Investors – Use ESG information for risk analysis and investment decisions.
• Governments & regulators – Monitor compliance (e.g., AFM in the Netherlands).
• Consumers – Expect transparency and sustainability responsibility.
• Employees & suppliers – Contribute to making the value chain more sustainable.
• NGOs & civil society organizations – Safeguard sustainability goals and accountability.

What are the benefits of CSRD for companies? – Risk management, financing, and reputation

Complying with the CSRD offers companies:

• Improved risk management – Prevents ESG-related risks.
• Access to capital – Transparency makes companies more attractive to investors.
• Stronger reputation – Open communication on sustainability strengthens the image.
• Operational efficiency – Sustainability data helps with cost savings and innovation.

The CSRD and ESRS contribute to a more transparent and sustainable corporate world. Companies that prepare well will benefit from strategic advantages and compliance with EU legislation.