Everything you need to know about the Corporate Sustainability Reporting Directive (CSRD)

The main goal of CSRD is to ensure consistent and comparable reporting of ESG performance for investors, consumers and data users. Under CSRD, companies are required to:

Step 1: Complete a double materiality assessment;

Step 2: Follow the directive’s reporting standards, known as the European Sustainability Reporting Standards (ESRS);

Step 3: Report using XBRL format;

Step 4: Prepare for assurance.

This article provides an executive summary, equipping you with the vocabulary and context to launch your CSRD compliance journey.

More than 40,000 companies in the EU and 10,400 non-EU companies are estimated to be affected by the CSRD. Although the regulation was born in Europe, the CSRD captures a range of companies, including non-EU companies with significant operations in the EU and non-EU-based companies listed in the EU.

Article 5 of the CSRD outlines the applicability of the regulation for different types of entities. The timeline stipulates:

CSRD explicitly adopts a double materiality lens. Unlike other reporting standards, CSRD makes it clear that companies need to consider both the financial impact of sustainability issues on their operations and the impact of their operations on society and the environment. Once complete, companies can determine which ESRS topical standards are material and required.

Definitions:

Financial Materiality: refers to how sustainability issues affect the financial performance of the company. This includes any risks or opportunities related to ESG factors that could have a significant impact on the company’s financial outcomes.

Impact Materiality: Concerns the outward effects of the company’s operations. This involves assessing how the company’s activities, products, and services affect external stakeholders and ecological systems.

Curious to learn more about double materiality – click here.

The European Sustainability Reporting Standards (ESRS) are a set of standards developed by the European Financial Reporting Advisory Group (EFRAG) under the CSRD. These standards provide a detailed framework for companies to report on ESG factors, ensuring that the sustainability information disclosed is consistent, comparable, and reliable. As depicted, the ESRS outlines two mandatory cross-cutting standards and ten topical standards. Together, all 12 standards push companies to disclose quantitative and qualitative metrics and targets, details on their governance and strategy to address material sustainability topics, and information regarding the impacts, risks, and opportunities arising from those topics.

The goal of reporting formats like ESEF and inline XBRL™ is to make reports machine-readable, driving access, analysis and comparability of sustainability and financial statements. Compliant CSRD disclosures will need to follow a specific structure.

Companies need to present their Sustainability Statement in their management report as a clearly identifiable, dedicated section published at the same time as financial statements. Reports must be digitally tagged and presented in a format that is both human and machine readable using the ESEF and ESRS inline XBRL Taxonomy.

Under the Corporate Sustainability Reporting Directive (CSRD), assurance plays a crucial role in ensuring the reliability and credibility of sustainability information disclosed by companies. The CSRD introduces a phased approach to implementing assurance requirements, with limited assurance being mandated initially and a transition to reasonable assurance expected over time. This gradual approach allows companies to build the necessary processes and systems to support higher assurance levels.

Reimag.in's approach was built with partnerships in mind. Work with your assurance partner to manage data and verification seamlessly.

Accelerating your journey to CSRD compliance. Reimag.in's CSRD module combines powerful tools and expert support to keep you on track and finish the reporting exercise quickly and with the highest degree of reporting confidence.

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