CSRD - Our guide (1/2)

june 2022
10 min read

 On April 21, 2021, the European Commission adopted a new proposal for a directive on corporate sustainability reporting.

It will come into force on January 1, 2024.

·      Companies concerned

Whereas the NFRD affected only large listed companies with over 500 employees, the CSRD involves all companies listed on European regulated markets, except micro-businesses, as well as all other large unlisted European companies (companies meeting 2 of these 3 criteria: over 250 employees, sales in excess of €40 million, balance sheet total in excess of €20 million). It should be noted, however, that listed SMEs, which were not subject to these standards until now, benefit from lighter reporting obligations. Finally, the new European directive also extends to non-European companies with sales in excess of 150 million euros in the European Union, even though they are only required to provide information on their socio-environmental impacts.

In all, some 50,000 companies in 27 countries will be affected by these new standards.

·      New sustainability reporting standards

Companies will have to publish information on the environment, personnel management and approach to social issues, human rights, anti-corruption and board diversity. Sustainability reporting standards will be based on the principle of double materiality, as confirmed by the European Commission in early June. In other words, organizations will have to detail not only their impacts on social and environmental issues, but also how these issues are likely to affect the organization in the future. The type of information provided will therefore be both quantitative and qualitative (what are their risk assessments, what are their strategies). Finally, the CSRD will require the disclosure of information on Scope 3 emissions, i.e. indirect CO2 emissions throughout the supply chain.

These "ESRS" (European Sustainability Reporting Standards), drawn up by EFRAG (the European Financial Reporting Advisory Group), will be divided into 3 categories:

  • Standards applicable to all companies, whatever their sector of activity (June 2023), known as agnostic standards.
  • Sector-specific standards (June 2024, subject to a second delegated act).
  • Specific standards for SMEs listed on regulated markets (also June 2024).

When a consolidated sustainability report is drawn up by the parent company of an unlisted group, subsidiary companies may benefit from an exemption from reporting. However, minimum information must be provided by the exempted subsidiary (in particular, the declaration of exemption and the reference to the consolidated report).

This reporting must follow a 4-pronged approach:

  • How governance takes sustainability issues into account
  • How sustainability issues are integrated into strategy and the business model
  • How sustainability impacts, risks and opportunities are identified and managed throughout the value chain
  • How performance criteria (KPIs) are measured, and objectives linked to action plans and resources implemented to achieve these objectives.

In the event of non-compliance, sanctions may vary from state to state: public declaration, cease-and-desist order, financial penalties proportional to the profits earned through the infraction and the company's financial strength.

·      Harmonized reporting

Sustainability reporting will be published in a specially dedicated section of the management report, in a single electronic format (xHTML) and with a predefined layout. Data will also have to be verified by an auditor or an independent third-party organization (at the choice of the States), initially with a "moderate" level of assurance, then "reasonable" from 2028 onwards. This standardization of non-financial reporting indicators will enable comparisons to be made between companies.

The period and scope of non-financial reporting are aligned with those in force for financial statements. Sustainability information will also be digitized in ESEF (European Singel Electronic Format), like the financial information available on the European Single Access Point (ESAP).

·      Timeline

  • Large European and non-European companies subject to the NFRD, i.e. 11700 companies meeting 2 of the 3 following criteria: +500 employees, +40m sales, +20m balance sheet

Reference  year : 2024 - First  reporting : 2025

  • Other large European companies : +250 employees, +40m sales, +20m balance sheet and non-european listed companies that meet 2 of the 3 criteria

Reference year  : 2025 - First  reporting : 2026

  • SMEs listed on a European regulated market except micro enterprises: meeting 2 of the 3 criteria of 10 to 250 employees, 700k to 40m sales, 350k to 20m balance sheet.

Reference year : 2026 (but can be postponed to  2028) - Reference year: 2027 (but can be postponed to 2029)

  • Other large non-European companies: European  sales > 150m + 1 subsidiary/branch based in the EU

Reference year: 2028 - First reporting: 2029

To find out more about Sustainable finance timeline regualtions, read this article !

·      Specifications :

According to the latest draft from the European Commission, companies that have never reported on sustainability will be given a period in which to adapt.

  • For companies with fewer than 750 employees subject to reporting obligations for the first time

In the first year, they may omit Scope 3 GHG emissions data and the disclosure requirements specified in the own workforce standard.

For the first two years, they may omit data relating to ESRS biodiversity, value chain workers, affected communities, consumers andend-users.

  • All companies subject to reporting obligations for the first time

In the first year of application of the standards, they may omit the following information: anticipated financial effects related to non-climate environmental issues (pollution, water, biodiversity, resourceuse) and certain data relating to their own workforce (social protection, disabled people, work-related ill-health, work-life balance).


The Commission plans to adopt the final version of the text at the end of August. The European Parliament and Council will then have two months to examine the text and indicate whether or not they wish to veto it.

If vou wish to know more about ESRS standards, don't hesitate to read our last study about it.

October 2022
6 min read