What is CSRD? An ELI5 Guide

What is CSRD?

CSRD stands for Corporate Sustainability Reporting Directive. It's a new EU law that requires companies to report on how their business affects the environment and society—and how environmental and social issues affect their business.

Think of it as a report card for how "green" and socially responsible your company is.

Why Does CSRD Exist?

The EU wants to:

Make companies more transparent about their environmental and social impact
Help investors make informed decisions about sustainable businesses
Combat greenwashing (when companies falsely claim to be eco-friendly)
Drive real change toward sustainability

Who Does It Affect?

CSRD applies to:

Large EU companies (500+ employees)
Listed SMEs on EU stock exchanges
Non-EU companies with significant EU operations (€150M+ revenue)

Timeline:

2024: Large companies already reporting under NFRD
2025: All large companies (500+ employees)
2026: Listed SMEs
2028: Non-EU companies with EU subsidiaries

What Do You Need to Report?

This is called "Double Materiality" - you report on two things:

1. Impact Materiality

How your business affects the world:

Carbon emissions
Water usage
Labor practices
Community impact

2. Financial Materiality

How sustainability issues affect your business:

Climate risks to operations
Regulatory compliance costs
Reputation and brand value

The Reporting Standards: ESRS

Companies must follow ESRS (European Sustainability Reporting Standards). These are detailed guidelines on:

What to measure
How to measure it
How to present the data

There are 12 ESRS standards covering:

Climate change
Pollution
Water and marine resources
Biodiversity
Workers' rights
Business conduct

How to Get Started

If CSRD applies to you:

Understand your timeline - When do you need to start reporting?
Conduct a materiality assessment - Which topics matter most to your business?
Gather baseline data - What are your current emissions, water use, etc.?
Set up systems - How will you collect and track this data ongoing?
Get external assurance - Your report will need to be verified by auditors

Key Differences from Other Regulations

| Feature | CSRD | NFRD | GRI | |---------|------|------|-----| | Mandatory | Yes (for in-scope companies) | Yes (limited scope) | No (voluntary) | | Assurance Required | Yes | No | No | | Double Materiality | Yes | No | Partial | | Digital Format | Yes (XHTML) | No | No |

Common Misconceptions

"CSRD is just for huge corporations" → Not true. Listed SMEs and EU subsidiaries of foreign companies are included.

"It's just a paperwork exercise" → CSRD requires external auditing and penalties for non-compliance.

"We can copy someone else's report" → Each company must do their own materiality assessment based on their specific impacts.

Next Steps

Disclaimer: This article provides general educational information about CSRD. It is not legal or professional advice. Consult qualified compliance professionals for guidance specific to your organization.