CSRD: complete guide to the Corporate Sustainability Reporting Directive for companies

The Corporate Sustainability Reporting Directive (CSRD) has introduced stricter transparency requirements on sustainability for European companies. In this guide, you will learn what the CSRD is, what obligations it imposes, who it involves, the principle of double materiality, the new reporting standards, and how Etifor supports companies in achieving ESG compliance.

In the early months of 2025—after the publication of this article—the omnibus simplification proposal will be discussed, which could modify and scale back certain reporting obligations. We are awaiting the official publication to assess its impact.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a European Union regulation approved in 2022 and effective from 2023, designed to enhance transparency in corporate non-financial information. Replacing the previous Non-Financial Reporting Directive (NFRD), the CSRD requires companies to provide comprehensive details about their environmental, social, and governance (ESG) performance.

It introduces the mandatory adoption of the European Sustainability Reporting Standards (ESRS), which establish uniform metrics for assessing the impact of business activities. The ESRS covers climate, biodiversity, natural resource use, employee well-being, supply chain management, corporate ethics, and governance, ensuring broad and detailed reporting.

Who Does the CSRD Apply To?

The CSRD applies to:

• From January 1, 2024: Large public interest entities with over 500 employees.
• From January 1, 2025: All other large companies that meet at least two criteria: 250 employees, €40 million in turnover, and €20 million in total assets.
• From January 1, 2026: Listed SMEs (excluding micro-enterprises).
• From January 1, 2028: Non-EU companies generating over €150 million in revenue within the EU.

While the direct obligation involves relatively few companies, a cascading effect is expected to impact many Italian SMEs, as large companies and parent companies will require ESG information from suppliers and companies in their supply chains to ensure compliance. Non-compliance penalties may include substantial fines and restrictions on public and private funding access, making timely adaptation crucial for businesses. 

What Does the CSRD Require?

The Corporate Sustainability Reporting Directive (CSRD) mandates companies to publish detailed reports on environmental, social, and governance (ESG) aspects. Companies must report the impact of their activities on people and the environment and how sustainability issues affect their financial situation, following the principle of double materiality. The goal is to ensure transparency and provide relevant information to all stakeholders.

Compared to the previous NFRD, the CSRD broadens the reporting scope by including data related to the entire value chain, encompassing products, services, business relationships, and supply chains. Additionally, it mandates compliance with the European Sustainability Reporting Standards (ESRS) and integrating this information into the management report.

Another new requirement involves ESG performance reviews, which must be certified by a sustainability auditor. Furthermore, documentation must be digitized in XHTML and XBRL formats to ensure accessibility, comparability, and verifiability by investors and stakeholders.

What is Double Materiality?

The principle of double materiality, introduced by the CSRD, represents a significant shift in corporate reporting. Companies must assess sustainability issues from two perspectives:

• Financial Materiality (“outside-in” ): Analyze the impact of environmental, social, and governance factors on the company’s economic performance.
• Impact Materiality (“inside-out” ): Examines how the company’s activities affect society and the environment.

Issues considered material according to one or both approaches must be reported following the ESRS standards. The analysis requires identifying financial risks and current or potential sustainability-related impacts, assessing their relevance to corporate strategy, and ensuring stakeholder transparency.

The Requirement to Adopt European Sustainability Reporting Standards (ESRS)

The European Sustainability Reporting Standards (ESRS) define detailed criteria for ESG reporting, ensuring transparency and comparability among companies. The standards are divided into three main areas:

• Environment (E): Covers topics such as climate change (E1), pollution (E2), water and marine resources (E3), biodiversity (E4), and circular economy (E5).
• Social (S): Addresses human rights and working conditions (S1), community impacts (S2), and relationships within the value chain (S3).
• Governance (G): Encompasses corporate conduct, ethics, and transparency (G1).

The ESRS are periodically updated to reflect regulatory developments and global challenges, encouraging companies to improve sustainability management and apply the principle of double materiality as required by the CSRD.

How Can Companies Prepare for the CSRD?

Companies can prepare for the CSRD by first assessing if and when they will be subject to the obligation and defining a roadmap. Reviewing corporate governance to clarify roles and responsibilities in reporting, address double materiality by involving stakeholders, and identify any gaps in data collection systems is valid.

Each company must tailor the process to its reality, evaluating risks, opportunities, and financial impacts to comply with the ESRS. Preparation requires a customized analysis and a flexible approach to ensure long-term compliance and success.

Etifor’s Services for the CSRD

Etifor offers strategic support for CSRD compliance with specific services such as:

• Double materiality analysis on climate and biodiversity (ESRS E1, E4).
• Impact, risk, dependency, and opportunity analysis are the same topics.
• Carbon footprint measurement and biodiversity analysis (e.g., endangered species, proximity to protected areas).
• Development of climate and biodiversity strategies for Net Zero or nature-positive targets.
• Stakeholder engagement on these topics.

Discover more about Etifor’s services.