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

The Corporate Sustainability Reporting Directive (CSRD) has introduced more stringent transparency requirements on sustainability for European companies. In this guide, you’ll discover 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 2025, after this article was published, the “Omnibus I” package presented by the European Commission was approved, simplifying certain aspects of the Regulation to reduce mere mandatory compliance and favor a responsibility-based approach. The text of this article has been updated accordingly.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a European Union regulation approved in 2022 and entered into force in 2023, designed to improve the transparency of companies’ non-financial information. Replacing the previous NFRD (Non-Financial Reporting Directive), the CSRD requires companies to provide comprehensive details on their environmental, social, and governance (ESG) performance.

It introduces the obligation to adopt the European Sustainability Reporting Standards (ESRS), which establish uniform metrics for assessing the impact of business activities. The ESRS cover topics such as climate, biodiversity, the use of natural resources, employee wellbeing, supply chain management, business ethics, and governance, ensuring broad and detailed reporting.

Omnibus I has driven a revision of the ESRS, reducing the required data points by around 60%, with the aim of discouraging a compliance-only approach. Companies will no longer have to follow a checklist of items to report, but will instead need to focus on the real impacts, risks, and opportunities of the business and explain the reasoning behind the priorities chosen and the concrete actions taken as a result.

Who Does the CSRD Apply To?

The CSRD applies to companies with more than 1,000 employees and an annual net turnover exceeding €450 million.

The 2025 amendment to the CSRD drastically reduced the mandatory scope of the regulation. Despite some concerns about this, the goal is to reduce formal obligation and encourage voluntary adoption by companies, revealing which ones will genuinely commit because they recognize sustainability as a strategic lever. Indeed, this simplification does not change the expectations of markets, supply chains, and investors.

What Does the CSRD Require?

The Corporate Sustainability Reporting Directive (CSRD) requires companies falling within the scope of the regulation to publish detailed reports on environmental, social, and governance (ESG) aspects. Companies must report both the impact of their activities on people and the environment, and the way 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 directive, the CSRD extends the scope of reporting to include data relating to the entire value chain, covering products, services, business relationships, and the supply chain. It also introduces the obligation to comply with the European Sustainability Reporting Standards (ESRS) and to integrate this information into the management report.

Another novelty concerns the review of ESG performance, which must be verified by a sustainability auditor. In addition, the documentation must be digitized in XHTML and XBRL formats, to ensure accessibility, comparability, and verifiability by investors and stakeholders.

With the Omnibus I package, the approach shifts from a “compliance framework” to a “fair presentation framework.” What matters is no longer filling in forms correctly, but credibly conveying real impacts, risks, and opportunities by referring to the company’s business model and double materiality analysis.

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”): analyzes the impact that environmental, social, and governance factors can have 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 in line with the ESRS standards. The analysis requires identifying financial risks and current or potential sustainability-related impacts, assessing their relevance to the company’s strategy and transparency toward stakeholders.

The Requirement to Adopt European Sustainability Reporting Standards (ESRS)

The European Sustainability Reporting Standards (ESRS) set out 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): covers human rights and working conditions (S1), community impacts (S2), and value chain relationships (S3).
Governance (G): covers business conduct, ethics, and transparency (G1).

The ESRS are updated periodically to reflect regulatory developments and global challenges, prompting 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 whether they will be subject to the reporting obligation. If they are not, they will need to decide whether to proceed with voluntary reporting. To begin, it is useful to review corporate governance to clarify roles and responsibilities in reporting, address double materiality by engaging stakeholders, and identify any gaps in data collection systems.

Each company will need to adapt the process to its own reality, assessing the risks, opportunities, and financial impacts of its business model. Preparing requires a tailored analysis and a flexible approach to ensure compliance and long-term success.

Etifor’s Services for the CSRD