What is CSRD?

Introduction to CSRD

The CSRD (Corporate Sustainability Reporting Directive) is a European directive aimed at improving financial flows in favor of sustainable activities.

It provides a framework for extra-financial reporting at European level, i.e. the way in which companies report their consideration of environmental, social and governance issues. It succeeds the NFRD (Non-Financial Reporting Directive), which applied to large companies in the European Union (EU) since 2014.

Very concretely, the CSRD is a directive that requires European companies to produce a sustainability report every year. The CSRD creates a common framework for all European businesses, ensuring that all aspects of CSR are dealt with comprehensively and in a standardized manner. This approach allows a reliable comparison between European companies, thus strengthening transparency and identifying those who adopt a genuine CSR approach compared to those who practice greenwashing.

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The different types of companies concerned by the CSRD

This is the main novelty of this directive: it concerns a very large number of European companies, from large groups to SMEs.

In fact, it is estimated that around 50,000 European companies are affected by the new CSRD regulations, compared to 11,700 companies currently subject to the NFRD (Non Financial Reporting Directive). This represents a significant increase in the number of businesses required to publish information about their commitment to sustainability, which is good news for the social and environmental transition!

In particular, the following are concerned:

- Large companies, defined as businesses that meet at least two of the following three criteria:

• An average number of employees employed during the fiscal year of 250 people.
• A net turnover of more than 50 million euros.
• A balance sheet total of over 25 million euros.

This definition is broader than that of the previous directive on extra-financial reporting (NFRD), which only applied to companies with more than 500 employees.‍

- SMEs listed on the stock exchange: SMEs whose securities are admitted to trading on a regulated market. This includes companies listed on regulated exchanges, such as those of Euronext Access Paris or those of the London Stock Exchange.

Note: In order to alleviate the reporting burden on businesses, new measures have been announced by the European executive concerning CSRD.

If these measures are successful, the reporting requirements will only apply to large companies with more than 1000 employees, with a turnover of more than 50 million euros or a balance sheet total of more than 25 million euros.

To find out more about these new measures, you can refer to the European Commission website.

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The frequency of publication of the CSRD sustainability report

Sustainability reports should be published annually, at the same time as traditional financial reports. This synchronization aims to fully integrate sustainability considerations into the company's overall strategy and financial communication.

These requirements aim to provide stakeholders with a clearer and more comprehensive picture of corporate ESG performance, thereby promoting more informed and responsible decision-making.

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The gradual application of the CSRD from 2024

The CSRD came into force on 1 January 2024. For the first companies concerned, the first reporting will therefore cover the fiscal year 2024. It should be published on January 1, 2025.

For all the actors concerned, the publication of the first CSRD report will take place at dates following:

• January 1, 2025 (for the financial year 2024) for European and non-European companies already subject to NFRD reporting;
• January 1, 2026 (for the financial year 2025) for large European companies and non-European companies listed on a European regulated market not subject to the NFRD;
• January 1, 2027 (for the financial year 2026) for listed European and non-European SMEs. Small subtlety: these SMEs will benefit from a period of two additional years subject to justification;
• January 1, 2028 (for the financial year 2027) for non-European companies whose European turnover exceeds €150 million via a subsidiary or branch.

Note: Following the new measures announced, the European executive is planning a Two-year deferral (until 2028) reporting requirements for companies that are currently required to produce a report from 2026 or 2027 and listed SMEs with an expected entry into force in 2027.

For more information, consult the European Commission website.

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Penalties in case of non-compliance with the CSRD

Each state sets its own sanctions for non-compliance with the CSRD. In France, financial sanctions vary according to two scenarios:

1. Lack of certification of information in terms of sustainability: the company manager risks a fine of 30,000 euros and up to two years in prison.
2. Obstacle to the certification of information in terms of sustainability: the company manager risks a fine of 75,000 euros and up to five years in prison.

Finally, in addition to the legal and financial consequences, other risks remain:

• Impact on reputation : non-compliance can seriously damage a company's image.
• Extensive consequences : this can lead to a loss of investor confidence, market restrictions, and partnership difficulties.

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The differences between CSRD and DPEF

The DPEF (Extra-Financial Performance Declaration) was the version of the NFRD for French companies. The CSRD sustainability report was designed to fill the shortcomings of the DPEF, which it replaces:

• It is aimed at a wider scope: Most companies are required to issue a sustainability report under the CSRD.
• She wants to protect users incomplete or misleading sustainability reports, especially investors: The sustainability report is therefore audited.
• The EU plans a very limited margin of manoeuvre for transposition into French law (transposition is expected on the role of auditors: Penalty in case of failure to comply with the CSRD).
• The sustainability report will make it possible to offer the financial sector and all its users a standardized, comparable and understandable information.

Also to read:
‍The regulatory and legal framework for CSR
‍What are the CSR challenges for businesses in 2025?

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You are an eligible company: how to comply with the CSRD?

Although it may seem tedious, the CSRD exercise becomes accessible when done with the right methodology. Here are the main steps.

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0- Understand in detail the CSRD directive and its challenges

Before embarking on the projects necessary to comply, it is necessary to fully understand everything that frames this directive.

Several best practices for this:

• Studying the ESRS (European Sustainability Reporting Standards), list of reporting indicators published by EFRAG. Sami published a public list.
• Join a community of concerned businesses to discuss its progress and difficulties continuously.
• Exchange with other more advanced companies in the process. Sharing experiences is one of the keys to starting CSRD more peacefully.

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1- Create your double materiality matrix

To meet the standards, it is necessary to carry out a matrix of double materiality. This dual approach requires a thorough and detailed analysis of the internal and external impacts of your company (across its entire value chain).

The analysis of double materiality is the entry point of the CSRD since it will define what topics you should report on.

The realization of the double materiality matrix requires several key steps:

1. Identifying Impacts, Risks and Opportunities (IRO)
2. Interviewing stakeholders
3. IRO evaluation and scoring
4. Synthesis work and formatting of the double materiality matrix
5. Translation of material issues into a list of indicators within the ESRS

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2- Collect and monitor CSRD reporting data

Once the material indicators have been identified, it is time to complete the reporting.

This must be done in collaboration with several stakeholders in the company: CSR, finance, HR, management. It is also possible to carry out this collection and monitoring via a specialized platform.

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3- Create your Sustainability Report

The sustainability report should include information on:

• The company's sustainability policies;
• The goals set and the progress made;
• The main risks and opportunities related to sustainability issues.

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4- Have the entire CSRD process checked by an OTI (Independent Third Party Organization)

To ensure the reliability of the information reported, the CSRD requires verification by a independent third party organization (OTI). This OTI must be accredited and conduct a rigorous evaluation of the sustainability data provided by the company. This includes audits on dual materiality, data collection processes, reporting methods, and the accuracy of the information disclosed.

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5- Publish your sustainability report

The sustainability report produced as part of the CSRD must:

• Be attached to the company's management report;
• Be published on the company's website,
• Be published on a European platform disseminating all the reports of companies subject to the directive.

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6- Going further by going beyond the simple regulatory framework

Beyond a constraint, CSRD is also an opportunity to bring social and environmental issues to a more strategic level for the company.

Analysis of the impacts of company activity, identification of major risks and opportunities related to the organization's environment, regular monitoring of all key sustainability issues... These are all ways for a company to accelerate its social and environmental transition.

For this to be possible, the CSRD exercise must necessarily be carried out by involving its teams. They must in fact become aware of the strategic challenge of this directive, and can also be asked at several stages to give their opinion, participate in discussions, and think about the next steps that the exercise may raise.

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