Corporate Sustainability Reporting Directive
Corporate Sustainability Reporting Directive will transform the EU’s business landscape
The Corporate Sustainability Reporting Directive (CSRD)1, along with the European Sustainability Reporting Standards (ESRS), significantly drives organizational change and strategic development to boost the green transition within companies over time. It has been designed to align sustainability (non-financial) information with financial information through balancing harmonization and standardization.
The Corporate Sustainability Reporting Directive (CSRD)2 is a regulation under the European Green Deal. The directive answers to investors’ need for harmonized ESG disclosures and is meant to help drive capital to sustainable investments. This directive levels the playing field of publicly disclosed sustainability information across the value chain and is designed to drive profound transformation in companies across all ESG areas.
The CSRD is much more detailed than other reporting frameworks, such as its predecessor, the Non-Financial Reporting Directive (NFRD)3. Data and claims must be included in the annual management report and require third-party limited assurance. The data must be digitally tagged to enable investors to scrape and collect it efficiently. Consequently, this is driving organizations to include non-financial information in their decision-making processes.
CSRD drives transparency and has detailed requirements for all key aspects of sustainability
The Corporate Sustainability Reporting Directive, or the CSRD (EU 2022/2464), CSRD entered into force in January 2023. It amends the 2014 Non-Financial Reporting Directive (NFRD) and expands the scope of companies that must report on sustainability topics in a more regulated manner.
The growing demand for non-financial information has led to the development of the CSRD Corporate Sustainability Reporting Directive. The CSRD will expand the scope and increase the specificity of sustainability reporting requirements for companies in the EU as well as Third-Country companies that have significant activity in the EU market.
Companies subject to the CSRD will have to report according to the 12 European Sustainability Reporting Standards (ESRS). There are overlapping reporting standards and frameworks, but CSRD will require more companies to report and will be less flexible and more detailed than the NFRD to meet investor demand. Companies must report material aspects, and the number of mandatory data points to report on is significantly expanded compared to the previous NFRD directive. The CSRD introduces the concept of double materiality: the business’ impact on people and the planet, and the financial impact on the business model.
The Omnibus package simplifies and streamlines various EU regulations, with delays and scope adjustments to the CSRD
The Omnibus Package refers to a set of regulatory updates and technical amendments designed to simplify and streamline EU regulations such as CSRD, EU Taxonomy and CSDDD. The Omnibus proposal includes significant changes to CSRD, with scaling down the scope of mandatory sustainability reporting from companies with 250 employees to companies with 1,000 employees, exempting approximately 80% of companies. The proposal also includes scaling down the number of mandatory data points, revision of EFRAG’s European Sustainability Reporting Standards (ESRS), cancellation of sector-specific standards as well as adoption of a proportionate standard for voluntary use which would be based on the VSME standard developed by EFRAG.
In April 2025, the EU Commission adopted a "Stop the Clock" proposal, delaying CSRD reporting requirements to give companies and regulators more time to adapt. This means that companies included in the second wave who were supposed to report for the first time in 2026 from 2025 information need to report for the first time in 2028 from 2027 information.
In June 2025, the EU Commission proposed to increase the CSRD reporting employee threshold to 1 000 employees and to completely remove listed SMEs from the scope. In its mandate, the Council also added a net turnover threshold of over €450 million to further reduce the scope of mandatory CSRD reporting. In July 2025, EFRAG published new draft simplified European Sustainability Reporting Standards (ESRS), which were after a commenting period submitted to the EU Commission as Technical Advice in December 2025.
The Omnibus package was signed off by the Council of the EU in February 2026, meaning that the CSRD’s scope is narrowed by raising the thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. Regarding third-country undertakings, the updated requirements will apply only to companies with a net turnover above €450 million for the parent undertaking within the EU and above €200 million generated turnover for the subsidiary or branch. Member states will now have 12 months to transpose the new provisions into national law. The Technical Advice ESRS are expected to be adopted in 2026, but many companies are already transitioning to the simplified ESRS.
The Omnibus package has received criticism for weakening the ambition level and transparency of sustainability work in EU. At AFRY, we believe that compliance is just the first step in an organization's sustainability journey. Gaining transparency and deeper ESG impact insights will remain a driver for competitiveness.
Timeline (subject to change):
2017: Non-Financial Reporting Directive (NFRD) becomes a law
2023: Corporate Sustainability Reporting Directive (CSRD) replaces NFRD
2024 (Jan): Reporting entities already subject to the NFRD to report their 2024 data in 2025
2025: (Feb): Omnibus proposal published
2025: (Apr): Stop-the-Clock adopted, pushing back the second wave of CSRD reporting by two years
2026 (Feb): Omnibus package signed off by the Council of the EU
2028 (Jan): Large reporting entities with more than 1,000 employees and above €450 million net annual turnover not currently subject to the NFRD to report their 2027 data in 2028
2029 (Jan): Non-EU companies required to report their data if conducting business within the EU report their 2028 data in 2029
How can companies make the most of the additional time provided by the Omnibus regulation?
As the CSRD reporting of second-wave companies was postponed by two years by the Omnibus’ “Stop the Clock”, companies have more time to set their ambition level and prepare for sustainability reporting.
Companies can take the following steps to gain the most benefits from the extra time:
- Take time to carry out CSRD-related projects, such as the Double Materiality Assessment (DMA) and gap analysis, in a robust and high-quality way
- Prepare for CSRD reporting by developing internal KPIs, data collection and data management
- Plan and strategize future sustainability work, including focus points for sustainability work, targets, policies, action plans and sustainability governance
- Practice for CSRD reporting by producing a sustainability statement in accordance with the requirements to identify development areas
How can the CSRD affect your company?
At its core, the CSRD aims to standardize ESG performance reporting for companies. However, CSRD is about more than closing the reporting gap. CSRD answers to the rising demand for sustainability and represents a significant shift in the financial market, promoting transparency, accountability and environmental awareness.
Therefore, the CSRD is more than a legal obligation: it provides an opportunity for companies that want to improve their ESG performance and stakeholder engagement while creating long-term value. It ultimately empowers those who lead the transition to a sustainable and socially responsible economy.
- Successful and timely implementation of the CSRD provides opportunities for companies by:
- Double materiality
- Compliance
- Creating new investment opportunities by attracting investors interested in sustainability
- Better identification of activities and projects that contribute to the transition towards sustainability
- Cost reduction and efficiency gains
- Improving company reputation and image by demonstrating a commitment to sustainability and social responsibility
- Identifying and managing ESG risks
- Disclosure builds on the principle of double materiality, a central concept in the CSRD. The principle of double materiality requires undertakings to assess both the impact materiality and the financial materiality of sustainability matters.
- Companies should consider each materiality perspective on its own and disclose information that is material from both perspectives as well as information that is material from only one perspective.
The EU member states will be required to ensure compliance with the directive and apply penalties where non-compliance is identified.
AFRY can help companies in multiple ways to prepare for the Corporate Sustainability Reporting Directive
Through AFRY’s unique CSRD approach, we build a strong organizational understanding to support clients in their transformation strategy. Using our multi-step approach, we assess the organization's high-level CSRD readiness to identify potential future opportunities and challenges, while the double materiality assessment (DMA) provides deeper insights into business activities and processes.
By combining these findings, we assist our clients in prioritizing during the CSRD gap analysis by categorizing and flagging potential challenges early on. This enables us to provide organizations with insight-driven, well-founded transformation journeys tailored to their specific business and organizational needs.
We also support companies in their sustainability reporting, a process that can be time-intensive, particularly in the first year. With AFRY's expertise, companies can produce a high-quality first report and establish the necessary internal processes for future reporting.
We combine sustainability reporting with actionable solutions to achieve measurable impact and real, lasting change
At AFRY, we assist clients across sectors with ESRS gap analyses, double materiality assessments, tailored action plans for their implementation journey and concrete reporting support. In addition, we provide guidance to clients seeking to embed sustainability into their strategies and daily operations, positioning them at the forefront of sustainable practices.
With comprehensive expertise in sustainability, technical, commercial, financial and project management fields spanning various industries, we leverage this diverse skill set to empower companies to adopt and implement a broad range of sustainable solutions. We deliver actionable strategies and solutions that surpass compliance and reporting to drive measurable impact to ensure measurable impact and real, lasting change.
Sustainability Consulting
Our team leverages the engineering, consulting, and industry expertise of AFRY's 18,000-strong network of professionals worldwide, helping provide world-class sustainability solutions.
Frequently asked questions
Originally, the following companies were in scope for mandatory CSRD reporting:
- Large public-interest companies with more than 500 employees and subject to the NFRD (1st wave)
- Large EU companies meeting two or more of the following criteria (2nd wave):
- €50 million in net turnover
- €25 million in assets
- 250 or more employees
- Listed SMEs (3rd wave)
- Non-EU companies with an annual EU revenue exceeding €150 million in two consecutive years (4th wave)
Due to the Omnibus package released in February 2025, changes to the reporting scope are expected. While the 1st wave companies have already reported according to the CSRD, the EU Commission’s “Stop the Clock” pushes back the reporting of the following waves by two years. Remaining changes to the reporting scope are expected to be adopted in 2025.
In addition, SMEs will need to produce reports required by the directive starting in the fiscal year 2026.
The Omnibus Package is a legislative proposal introduced by the European Commission in February 2025 to amend and simplify several key EU regulations related to corporate sustainability and financial reporting. It primarily addresses the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy Regulation.
For the CSRD, the Omnibus Package proposes several significant changes. One of the most immediate is a formal two-year delay (Stop the Clock) in the reporting obligations for companies that were scheduled to start in the second and third waves of implementation.
This delay was officially adopted by the European Parliament and Council in early April 2025, making it binding law. Another major component of the proposal is a narrowing of the reporting scope. Specifically, the Commission suggested raising the thresholds so that only large companies with at least 1,000 employees, along with certain financial criteria, would be subject to the CSRD. This measure aims to exclude tens of thousands of smaller companies from the reporting requirements. Changes to the reporting scope are not yet adopted.
In addition to timing and scope, the Omnibus Package proposes simplifications to the European Sustainability Reporting Standards (ESRS). This includes reducing the number of mandatory data points, prioritising quantitative over narrative disclosures, and eliminating the need for sector-specific standards in the immediate future. The package also clarifies the obligations related to value chain reporting, particularly for SMEs, ensuring that companies are not required to collect excessive information from smaller suppliers.
The package is moving through the EU’s legislative process, with some parts already adopted and others expected to be finalised by the end of 2025.
- Environmental, e.g. carbon emissions, water usage and waste management
- Social, e.g. employee diversity, labor practices and community engagement
- Governance, e.g. board composition and ethical policies
Footnotes
- 1. https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en a↩
- 2. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464 a↩
- 3. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52013PC0207 a↩