The Corporate Sustainability Reporting Directive (CSRD) is an EU directive that aims to provide both investors and consumers with knowledge about businesses’ sustainability impact. CSRD replaces and is an extension of the scope and reporting requirements of the Non-Financial Reporting Directive (NFRD). While the NFRD only provided guidelines for ESG reporting, the CSRD introduces mandatory reporting standards, known as the ESRS (European Sustainability Reporting Standards). The new Directive is estimated to affect almost 50.000 companies in the EU starting from 2024 and as it was with the NFRD not only are the largest corporations affected but also listed SMEs. EU CSRD stands for the European Union Corporate Sustainability Reporting Directive. It is a proposed legislation by the European Commission that aims to improve the transparency and consistency of corporate sustainability reporting across the European Union.
The directive builds on the existing Non-Financial Reporting Directive (NFRD), which requires large companies to disclose information on their environmental, social, and governance (ESG) performance. The EU CSRD expands the scope of the NFRD by requiring more companies to disclose sustainability information, introducing minimum reporting standards, and mandating digital reporting.
The EU CSRD proposal sets out a comprehensive reporting framework, including mandatory sustainability disclosures for all large companies and a set of harmonized sustainability reporting standards. The proposal also requires companies to disclose information on their business model, policies, risks, and outcomes related to sustainability, as well as information on how they are addressing the sustainability challenges they face.
The EU CSRD is expected to improve the comparability and reliability of sustainability reporting, enhance the quality of information available to investors and other stakeholders, and contribute to the EU's sustainable finance agenda.
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