by Laura McGrath May-01-2024 in Commercial & Business

What is the Corporate Sustainability Reporting Directive?

The Corporate Sustainability Reporting Directive (CSRD) came into effect on 5 January 2023 and made significant changes to the previous Non-Financial Reporting Directive (NFRD). The new framework is part of the European Green Deal which is the European Union’s plan to achieve climate neutrality across the EU by 2050.

The CSRD replaced the NFRD with a new harmonised reporting framework for sustainability information across Europe. Building on the existing disclosure requirements under the NFRD, reporting obligations now apply to a much wider range of companies as well as extending the scope of information required to be disclosed. The overall aim of this new legislation is to increase transparency and to ensure stakeholders such as customers or investors have access to high-quality, standardised and easily comparable information on a company’s sustainability activity. This is intended to move capital flow away from unsustainable business models and allow for more strategic investment into sustainable business.


Who does it apply to?

The CSRD will now apply to a much wider range of companies than had previously been captured. The Directive will apply to EU large “public interest” undertakings and their parent companies, large undertakings and their parent companies, listed SMEs and certain non-EU undertakings. Large undertakings for example will include companies which meet two of the following criteria:

  • a balance sheet total of €25 million
  • A net turnover of €50 million
  • Over 250 employees

This affects some 10,000 companies across the EU. Commencement of reporting obligations will be staggered based on the company type.


What are some of the key provisions of the CSRD?

Reporting Format and Independent Assurance

Sustainability information will be required to be reported on an annual basis in a separate and dedicated sustainability statement within the company’s management report. One of the CSRD’s aims is to place sustainability information on an equal footing with financial information both in terms of reliability and status. To this end, the CSRD has introduced a requirement for sustainability reports to be audited, initially to a “limited assurance” standard with the introduction of a “reasonable assurance” standard if feasible. These audits are to be carried out by statutory auditors or accredited independent assurance service providers.



One of the key innovations of the CSRD is the introduction of a new set of common reporting standards which are known as the European Sustainability Reporting Standards (ESRS). These standards will be adopted by the European Commission under the CSRD and aim to introduce a level of transparency and certainty across corporate sustainability reporting. The standards will specify in prescriptive detail, the information required in order to be compliant with the CSRD. Compared to previous European sustainability related reporting requirements, the ESRS will be significantly more detailed in both depth of disclosure and the scope of metrics to be reported.

The European Commission adopted their first set of ESRSs in December 2023 with additional standards to follow. 12 ESRSs have been adopted and include general disclosure requirements and specific disclosure requirements under environmental, social and government topics. Each of these 12 ESRSs contains a large number of specific disclosure requirements and individual data points. The prescriptive nature of the ESRSs and the level of detail required aims to ensure that there is consistent and comparable sustainable data available across different companies.

In many cases, the ESRSs will require companies to report not only on their own operations but also on the operations of their entire value chain.


Current Status

The CSRD has been in place since 5 January 2023 with Member States given a period of 18 months to transpose it into national law. The Department of Enterprise, Trade and Employment is government department with responsibility for the implementation of the CSRD in Ireland. It has recently confirmed it is working with the Office of the Parliamentary Counsel to draft the legislation to transpose CSRD into Irish law. This national law will govern how important aspects of the CSRD will function for Irish companies, including penalties for non-compliance. This draft legislation is expected to be published in advance of the 5 July transposition deadline.

As mentioned above the first set of general and topical ESRS have already been adopted by the European Commission and in-scope companies will now have to start reporting according to these standards. The reporting directive initially envisaged sector specific standards that should be adopted in 2024.  However, in January of this year the European Parliament announced a two-year delay to the adoption of these ESRS until no later than 2026. The European Financial Reporting Advisory Group (EFRAG), who is the technical advisor to the European Commission on the ESRSs, is currently working on these standards which will include sectors such as oil and gas, road transport, food, agriculture, energy production and textiles.

EFRAG has also recently published for public consultation draft voluntary reporting standards for non-listed SMEs. These are designed to be a simple reporting tool to assist non-listed SMEs, which are not subject to reporting obligations under the CSRD, in responding to requests for sustainability information. Such requests may come, for example, where a company forms part of a value chain with an in-scope company.


Take aways and Conclusion

The impact of the CSRD and the compliance challenges it poses should not be underestimated by any in-scope companies, but particularly by companies not previously in-scope under the NFRD and to date have little to no existing sustainability reporting practices. In-scope companies need to ensure that they, or any company within their group, know whether they are subject to the CSRD and if so, when their reporting obligations commence and to whom they must report. They will need to ensure that they have systematic and robust practices in place to begin collecting the relevant data required under the ESRS before their first report is due. This may also include any information required from relevant companies in their value chain.

Even if your company is not in-scope under the CSRD, it may be prudent to begin looking at your own sustainability practices and information collection in these areas. This is and will continue to be an increasing area of regulatory focus for the European Commission and is an indication of more onerous sustainability reporting requirements for all EU companies in the future. Only last week, the EU Parliament approved the Corporate Sustainability Due Diligence Directive (CSDDD) after protracted negotiations. This Directive will require companies and their value chain to actively mitigate their negative impacts on human rights and the environment with heavy sanctions for non-compliance. The CSDDD will apply to companies with more than 1,000 employees and a global turnover of €450 million but will also be of significant relevance to smaller companies and SMEs present in the chain of activities of in-scope companies.

Further, as more and more companies begin to report in a systematic way under the CSRD, demand will rise from various stakeholders for reliable sustainable information from all types of companies regardless of their size. It is therefore important for all companies to review their reporting strategies and data collection systems on sustainability to ensure they will be able to to respond to an inevitable demand.

For more information on the CSRD and how the issues discussed in this article may affect your company, please contact our Commercial and Business team, headed by David Phelan ( or your usual Hayes solicitors contact.

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