The Corporate Sustainability Reporting Directive (CSRD)

Sustainability reporting is gaining momentum across the European Union (EU). Passed by the European Parliament and the EU Council in December 2022, the Corporate Sustainability Reporting Directive (CSRD) requires more than 50,000 companies to include a sustainability report in their management reports as part of their financial statements. The CSRD aims to improve the sustainability reporting framework by improving the quality of available sustainability information to meet the needs of various stakeholders and help Europe become a more sustainable economy. Companies may face considerable challenges in meeting these comprehensive and specific requirements, so it’s necessary to identify resources companies will need to meet CSRD requirements.

Key CSRD requirements:

A single reporting standard – sustainability reports will have to be prepared using a single reporting approach according to European Sustainability Reporting Standards, which are aligned with the existing sustainability standards, the EU taxonomy and other transparency requirements.
Part of your management report – your sustainability report will be part of your financial statements and should be inserted in your management report (in the designated section).

An independent auditor’s opinion – the CSRD states that your sustainability report will need to obtain a limited assurance conclusion from an independent auditor, upgrading to a reasonable assurance opinion in the future.
An electronic reporting format (ESEF) – sustainability reports will have a mandatory electronic format and tagging.
Dual materiality – companies will have to comply with the principle of dual materiality, which has two dimensions: impact materiality and financial materiality. A sustainability matter meets the condition of dual materiality if it’s material in terms of impact or from a financial perspective, or both.

CSRD reporting requirements will cover about 50,000 companies across Europe.

Large companies meeting two of the three criteria:
- EUR 25** million in total assets
- EUR 50** million in revenue
- 250 employees
Small and medium companies listed on a regulated market

* Credit institutions and insurance companies are governed by special rules (in particular relating to their legal form and first-time reporting)
** Enters into force on January 1, 2024. More information here

Parent companies of a large group in their consolidated management report
Large companies meeting two of the three criteria:
- EUR 25** million in total assets
- EUR 50** million in revenue
- 250 employees
Small and medium companies listed on a regulated market

Third-country companies with large EU subsidiaries or branches meeting certain criteria -

Net revenue > EUR 150 million in the EU for two consecutive financial years.

The CSRD will be rolled out in several stages:

2024
2025
2026
2028

2024

From 1 January 2024 it applies to companies covered by the non-financial reporting requirements. These companies are to publish their first reports in 2025.

2025

From 1 January 2025 it will apply to all large companies that are not currently covered by the non-financial reporting requirements. These companies are to publish their first reports in 2026.

2026

From 1 January 2026* it will apply to:

Small and medium listed companies
Small and non-complex credit institutions
Captive insurance companies

These companies are to publish their first reports in 2027.

* The option of delay for two years

2028

From 1 January 2028 it will apply to third-country companies with a net EU revenue exceeding EUR 150 million if they have at least one subsidiary or branch in the EU that exceeds certain thresholds. These companies are to publish their first reports in 2029.

Your sustainability report will need to disclose a wide range of details to help understand your impact on sustainability areas.

For example, a description of your business model and strategy:

Resistance to risks associated with sustainability matters
Your capabilities associated with sustainability matters
Implementing your strategy on sustainability matters
Your plans, including financial plans and investment plans
Your business model and strategy to ensure you are moving towards a sustainable economy and restricting global warming to 1.5 °C under the Paris Agreement
Achieving climate neutrality by 2050
Whether your business model and strategy consider your stakeholder interests and your impact on sustainability matters

A description of:

Your targets associated with sustainability matters to be met by a particular deadline (including GHG emissions reduction targets at least for 2030 and 2050)
Your achievements towards meeting those targets and a statement of whether your environmental targets are based on scientific evidence
The role of your administrative, management and supervisory functions in dealing with sustainability matters, plus their skills and expertise

as well as other information required by the CSRD.

European Sustainability Reporting Standards

A key section of the CSRD is the development of European Sustainability Reporting Standards (ESRS), which aim to secure the quality of sustainability information by requiring it to be comprehensible, verifiable, comparable and accurately presented.

Approved by the European Commission on 31 July 2023, ESRS apply from 1 January 2024.

PwC can help you get ready for the new sustainability reporting requirements, for example:

Carry out a dual materiality assessment (impact and financial)
Develop the structure of your sustainability report in line with the CSRD and ESRS
Assess your risks associated with sustainability areas
Help revise your strategy framework to accommodate your sustainability challenges
Evaluate your current level of compliance with the CSRD and ESRS and prepare a road map for full compliance
Carry out a limited review of your sustainability report and help you get ready for such a review being undertaken in the future