đź“Ś This article, written by CSRD specialist Yoeri Buis, explains how CSRD works, outlines who must comply and when, what to disclose under ESRS, and the key rules on double materiality, assurance, and penalties.
The Corporate Sustainability Reporting Directive (CSRD) is a European Union regulation that replaces and expands the Non-Financial Reporting Directive (NFRD). It creates a single standard for how large and listed companies must disclose sustainability data on environmental, social, and governance (ESG) topics. The purpose is to improve transparency, comparability, and accountability in corporate sustainability reports.
CSRD applies to all EU companies meeting at least two of the following: over €50 million in net turnover, €25 million in total assets, or 250 employees. It also includes listed SMEs, large non-EU companies operating in the EU above certain thresholds, and publicly traded firms in regulated markets.
Source: https://business.gov.nl/amendment/large-companies-must-report-sustainability/
Implementation is phased. Companies already under NFRD began reporting in fiscal year 2024. Other large companies follow from 2025 onward, listed SMEs from 2027 (with an optional delay until 2029), and non-EU multinationals from 2028. Each phase demands full compliance through integrated sustainability reporting.
Reports must follow the European Sustainability Reporting Standards (ESRS), detailing material topics such as climate change, resource use, pollution, biodiversity, workforce conditions, diversity, and governance ethics. Data on scope 1–3 greenhouse gas emissions and social impacts across supply chains must be included.
The CSRD introduces double materiality: companies must report not only how sustainability issues affect their business performance (the outside-in view), but also how their operations impact people and the environment (the inside-out view). This two-way lens creates full accountability across the value chain.
Sustainability data must undergo external verification. Initially, companies must receive limited third-party assurance, evolving toward full or “reasonable” assurance similar to financial audits. This independent verification improves data reliability and protects investors and stakeholders from misleading ESG claims.
Non-compliance can result in administrative fines between €100,000 and €10 million, or up to 5% of a company's net turnover depending on the jurisdiction. Beyond monetary penalties, companies risk exclusion from public tenders, reputational damage, investor distrust, and potential trading restrictions for listed firms.
Yes. Non-EU firms with EU subsidiaries or branches generating more than €150 million in EU turnover, and at least one subsidiary earning €40 million or more, must prepare sustainability reports aligned with EU standards from 2028 onward.
Deliberate non-compliance exposes firms to compounded penalties, liabilities, and bans from regulated exchanges. Professional negligence charges may also arise against executives. National regulators like the Dutch AFM or Germany’s BaFin have been empowered to investigate and demand corrective actions, with escalating financial consequences for continued breaches.
👉European Commission on corporate sustainability reporting: Finance.EC.Europe.Eu
👉 Read the complete text of the CSRD: Directive - 2022/2464 - EN - CSRD Directive - EUR-Lex
👉 A guide on how to achieve CSRD compliance with a digital solution: CSRD Software solution