CSRD: Corporate sustainability reporting standards for EU Entities

In brief:

• – The CSRD Directive mandates standardized sustainability disclosures for thousands of companies starting from the 2024 fiscal year
• – Reporting must align with ESRS standards and undergo mandatory third-party assurance to ensure data integrity
• – CSRD compliance rules are a key driver for transparency in a world where consumers and investors place increasing importance on environmental, social and governance (ESG) factors.

What is the CSRD directive and who must comply?

The CSRD directive mandates that large and listed firms provide regular disclosures regarding their social and environmental risks, alongside the specific impacts their operations have on society and the planet. These reporting norms serve as a primary driver for accountable business practices and increased investor appeal.

Broadening the scope of previous legislation, the CSRD ensures that non-financial data is comparable, reliable, and easy for investors to digest. Essentially, companies must adopt a double materiality lens, reporting on both financial risks and outward environmental impacts.

Under the CSRD Directive, corporate sustainability reporting for EU entities is rolling out in stages:

For a definitive look at the legal text and timelines, you can visit the European Commission’s official CSRD portal.

Which ESRS standards apply to my business?

To achieve consistency, the EU developed the European Sustainability Reporting Standards (ESRS). These serve as the ‘how-to’ guide for your disclosures.

CSRD reporting approaches for EU corporations in 2026 require alignment across four categories:

1. 1. Cross-cutting standards: General requirements and disclosures
2. 2. Environmental factors: Climate change, pollution, water, biodiversity, and resource use
3. 3. Social factors: Own workforce, workers in the value chain, affected communities, and consumers
4. 4. Governance factors: Business conduct and internal controls

By mandating common reporting standards, the EU aims to eliminate greenwashing and ensure that investors and citizens have access to reliable, machine-readable, and comparable data regarding a company’s sustainability performance and its long-term viability.

How does double materiality under CSRD for firms work?

The CSRD Directive requires companies to report based on the principle of double materiality. It requires companies to look at sustainability through two distinct lenses by providing:

• – Impact materiality: Information necessary to understand the undertaking’s impacts on sustainability matters (e.g. environmental and social impacts)
• – Financial materiality: Information necessary to understand how sustainability matters affect the undertaking’s development, performance, and position (e.g. climate-related financial risks)

A thorough materiality assessment is the first step in adhering to CSRD compliance rules, helping you filter out irrelevant data and focus on what truly matters to your stakeholders.

Value chain requirements

The reporting scope extends beyond a company’s immediate operations. Companies must disclose information regarding their entire value chain, including:

• – Direct and indirect business relationships
• – Products and services
• – Supply chains and any actual or potential adverse impacts connected to them

Reporting formats

The CSRD Directive mandates that companies move toward a highly standardized, digital, and integrated reporting format.

Integration into the management report

Undertakings must include their sustainability information in a dedicated section of their management report. This ensures that financial and sustainability information are presented together, providing an integrated view of the company’s performance and impact.

Electronic reporting format (digital tagging)

To facilitate the accessibility and comparability of data, the CSRD introduces strict digitalization requirements:

• – Single electronic reporting format: Companies must prepare their management reports in the electronic reporting format specified in Delegated Regulation (EU) 2019/815 (the ESEF format)
• – Digital tagging: Sustainability information, including the disclosures required by Article 8 of Regulation (EU) 2020/852 (the EU Taxonomy), must be digitally marked up or tagged. This allows the data to be machine-readable and easily incorporated into the European Single Access Point (ESAP)

The reported information must be accompanied by an assurance opinion. Initially, this will be “limited assurance,” with a potential move toward “reasonable assurance” (a higher level of scrutiny) as standards are developed. Read more about limited vs. reasonable assurance. 

What are the main difficulties in CSRD execution?

Tackling CSRD data issues in businesses is often the steepest hill to climb for most risk professionals tackling the new reporting requirements. The shift from voluntary, high-level goals to rigorous, audited data points uncovers several hurdles, notably:

• – Data collection burdens: Gathering granular information from far-flung global supply chains is notoriously challenging.
• – Assurance gaps: Many firms lack the internal audit trails necessary to pass a third-party review.
• – Stakeholder alignment: Ensuring that legal, IT, and HR teams are all speaking the same ESG language.
• – Cross-border variances: Reconciling EU standards with other global frameworks can lead to data discrepancies.

How can tech aids for CSRD in corporate settings help?

Manually managing thousands of ESG data points in spreadsheets simply isn’t a workable solution. It’s not sustainable, it duplicates work, and can leave organizations exposed to risk.

That’s why using tech aids for CSRD in corporate settings has become a critical business investment, allowing for better data harmonization, improved accuracy, and regulatory adherence.

CSRD assurance best tactics include covering the following areas:

1. 1. Automated validation: Implementing software that flags outliers or missing entries in real-time helps address gaps, for example in your value chain, that could leave holes in your CSRD reports.
2. 2. Centralized data lakes: Housing all ESG metrics in a single “source of truth”, for example a cloud-based archive, avoids reconciliation errors and keeps you compliant, informed, and in control.
3. 3. Efficiency tools: Leveraging technology to drive efficiencies helps you meet the digital and technical requirements associated with the CSRD, for example social impact trackers and integrated reporting platforms. 

Meeting CSRD requirements through outsourcing

The most critical CSRD assurance tactic has to be outsourcing. While navigating the multifaceted CSRD reporting standards is undeniably challenging, partnering with the right experts not only eases this burden, it provides added value too.

A strong partnership allows organisations to move beyond mere compliance, enabling leadership to focus on more strategic priorities and the long-term sustainable growth of their business.

Final thoughts

In this complex regulatory landscape, leveraging the right technological solutions enables your organization to meet transparency requirements for the CSRD directive and generate added value.

Global Relay’s data retention and advanced analytics solution provides the rigorous data integrity and audit trails necessary to meet mandatory assurance requirements. It enables you to gain deep insight in your data and help employees work more efficiently.

Find out more about how Global Relay can deliver compliant communications across your financial services organization.