What is CSRD? Understanding the EU’s Corporate Sustainability Reporting Directive (Updated 2026)

The Corporate Sustainability Reporting Directive (CSRD) is the European Union’s framework for standardising how companies report on environmental, social, and governance (ESG) matters. Its objective is to improve the consistency, comparability, and reliability of sustainability information disclosed alongside financial reporting.

CSRD replaces and significantly expands the former Non-Financial Reporting Directive (NFRD). It requires in-scope companies to disclose sustainability information using a common set of rules — the European Sustainability Reporting Standards (ESRS).

Following the EU’s Omnibus I legislative agreement, finalised in December 2025, several important aspects of CSRD have been revised. These changes affect which companies are required to report, when reporting starts, and how detailed disclosures need to be.

In this article, you will learn about the CSRD timeline and what it means for businesses in their sustainability practices.

Before we begin, if you are in need of a corporate reporting software for your CSRD submission, check how CtrlPrint can help you deliver compliant and captivating sustainable reports.

Key takeaways on the upcoming CSRD reporting

Here are our main takeaways regarding CSRD and how they might affect your company:

CSRD requires companies to include their environmental and social impact in their Annual Report.

Following the CSRD can boost a company’s reputation, attract investors, and help manage risks better.

Contents of this article:

What is CSRD and what does it do?

Why was CSRD introduced?

What are the benefits of CSRD?

What is the timeline of CSRD?

When will CSRD come into effect?

Final Thoughts

Frequently Asked Questions (FAQs)

What is CSRD and what does it do? Double Materiality Assessment (DMA) and Gap Analysis

The CSRD is an EU law that requires EU businesses, including some non-EU companies, to report their environmental and social impacts and how their ESG actions affect their business.

The goal of the CSRD is to provide clarity that helps investors, analysts, consumers, and other stakeholders to evaluate companies' sustainability performance and related business impacts and risks.

CSRD reporting is based on a double materiality assessment. This means that organisations must disclose information on how their business affects the environment, and also how their sustainability goals, measures, and risks impact their finances.

For example, in addition to reporting energy usage and costs, CSRD requires them to report emissions metrics, targets for reducing emissions, and information on how achieving those targets will affect their finances.

After finishing the Double Materiality Assessment (DMA), which is an important step in determining a company's reporting obligations under the CSRD, companies also need to conduct a Gap Analysis.

This analysis is important for identifying differences between an organisation's current data system and the standards mandated under the CSRD.

The Gap Analysis serves as a strategic method for pinpointing the disparities between a company's current ESG data collection and reporting, and the CSRD disclosure prerequisites. It acts as a guiding tool, steering companies through the unfamiliar terrain of sustainability reporting, enabling them to progress from their present status to achieving full compliance with CSRD.

All CSRD disclosures must be publicly available, and the CSRD mandates third-party auditing of all disclosures for accuracy and completeness. Also, let's not forget that under the CSRD the sustainability report must be part of the Annual Report.

Under CSRD, companies must report sustainability information based on the principle of double materiality:

• Impact materiality: how the company’s activities impact the environment and society

• Financial materiality: how sustainability risks and opportunities affect the company’s financial position and future performance

Disclosures are structured according to the European Sustainability Reporting Standards (ESRS) and cover, where material:

• Climate change and environmental matters

• Social topics, including workforce and value-chain impacts

• Governance, internal controls, and risk management

Companies must also explain policies, targets, actions, metrics, and progress over time, supported by data suitable for assurance.

Why was CSRD introduced?

In 2021, the European Parliamentary Research Service identified gaps in the Non-Financial Reporting Directive (NFRD), including inconsistent and costly data.

For this reason, CSRD was introduced to address these gaps and provide clearer, more comparable ESG disclosures, that help investors and analysts make better decisions.

CSRD was introduced to address long-standing issues with sustainability reporting in Europe, including:

• Inconsistent ESG disclosures across companies and countries

• Limited comparability for investors and analysts

• Insufficient linkage between sustainability risks and financial performance

By embedding sustainability reporting into the management report and aligning it with financial reporting cycles, CSRD aims to make sustainability information decision-useful, auditable, and integrated into corporate governance

What are the benefits of CSRD?

Complying with the CSRD presents several advantages for businesses. Let's see now 5 main reasons why your company should comply with CSRD and benefit from it.

• Better reputation

Following CSRD shows that companies care about sustainability and accountability for environmental, social, and governance (ESG) factors. This can improve a company’s reputation with customers, investors, and the community.

• Increased investor confidence

By offering clear, detailed insights into a company’s sustainability measures, the directive makes things more transparent and trustworthy for investors. This can lead to increased investment and higher market valuations.

• Competitive differentiation

Companies that follow CSRD can position themselves as leaders in sustainable practices, setting themselves apart from competitors.

• Improved risk management

The CSRD pushes companies to look at their ESG risks. This process makes organisations look closely at their operations for potential environmental and social risks, allowing them to develop effective strategies to fix them.

• Innovation and efficiency

Preparing for CSRD compliance often leads companies to evaluate their operations critically. Companies might find ways to use their resources better or cut down on waste. This can lead to smoother, more efficient operations.

What is the scope and timeline of CSRD?

CSRD implementation follows a phased approach, but Omnibus I has extended timelines for later reporting waves.

• The earliest reporting wave continues to apply to the largest companies already subject to enhanced sustainability reporting obligations

• Subsequent waves have been delayed, with some companies now expected to report from 2027 onwards, depending on national transposition

• Member states retain discretion over exact timing within the EU framework

Companies should monitor local implementation rules, as enforcement and deadlines may vary between EU countries.

CSRD was officially implemented on January 5, 2023, after receiving approval from the European Union Council. Here's a detailed overview of its implementation timeline:

Learn more about the timeline of the CSRD and policy-making timeline on the official European Commission website.

When will CSRD come into effect?

Individual EU countries will be responsible for enforcing CSRD compliance. Their regulators will monitor companies through audits and investigations.

As each country sets its own rules, enforcement, and penalties may vary.

Member states must adopt CSRD into their laws by July 6th, 2024, and penalties should be “effective, proportionate, and dissuasive.”

Why CSRD still matters despite a narrower scope

Although Omnibus I reduces the number of companies directly subject to CSRD, the directive remains strategically important. This is because CSRD:

• Sets a benchmark for sustainability reporting in Europe

• Influences investor expectations and data requests beyond formal scope

• Drives convergence with international sustainability standards

Even companies no longer legally required to report may face market-driven pressure to align with CSRD-style disclosures.

How companies should prepare for CSRD

For companies in scope, CSRD preparation requires more than narrative drafting. Key focus areas include:

• Data governance and internal controls

• Cross-functional collaboration between finance, sustainability, legal, and IT teams

• Integration of sustainability reporting into existing financial reporting workflows

• Readiness for assurance and regulatory scrutiny

Early preparation helps reduce compliance risk and avoids last-minute reporting challenges.

Final thoughts on CSRD

The Corporate Sustainability Reporting Directive represents a structural shift in how sustainability information is produced, governed, and assured in Europe. The Omnibus I reforms refine this framework, narrowing scope while preserving the directive’s core ambition: high-quality, comparable sustainability reporting integrated with financial disclosures.

Companies should reassess their obligations, update reporting roadmaps, and ensure their reporting processes are aligned with the latest CSRD requirements.

Are you looking for the right corporate reporting software to comply with the CSRD standards? Our experts at CtrlPrint are ready to help, contact us today to explore how our solutions can make a real difference to your sustainability reporting.

Frequently Asked Questions about CSRD (FAQs)

What is CSRD and ESRS?

The CSRD sets the stage for who needs to report and why, whereas the ESRS provides detailed guidelines on how to effectively carry out that reporting.

Is CSRD mandatory?

Yes, CSRD is already mandatory for a wide range of companies operating within the European Union.

How many companies are in the scope of CSRD?

With CSRD’s original scope (before the Omnibus I changes), it was projected to cover around 50,000 companies across the EU. Now, many mid-sized companies that would have been in scope under earlier CSRD criteria are now excluded or have delayed obligations. Recent media analysis suggests this could reduce the effective scope by up to 80 percent, potentially leaving on the order of 10,000–15,000 companies actually obligated to report under the latest rules.

Who is affected by CSRD?

Following the Omnibus I reforms, the scope of CSRD has been significantly narrowed. 

EU Companies

CSRD now applies primarily to the largest EU companies, defined as those that meet both of the following thresholds: More than 1,000 employees, and More than €450 million in net turnover. 
This change removes a substantial number of mid-sized companies that were previously expected to fall within scope.

Non-EU Companies 

Non-EU groups are required to report under CSRD only if they: Generate more than €450 million in net turnover within the EU, and have either a qualifying EU subsidiary or a significant EU branch. 

What happens if you are not complying with CSRD?

If a company fails to meet CSRD requirements, it could face serious consequences. Each EU member state will set penalties when they adopt the directive into their national laws. These might include financial fines or legal issues. Beyond that, non-compliance can hurt a company’s reputation, leading to lost trust from investors and stakeholders.

What are the penalties for CSRD?

Each EU member state is responsible for setting penalties under the CSRD. While the directive doesn't specify fines, countries can enforce monetary penalties, bar companies from public contracts, or even impose criminal charges in extreme cases. France, for example, fines up to €18,750 for not publishing a sustainability report, and companies may be excluded from government contracts. Severe offenses, such as obstructing audits, can lead to fines of up to €375,000 and up to five years of imprisonment.

How to start with CSRD?

To start with CSRD, first understand your company's scope and timeline. Assess your current sustainability practices and data collection. Develop a comprehensive sustainability strategy aligned with CSRD requirements. Invest in data management and reporting tools. Engage stakeholders and build internal capacity. Stay updated on CSRD developments and seek expert guidance.