Gri CSRD Essentials

CSRD ESSENTIALS
THE DEFINITIVE GUIDE TO THE EU CORPORATE

SUSTAINABILITY REPORTING DIRECTIVE
WITH THE SUPPORT OF PASCAL DURAND, MEMBER OF THE EUROPEAN PARLIAMENT, CSRD RAPPORTEUR
2
Acknowledgments
THE DEFINITIVE GUIDE TO THE EU CORPORATE
SUSTAINABILITY REPORTING DIRECTIVE This project has been undertaken on the initiative and with the
support of MEP Pascal Durand, rapporteur of the Corporate
Sustainability Reporting Directive
Global
Written and coordinated by Abrial Gilbert-
Reporting
d’Halluin, Director EU and Engagement at GRI
Initiative
We are grateful for their valuable inputs and for

contributing to the design of the infographics
to: Lefebvre – Sarrut Group (Giuffrè Francis
Lefebvre Dalloz Sdu Larcier Intersentia Stollfuß)
KEY CONTRIBUTORS OBSERVERS

Marc Boissonnet, Bureau Veritas/TIC Council Griet Cattaert, UN Global Compact
Sophie Bridier, Lefebvre Sarrut Group Paolo Mazzeo, EFRAG
Danielle Ciatti, E3G Stefano Matonte, UN Global Compact
Filip Gregor, Frank Bold
Yona Kamelgarn, Group Caisse des Dépôts PROOFREADING
Martin Michelot, TIC Council Stefano Giacci, GRI
Yoshimi Onishi, Panasonic
Mylène Rahel Damamme, Decathlon GRAPHIC DESIGN
Vita Ramanauskaité, Accountancy Europe Scribble Design
Pierre-Louis Robert, Decathlon
Reference: A. Gilbert-D’Halluin,
Camille Sztejnhorn, Lefebvre Sarrut Group SPECIAL THANKS TO THE OFFICE OF MEP
CSRD Essentials, 2024 Peter Paul van de Wijs, GRI PASCAL DURAND FOR THEIR HELP WITH THE
PROJECT COORDINATION.
3
CSRD ESSENTIALS Table of content

THE DEFINITIVE GUIDE TO THE EU CORPORATE Foreword 4
SUSTAINABILITY REPORTING DIRECTIVE NFRD vs CSRD: What’s new? 5
Scope 7
Timing 10
European Sustainability Reporting Standards (ESRS) 11
Legal interconnections 16
Reporting format 21
Consolidation of subsidiaries 23
Reporting by third-country companies 28
Audit & assurance 31
Materiality and internal supervision 33
SMEs and the value chain 36
Implementing & delegated acts 38
National implementation & penalties 40
Glossary 41
References 45
Table of figures
FIGURE 1 NFRD vs CSRD: What’s new? 6
FIGURE 2 CSRD: Who and When? 9
FIGURE 3 What’s the timeline? 10
FIGURE 4 Sustainability matters covered in topical ESRS 14-15
FIGURE 5 Legal interconnections 20
FIGURE 6 Consolidation of a third-country parent group with
subsidiaries or branches in the EU 25
FIGURE 7 Consolidation of a third-country parent company
that has listed subsidiaries in the EU 26
FIGURE 8 Consolidation of a parent company in the EU that
has subsidiaries listed or not 27
FIGURE 9 Materiality assessment of sustainability data 35
FIGURE 10 Secondary legislations mandated by CSRD 39
CSRD ESSENTIALS 4
WITH
THE DEFINITIVE
THE SUPPORTGUIDE
OF MEP
TO THE
PASCAL
EU CORPORATE
DURAND, CSRD RAPPORTEUR
Foreword
by Pascal Durand, MEP and CSRD rapporteur
of sustainability information so far, creating real and rights record will be just as important as having a flawless
lasting value, away from short-term logics that focuses balance sheet.
solely on profit maximization.
The EU is not alone in this journey. Globally, sustainability
Based on the CSRD, companies will need to report on the reporting has grown from a niche activity, adopted by
impact of their activities on the environment and society, a handful of companies, to a common and increasingly
as well as the related (financial) risks and opportunities required practice for thousands of organizations
using ESRS; they will also be required to provide worldwide. Today, more than 130 countries all over the
assurance of reported information through standardized world mandate voluntary or mandatory sustainability
reporting and transparency. The EU sends a strong signal reporting. Since reporting obligations will also apply to a
to drive progress towards a more sustainable society and significant number of companies headquartered outside
conveys a message of hope and humanity regarding the the EU, European decision-makers and the delegated
fight against daily abuses in global supply chains. EU standard-setter (EFRAG) should maximize the
Over the last decade, the way consumers and market development of financial and impact-related standards
operators look at sustainability issues and corporate Organizations will now have to assess how their compatible with those already in use globally (such
business accountability has evolved significantly. As operations affect the wider world and will do so by as GRI, the Task Force on Climate-related Financial
a consequence, the European Union had to adapt the conducting a double materiality assessment process, Disclosures or the Carbon Project Disclosure).
legislation on corporate disclosure, in accordance with known as ‘impact materiality.’ They will also have to
its values and principles. With the final adoption of the gauge how sustainability issues, in turn, affect their The CSRD can appear as a complex mandatory
Corporate Sustainability Reporting Directive (CSRD) bottom-line or ‘sustainability-related financial materiality.’ regulation at first. The present work, carried out by
in December 2022 and the subsequent European This will help make economic activity more ethical various stakeholders in a collaborative and transparent
Sustainability Reporting Standards (ESRS), the and clean up the market. By declaring actions against way, shows that its rules are, in fact, quite easy to
European Union now finds itself at a decisive moment deforestation and social right abuses, companies will find understand and apply. I would like to thank warmly all of
– a moment where the application of reporting rules themselves in a clearer and more transparent competitive those who contributed to these briefings, which continues
by market operators supervised by authorities can be situation compared with those that continue to import and sheds light on the legislator’s work.
transformational for the economy and society. This new timber illegally or use child labor. In a nutshell, this marks
framework is not about undermining the business world, the end of declarations made by companies purely for Pascal Durand
but about ending the overly arbitrary and disparate nature public-relation reasons: having an impeccable human
CSRD ESSENTIALS 5
WITH
THE DEFINITIVE
THE SUPPORTGUIDE
OF MEP
TO THE
PASCAL
EU CORPORATE
NFRD vs CSRD: What’s new?

The CSRD (EU 2022/2464) did not emerge ex nihilo; anti-corruption and bribery issues. To that purpose, the
its development is deeply embedded in recent history, European Commission issued non-binding guidelines to
starting from 2014 when the Non-Financial Reporting help companies disclose relevant information in a more
Directive (NFRD) came into force. consistent and more comparable manner. If a company
decided not to disclose certain information, it was
The NFRD was a regulatory framework within the required to provide a clear and reasoned explanation for
European Union (EU) designed to enhance transparency this omission.
and disclosure of non-financial information by certain
large companies and groups within the EU. It was The NFRD did not require assurance of the sustainability
adopted by the European Parliament and the Council of information disclosed, although EU Member States
the European Union on November 22, 2014. were free to set up their own assurance requirements.
Although it marked a milestone in the comparability of
The NFRD encouraged businesses to consider sustainability disclosure, it had a rather limited scope both
environmental, social, and governance factors in their when it came to reporting requirements and to the type of
business strategies and operations, and required companies affected.
companies to disclose certain non-financial information. It
affected about 11,000 companies and directly referred to With the CSRD, many more companies will have
the GRI Standards and to other frameworks. to provide standardized qualitative and quantitative
information, both forward-looking and retrospective.
The directive applied to large public-interest entities
(PIEs) with over 500 employees, including listed
companies, credit institutions, and insurance companies,
as well as some other large companies brought within
the scope of application by decision of EU Member
States. Companies falling under the scope of the directive
were required to disclose non-financial information
either in their management report or in a separate
report published alongside their management report.
This statement covered information on environmental,
social and employee matters, respect for human rights,
NFRD vs CSRD: What’s new? 6
FIGURE 1
NFRD Non-Financial Reporting Directive

Disclose information on:
Approx. 11 700 1. Environmental
companies including: 2. Social and employee
Large public interest matters
entities (> 500 3. Respect for human
employees) such as : rights
- Listed companies 4. Bribery and corruption
- Banks and insurance + to present general In the management Voluntary disclosure
companies, etc. disclosures (business Double materiality report or in a separate based on International,
If they exceed some model, due diligence in the NFRD’s guidelines On a voluntary basis Online reporting / non-financial European or national
thresholds 2018: first report process, etc.) (soft law) by Member States PDF format statement guidelines
Disclosure Assesment Audit Reporting Located

Affect When ? Standards
requirements requirement requirement format reporting
Approx. 42 500 2025: first report from Disclose information on Double materiality in From limited assurance Human-readable Specific section of the Mandatory disclosure
companies including: Large listed companies 10 topics in line with EU the directive (hard law) of the reporting format of reporting management report based on European
Small, medium and standards (ESRS): (for the first report) to with structured Sustainability Reporting
large Public interest 2026: first report from 1. Climate change reasonable assurance machine-readable Standards (ESRS)
entities (PIE) Large companies 2. Pollution of the reporting (after data (compliant with (including sector-
Large companies 3. Water and marine the adoption of a European Single agnostic and secto-
Third-countries resources
2027: first report from 4. Biodiversity and standard on it no later Electronic Format specific standards)
companies SMEs which are PIE ecosystems than 1 October 2028) (ESEF) based on inline and a robust materiality
If they exceed some (with option to opt out 5. Resource use and circular XBRL) assessment
thresholds to 2029) economy
6. Own workforce
Example: Large companies 7. Workers in the value
should exceed at least 2029: first report chain
two of the following three from third-country 8. Affected communities
criteria: companies 9. Consumers and end-
- €25m (balance sheet users
total); 10.Business conduct
- € 50m net turnover; (business model,
value chain, views
- 250 employees during
of stakeholders, due
the financial year diligence, etc.)
+ to present general
disclosures
CSRD Corporate Sustainability Reporting Directive
Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

and MEP Pascal Durand, CSRD rapporteur
CSRD ESSENTIALS 7
WITH
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THE SUPPORTGUIDE
OF MEP
TO THE
PASCAL
EU CORPORATE
Scope
The CSRD makes a big leap in scope compared to the ■ Member States may choose to include some What is a branch?
NFRD it replaces. From the 11,000 companies included companies in the list of PIEs at national level.
in the NFRD Scope, the CSRD will directly apply to about In EU law a branch is a place of business
42,500 companies with their headquarters in the EU. Furthermore, certain financial products, such as pension other than the head office which is a part of
While no official figure has been communicated by the schemes or companies dedicated to cross-border an investment firm, has no legal personality,
EU, a few thousand companies with headquarters outside investments (UITPs), are excluded from the scope of this provides activities or investment services,
the EU will also be covered by these new rules. directive. and which may also perform reception and
The type of companies covered by the directive in On top of the above-mentioned entities, all the transmission of orders in relation to one or more
each Member State are listed in Annex I of the Accounting companies with their headquarters in the EU exceeding financial instruments for which the firm has
Directive (2013/34/EU). In most cases, it concerns public at least two of the three thresholds listed below fall been authorised.
and private companies limited by shares or by guarantee. within the scope of the CSRD2. The following thresholds
For companies which are not governed by the law of an also apply on a consolidated basis. They define “large
EU Member State, obligations are defined by the legal companies” as per EU law:
form which is comparable with the types of companies
listed in this specific annex. ■ average net turnover of EUR 50 million;
■ average balance sheet of EUR 25 million;
Several types of companies fall under the scope of the ■ at least 250 employees.
CSRD, depending on specific size criteria. This is the
case for large, small and medium public-interest entities Any company with a lower turnover, balance sheet and/
(PIEs), meaning: or number of employees is defined as a micro, small and
medium enterprise. The following thresholds also apply
■ Listed companies on regulated markets. These on a consolidated basis.
markets, such as certain stock exchanges, are
recognized by national authorities and function ■ Micro-companies that do not exceed two of the
in accordance with the provisions of EU rules on following criteria are not within the scope of the
“markets in financial Instruments” .
1
directive:
■ Credit institutions, insurance companies, mutual or ■ a net turnover of EUR 900,000;
other, including cooperatives. ■ a balance sheet of EUR 450,000;
● Member States may choose to exclude central ■ 10 employees. 1 Directive 2014/65/EU (MIFID).
2 Based on the latest adjustments of the Commission as per the EU delegated act
banks and particular public credit institutions. of 17.10.2023.
Scope 8
Companies with their headquarter outside the EU and

with either a large, small or medium listed subsidiary, or a
branch in the EU, fall under the scope of the CSRD if:
■ the large, small or medium, subsidiary, is a public-

interest entity and listed on an EU-regulated market;
■ the branch generates more than EUR 40 million of net
turnover a year;
■ The company that owns the branch or controls the
subsidiary generates more than EUR 150 million in the
EU during at least during two consecutive years.
Review clause of the directive

By April 2029, the Commission should provide an
assessment of whether and how the scope should
be further extended, especially in relation to small
and medium-sized companies and to third-country
companies. It should also provide an assessment of
the number of SMEs which have used the dedicated
non-binding European Sustainability Reporting
Standards (ESRS) for SMEs.
Scope 9
FIGURE 2 –CSRD: Who and When?
2025 2026 2027 2028 2029

on the 2024 data on the 2025 data on the 2026 data on the 2027 data on the 2028 data Thresholds (m = million)
with balance sheet (total) in excess of €25m;

and/or net turnover in excess of €50m;
Large listed companies
with more than 500 employees during the financial year.
Exceeding at least two of the following three criteria:
€25m (balance sheet total);
Large companies and groups €50m net turnover;
250 employees during the financial year.
Public interest entities (PIEs) other than large listed companies, credit institution and insurances Pending Member State’s applicable rules.
with balance sheet (total) in excess of €25m;

and/or net turnover in excess of €50m;
Listed parent companies of a large group with more than 500 employees (consolidated basis) during the financial year.
Exceeding at least two of the following three criteria on a consolidated basis:

Parent companies of a large group €50m net turnover;
250 employees (consolidated basis) during the financial year.
Possibility of an opt-out for 2 years Do not exceed two of the following three criteria:
Listed Small and Medium Enterprises (SMEs) €50m net turnover;
Small, non-complex credit institutions that are listed SMEs

or large corporates Thresholds of or
Captive insurance or reinsurance companies if they are listed SMEs

or large companies Thresholds of or
with net consolidated turnover of more than €150m in the EU;

IMPACT REPORTING ONLY Third-country and has either a large or listed subsidiary or a European branch with net
companies
turnover in excess of €40m.
EXCLUDED FROM THE SCOPE Do not exceed two of the following three criteria:
€450 000 (balance sheet total);
Micro-undertaking
€900 000 net turnover;

CSRD ESSENTIALS 10
WITH
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OF MEP
TO THE
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EU CORPORATE
Timing
FIGURE 3 –What’s the timeline?
2023 2024 2025 2026 2027 2028 2029 2030
05/01 Entry into force of the CSRD
06/07 End of transposition period for the Member States
First report (based on limited assurance) Evaluation report on the directive

Legislatives acts
EU Commission assessment of
and Proposals possible legal measures to ensure
sufficient diversification of the
sustainability assurance market
Public interest entities (PIEs) subject to a regulated market + Bank + Insurance companies if > 500 employees
Large companies
Listed SMEs (but possible to opt out during 2 years)
For which Non EU-companies if net consoli-

companies? dated turnover > 150 millions euros
End of exemption for Listed SMEs
31/07 Sector-agnostic standards
By June Standards for SMEs By June Sectorals standards and for Non-EU companies
By October Standards on limited assurance
First revision of the standards By October Standards

Under which
on reasonable assurance
standards?
End of the artificial EU consolidation for
subsidiaries with parents’ HQ outside the EU

CSRD ESSENTIALS 11
WITH
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OF MEP
TO THE
PASCAL
EU CORPORATE
European Sustainability Reporting Standards (ESRS)

What are the European Sustainability 3. The outcome of these policies; (to be used by listed and large companies), the standard
Reporting Standards – ESRS? 4. Risks and risk management; for listed SMEs, and the standard for third-country
5. Key performance indicators relevant to the companies.
The ESRS outline the disclosure requirements that business. The full ESRS are made up of three categories: cross-
companies need to meet to comply with the CSRD. cutting standards (sector agnostic), topical standards
The directive mandates companies falling within its How are the ESRS structured? (sector agnostic), and sector-specific standards.
scope to adopt the ESRS when reporting on their
sustainability information. The ESRS align with the goals There are different sets of ESRS to be used by the Cross-cutting standards (ESRS 1 and ESRS 2):
and requirements set forth by the CSRD and provide different companies in the CSRD’s scope: the full ESRS Standards that define the general principles when
a standardized approach to sustainability reporting
(environmental, social and governance) across the EU. In
short, they impose obligations in terms of transparency,
but they do not prescribe any obligations in terms of
behavior. Like a detailed recipe book, they provide step- The role of the EFRAG in developing the ESRS
by-step instructions to comply with the directive.
ESRS are based on technical advice from EFRAG, an independent, multistakeholder
What does the CSRD require for ESRS advisory body, primarily funded from the European budget. As part of its mandate
standards setting? granted by the CSRD to provide technical advice to the European Commission on
ESRS, EFRAG is in charge of developing sector-agnostic standards, sector-specific
Article 1 of the CSRD introduces new articles (19a and standards, mandatory standards for listed SMEs. The development of the initial sets of
29a) in the Accounting Directive, prescribing with various ESRS will be a multi-year exercise. Although this was not part of the CSRD mandate
levels of granularity what information shall be disclosed as such, EFRAG has undertaken to draft voluntary standards for SMEs, as well as
on environmental, social and governance matters. standards for companies operating in the European market with headquarters outside
More specifically, they require companies to disclose the EU. The CSRD requires a regular review of each standard no more than three years
information on five reporting areas: after its entry into force.
EFRAG has also issued implementation guidance documents, releasing three ‘ESRS
1. Business model implementation guidance’ resources to aid in adhering to reporting standards. These non-
2. Policies, including the due-diligence processes authoritative materials serve as educational tools and can be found in the REFERENCES
implemented; section.
reporting according to the ESRS (ESRS1). They Terminology of the standards

specify the “general disclosures”, which outline the
essential information to be disclosed irrespective Disclosure Requirements (DR): all the specific to the entity rather than the sector.
of the sustainability topics (ESRS 2) and can apply information that shall be or could be disclosed in When defining its entity-specific disclosures
across sectors. These include: whether a company has the various categories of ESRS. for the first three sustainability reporting years,
opted to omit a specific piece of information pertaining the company may use other frameworks or
to intellectual property, know-how or the results of Datapoint (DP): are the smallest, most specific reporting standards, such as IFRS industry-
innovation, or to what extent the sustainability statement reporting element of the of all disclosure based guidance or GRI Sector Standards,
covers the company’s upstream and downstream value requierements. It can be produced as a narrative to complement disclosures which are not yet
chain. (e.g. how the organization seeks to ensure available in the ESRS.
ESRS 1 and ESRS 2 apply to sustainability matters meaningful engagement with stakeholders) or
described in the topical standards and sector-specific as quantitative data (e.g. the percentage of total Materiality assessment: ESRS 1 requires all
standards. The information requested by ESRS 2 is employees covered by collective bargaining companies to conduct a materiality assessment
mandatory for all companies. All other standards are agreements). ESRS 2 and topical standards that applies the principle of double materiality
subject to a materiality assessment. represent more than 1,000 datapoints in total, (identification of relevant impact and financial
but not all of them will be reported by a company materiality). The identification of the material
Topical standards (10 of them) reflect the three – only those that are deemed material. matters is the starting point to determine the
dimensions of sustainable development (ESG). Each material information to be disclosed in the
dimension is indicated by a letter and a number (for Impacts, Risks and Opportunities (IROs): they sustainability statement, and to identify which
instance, ESRS S1 focuses on the social dimension, relate to environmental, social and governance related IROs need to be reported on, using the
specifically on the organization and its workforce). Each matters that are to be reported in the company’s relevant standard. This assessment requires the
topical standard is itself structured into sustainability own operations and its value chain. Only exercise of judgement by the company, which
topics, sub-topics and sub-sub-topics, collectively called material IROs are to be reported. needs to define itself what is material/relevant to
“sustainability matters”. its activities and throughout its value chain.
Entity-specific disclosure: when specific
Sectoral standards: as of 2027 and upon the adoption Impacts, Risks, or Opportunities (IROs) are not
of the sectoral standards by the EU, companies should addressed in the ESRS, whether at the topical
report on specific disclosures, depending on their sector or sectoral level, but the company deems them
of activity. They will be applicable to all companies within material for reporting, it can offer supplementary
a specific sector (e.g. textile industry, including footwear entity-specific disclosures. This allows users
and garment production activities). By addressing sector- to understand the impact of these IROs. In the
specific impacts, risks and opportunities, the ESRS absence of sector-specific standards, companies TO LEARN MORE ABOUT MATERIALITY
should ensure that organizations report information must report each material IRO, potentially ASSESSMENT, PLEASE READ OUR
BRIEFING ON MATERIALITY AND INTERNAL
that are specific to that sector, and that are not already resulting in a plethora of disaggregated data, SUPERVISION, AND OUR GLOSSARY.
covered, or not sufficiently covered, by the 10 topical the other ESRS, and no assurance of the data is required.
standards. Until sector-specific standards are adopted by A materiality assessment is nonetheless incorporated.
the EU, companies will also need to determine sector- Voluntary standards should be more basic, focusing on
specific material information on their own (using rules specific narratives on the company’s own policies, actions
for entity-specific disclosures). Companies or groups and targets, as well as information on lenders, investors
operating in more than one sector are likely to report and clients.
against more than one sectoral standard. However, there
may be some overlap in data points. Standards for third-country companies: they specify
the information to be included in the sustainability report
Standards for listed SMEs: the CSRD requests these of third-country companies, generating an annual net
standards to be simpler than the full ESRS set for large turnover of EUR 150 million in the EU and that have at
companies and proportionate to SMEs’ capacity to least one subsidiary or branch in the EU. These standards
report, as well as to the scale and complexity of their should be adopted by June 2026 and applied as of fiscal
activities. They should at least include requirements on year 2028. They will only address the sustainability
sustainability matters, including a set of targeted metrics performance of companies, focusing on their impacts.
to assess how companies measure their performance
and how they identify, manage, and engage on the impact In addition, the CSRD provides the European
and risks of their activities. Reporting standards for listed Commission with the possibility to allow third-country
SMEs are under development: they should be adopted companies within the scope of the CSRD, or non-EU
by June 2024, and apply as of fiscal year 2026, with a parent companies of EU subsidiaries (such as those
possibility to ask for a 2 year “opt-out” option (a delay). based in the U.S. or the UK), to use sustainability
They will apply to listed SMEs on regulated markets, standards equivalent to the ESRS. In that case, the
including small listed non-complex credit institutions, and European Commission will need to grant an equivalence
captive insurance or reinsurance companies. status to those jurisdictions first.
TO LEARN MORE ABOUT THE DIFFERENT TYPES OF SMEs

READ OUR GLOSSARY.
Voluntary standard (for SMEs): this standard can be

used on a voluntary basis for SMEs which are not listed
on regulated markets. Non-listed SMEs are outside the
scope of CSRD – the CSRD does not require them to
disclose any sustainability information. This standard will
therefore have no legal authority. Its structure differs from
FIGURE 4 –Sustainability matters covered in topical ESRS – 1/2
Climate change adaptation

ESRS E1c
Climate change mitigation
CLIMATE CHANGE
Energy
Pollution of air
Pollution of water
Pollution of soil
ESRS E2
Pollution of living organisms
and food resources POLLUTION
Substances of concern
Substances of very high concern
Microplastics
Water consumption
Water Water withdrawals
ESRS E3c
Water discharges
Climate Change
WATER AND Water discharges in the oceans
Land-use change, fresh water-use change MARINE RESOURCES Marine resources
and sea-use change Extraction and use of marine resources
Direct exploitation
Invasive alien species Direct impact drivers of biodiversity loss
Pollution
Others
Examples: Impacts on the state of species ESRS E4
Species population size,
Species global extinction risk BIODIVERSITY
AND ECOSYSTEMS
Examples: Impacts on the extent and condition
Land degradation, Desertification, Soil sealing of ecosystems
Impacts and dependencies
on ecosystem services Resources inflows, including resource use
ESRS E5c
Resource outflows related
CIRCULAR ECONOMY to products and services
Waste

BriefTitle 15
FIGURE 4 –Sustainability matters covered in topical ESRS – 2/2
Secure employment
Working time
Adequate wages
Social dialogue
Freedom of association, the existence Working conditions
of works councils and the information, consultation Gender equality and equal pay
and participation rights of workers for work of equal value ESRS S1
Collective bargaining, including rate Training and skills development Equal OWN WORKFORCE
of workers covered by collective agreements Employment and inclusion
Work-life balance
treatment and ESRS S2
of persons with disabilities
Health and safety opportunities
Measures against violence and
harassment in the workplace for all WORKERS
Diversity IN THE VALUE CHAIN
Adequate housing
Child labour Other work-related rights Adequate food
Forced labour Water and sanitation
Communities’ economic,
Adequate housing Land-related impacts
Privacy social and cultural rights Security-related impacts
ESRS S3c Freedom of expression
Communities’ civil
AFFECTED COMMUNITIES and political rights Freedom of assembly
Impacts on human rights defenders
Rights of indigenous peoples Free, prior and informed consent

Self-determination
Privacy Cultural rights
Freedom of expression Information-related impacts
Access to (quality) information for consumers and/or end-users
ESRS S4
Health and safety
Security of a person
Personal safety of consumers CONSUMERS
Protection of children and/or end-users AND END-USERS
Non-discrimination Social inclusion of consumers
Access to products and services and/or end-users
Responsible marketing practices
Corporate culture
Protection of whistle-blowers
ESRS G1c Animal welfare
BUSINESS CONDUCT Political engagement and lobbying activities
Management of relationships with suppliers including payment practices
Corruption and bribery Prevention and detection

including training
Incidents

CSRD ESSENTIALS 16
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EU CORPORATE
Legal interconnections
Legal reporting obligations on corporate sustainability are ■ specification of the content of the management report, exceed or meet certain thresholds;
often scattered across various legal frameworks. Despite including additional information on their performance, ■ disclosure of information about companies’ corporate
the inclusion of over 40 legal cross-references in the position, and future developments; governance practices in a Corporate Governance
CSRD, their primary objective is to establish consistency ■ audit and assurance requirements on financial Statement;
in disclosure requirements. By doing so, the CSRD not statements and sustainability reporting; ■ language of the report;
only adds significant value, but also simplifies the reporting ■ definitions, size criteria and thresholds for companies ■ designation of a “home Member State” – where the
process for both preparers and users. The following and groups, to determine the level of disclosure and company has its registered office.
briefing presents concise definitions of the essential cross- reporting requirements for companies.
references. It also aims to improve the understanding What is amended by the CSRD:
of the structure of mandatory measures outlined in the What is amended by the CSRD: To ensure that companies listed on a EU regulated
directive, and to clarify the implications for companies The CSRD extends the existing rules governing the market adhere to the same sustainability reporting
engaged in the preparation of their management reports. disclosure of financial information to encompass specific requirements as non-listed companies falling under the
details on to the disclosure of sustainability-related scope of the Accounting Directive, the CSRD amends
The CSRD (Directive 2022/2464/EU) amends information – including environmental, social, human rights, the Transparency Directive accordingly. Additionally,
four structural European legislative acts in and governance topics. It also introduces a single electronic it establishes criteria for the European Commission
the field of company law: format for the preparation of the management report. to assess the equivalence of sustainability reporting
standards used by third-country issuers.
1. The Accounting Directive (Directive 2013/34/EU) 2. The Transparency Directive (Directive 2004/109/EC)
establishes rules and standards for the preparation aims to improve the transparency of financial markets 3. The Audit Directive (Directive 2006/43/EC)
and presentation of financial and sustainability by establishing disclosure requirements for issuers of establishes rules for the statutory audit of annual and
statements by companies. securities listed on regulated markets. consolidated financial and sustainability statements in
the EU.
This directive harmonizes accounting rules and It focuses on enhancing transparency in financial and
regulations across EU Member States. It aims to ensure sustainability reporting by companies which are listed on It aims at improving the quality and transparency of audit
the consistency and comparability of financial statements regulated markets within the EU. services within the EU. This directive sets outs rules for
and sustainability information provided by companies. the appointment of statutory auditors, the conduct of
Key mandatory measures prescribed by the directive: statutory auditors and the oversight of audit firms.
Mandatory measures include:
■ periodicity of companies’ reporting;
■ preparation of (consolidated) financial statements; ■ obligations for shareholders when their voting rights
Key elements of the directive: the Audit Regulation’s list of prohibited services, it ■ a list of non-audit services (e.g. consultancy services)
also introduces provisions on prohibited non-audit that audit firms are prohibited from providing to the
■ a framework for quality assurance systems for audit services for statutory auditors carrying out sustainability clients they audit.
firms to ensure consistent high-quality audits; assurance services, such as consultancy services on
■ provisions for an audit committee composed of sustainability matters (e.g. preparation of a materiality What is amended by the CSRD:
non-executive members of the administrative or assessment). ■ extends the prohibition of the provision of non-audit
supervisory body; The CSRD also amends the Audit Directive, services to cover sustainability assurance;
■ measures on auditors’ independence, to avoid conflicts by adding specific requirements to the necessary ■ It extends the limits of certain audit fees to include
of interests; educational competencies. These requirements are sustainability assurance services.
■ measures for auditors and their firms to prevent them for statutory auditors to qualify for the conducting of
from engaging in financial, business, employment, sustainability assurance engagements. While defining which information should be disclosed by
and other relationships that could compromise their In a bid to promote diversity in the audit market, the companies, the CSRD also refers to key legal acts:
independence; directive provides companies’ shareholders with more
■ transparency requirements on ownership and than 5% voting rights or 5% capital the option to request The EU Taxonomy Regulation on
governance of audit firms, including disclosure of the involvement of an accredited third party, to prepare Sustainable Investment (Regulation (EU)
the legal structure, ownership, and governance a report on some elements of the sustainability reported. 2020/852)
arrangements; This accredited third party cannot be affiliated with the
■ requirements for education, training and competences same audit firm or network as the auditor conducting the The CSRD proposes to integrate the disclosure
for statutory auditors. statutory audit. requirements related to the EU Environmental Taxonomy
into the larger framework of sustainability reporting. This
Finally, the directive describes the content and format of 4. The Audit Regulation (Regulation (EU) No means that companies falling within the scope of the
auditors’ reports and requirements for the public oversight 537/2014) sets out specific requirements and rules CSRD would need to disclose information on the extent to
of statutory auditors and audit firms to ensure compliance governing the conduct and oversight of the statutory which their activities are associated with environmentally
with professional standards. audits of public-interest entities. sustainable economic activities, as defined by the EU
Taxonomy Regulation.
What is amended by the CSRD: It complements the Audit Directive to establish rules and The EU Taxonomy Regulation sets specific criteria for
The CSRD introduces a mandatory assurance (audit) of standards for the audit profession within the EU and economic activities to be classified as environmentally
sustainability information by an independent third party. provides additional requirements for the content of the sustainable. It focuses on economic activities
This can either be the statutory auditor, who already audit report. that substantially contribute to one or more of the
audits the financial information, or a second auditor or environmental objectives, without significantly harming
an Independence Assurance Service Provider (IASP), This Regulation introduces: (being detrimental) to other goals.
if allowed by national public authorities. Notably, the
directive introduces a limited assurance review in the ■ the mandatory rotation of audit firms for certain
European Single Market, with a planned transition categories of companies (the public-interest entities –
to reasonable assurance over time. By referring to see Glossary for more details);
The environmental objectives covered by the regulation sustainability of their economic activities, a requirement The European Climate Law (Regulation
include: fully integrated into the CSRD. Consequently, non-financial 2021/1119/EU)
companies concerned by the CSRD are required to
■ Climate Change Mitigation: activities that contribute disclose the three ratios, namely the turnover, CapEx Companies in the scope of the CSRD should disclose their
to the reduction of greenhouse gas emissions and the and OpEx in relation to economic activities which are climate transition plan – if they have one – showing how
transition to a low-carbon economy; Taxonomy-aligned. Reporting related to the Taxonomy their business model and strategy are compatible with:
■ Climate Change Adaptation: activities that enhance should be incorporated into a specific section within the
resilience to the impacts of climate change, helping management report, alongside the sustainability statement. ■ the transition to a sustainable economy;
society and ecosystems adapt to changing climate ■ the limiting of global warming to 1,5 °C, in line with the
conditions; The Sustainable Finance Disclosure Paris Agreement adopted as part of the United Nations
■ Sustainable Use and Protection of Water and Regulation (SFDR) (Regulation 2019/2088/ Framework Convention on Climate Change; and
Marine Resources: activities promoting the EU) ■ the objective of carbon-neutrality (the sum between
responsible and efficient use of water resources, positive and negative Greenhouse Gas Emissions –
as well as the protection and restoration of marine The SFDR aims to enhance the transparency and GHG is net zero) of the European Climate Law.
ecosystems; sustainability of disclosures in the financial sector by
■ Transition to a Circular Economy: activities that establishing a framework for how financial market This regulation establishes a legal framework in the
contribute to the sustainable use of resources, waste participants and financial advisers integrate ESG EU to address climate change and to set the stage for
prevention, and the promotion of circular business considerations into their investment processes and achieving climate neutrality by 2050. The key elements
models: decision-making. It sets disclosure obligations for and mandatory measures of the European Climate Law
■ Pollution Prevention and Control: activities aimed financial market participants, including investment include:
at preventing pollution, reducing the release of firms, asset managers and insurance companies, as well
hazardous substances, and promoting the sustainable as financial advisers, and for specific financial products. ■ an overarching goal for the EU to become climate-
use of resources; To meet these obligations, financial market neutral by 2050, with intermediate targets to reduce
■ Protection and Restoration of Biodiversity and participants need sustainability information from those by 55% by 2030 compared to 1990 levels;
Ecosystems: activities that support the preservation, companies, not only to understand the broader ■ carbon budget trajectories, which allocate the total
restoration, and sustainable use of ecosystems, sustainability performance of companies covered by the allowable emissions over a specific period for Member
biodiversity, and natural habitats. CSRD, but also to better assess the sustainable nature of States;
their investment portfolio. ■ a governance mechanism to monitor progress, ensure
These objectives are complemented with criteria for The directive introduces the notion of Principal accountability, and facilitate adjustments through
sustainable activities in each of the environmental goals Adverse Impact (PAI). PAIs refer to the adverse effects National Energy and Climate Plans (NECPs) outlining
mentioned above. Activities meeting these criteria can be or negative impacts that the investment decisions of the contributions of Member States to the EU’s climate
considered as environmentally sustainable. financial market participants may have on sustainability goals;
Article 8 of this Regulation specifically deals with the matters. However, the directive does not set any metrics ■ provisions for the regular review of Member
obligations of large companies and financial institutions to assess those. The ESRS should help financial States’ progress toward climate goals including an
to disclose information regarding the environmental institutions build relevant metrics for PAIs disclosure. intermediate target in 2040.
EU Climate Transition Benchmarks and processes (obligation to tell), the CSDDD requires
EU Paris-aligned Benchmarks (Delegated about 5,500 companies to identify, prevent, mitigate,
Regulation (EU) 2020/1816 – 1817 – 1818) communicate and remedy adverse impacts in their value
chain (obligation to act). This means that companies
The EU Climate Transition Benchmarks and EU Paris- within its scope have to describe how they act on due
aligned Benchmarks are among the key legislative diligence in their management report, using the ESRS.
vehicles used by EFRAG in the development of the ESRS That includes defining a climate transition plan in line with
on climate reporting. the Paris agreement on climate change, and consistent
These benchmarks are designed to help investors with the objective of meeting carbon neutrality by 2050.
identify environmentally sustainable economic activities, The directive should be formally adopted by European
and investments aligned with the objectives of the Paris policymakers in April 2024. Starting with EU and non-
Agreement on climate change. They strongly connect EU companies with over 5,000 employees and EUR400
with the EU Taxonomy Regulation: to qualify and comply million turnover, it should progressively enter into force
with an EU Climate Transition Benchmark, companies’ three years after its adoption.
activities and revenues to be considered as sustainable Companies falling within the CSDDD scope but not
must meet certain requirements, such as minimum covered by the CSRD, including certain sizable third-
carbon reduction and maximum carbon content. country companies operating in Europe without branches
or subsidiaries, will have to communicate their due
Corporate Sustainability Due Diligence diligence obligations in line with the CSRD requirements.
Directive (CSDDD) This communication will be guided by dedicated reporting
criteria, to be established at a later stage by the European
The Due Diligence Directive lays down obligations for Commission.
large companies regarding actual and potential adverse
impacts on the environment and human rights for their
business chain of activities. This includes coverage of the
upstream business partners of the company. Additionally,
it partially encompasses downstream partners’ activities.
These activities involve distribution, transport, and
storage. The directive requires companies to adopt a
plan ensuring that their business model and strategy are
compatible with the Paris agreement on climate change.
It also lays down rules on penalties and civil liability for
infringing these obligations.
While the CSRD sets mandatory disclosure
requirements for companies on their due diligence
FIGURE 5 –Legal interconnections
Linked to the CSRD Modified by the CSRD
EU Taxonomy Regulation Graph legend

Obligations regarding the content of the management report:
disclosure requirements (turnover, capex, opex) on the activities
of the companies that can be classified as environmentally sustainable.
Reporting requirements Accounting directive
Obligations regarding the content
Part of the sustainability reporting Obligation to act of the management report (reporting
requirements on financial and
sustainability reporting)
Audit + audit requirements, etc.
European Climate Law
Disclosure of a climate mitigation plan that shows how the business model and Financial Sector
strategy of the companies are compatible with the transition to a sustainable
economy and with the limiting of global warming of 1,5 °C and the objective of
carbon-neutrality (reduction of 55 % by 2030 compared to 1990 levels). Benchmarks Transparency directive
Obligations regarding the content
Part of the sustainability reporting (climate transition plan) of a corporate governance statement,
etc.
Corporate Sustainability
Due Diligence Directive
Requires companies to identify, prevent, mitigate, communicate
and remedy adverse impacts on the environment and human CSRD CSRD Audit directive
rights for their direct business chain of activities, etc.
Audit process of sustainability
Use the ESRS on due diligence processes information (from limited to
reasonable assurance)
+ measures on independance
EU Climate Transition of the auditor, etc.
and EU Paris-Aligned Benchmarks
Defines the minimum standards for EU climate transition
and EU Paris-aligned Benchmarks, etc.
Linked to the CSRD standards on climate reporting
Audit regulation
European Single List of forbidden non-audit services
Access Point for auditors + rotation rules.
Sustainable Finance Disclose Regulation Digital platform for the
Disclosure obligations on how sustainability matters are including centralized access to financial
in investment processes and decision-making. and sustainability information
ESRS will serve financial institutions to monitor information in the EU (by July 2027).
to be disclosed on Principal Adverse Impacts (PAIs) Access to sustainability reporting
(by january 2028)

CSRD ESSENTIALS 21
WITH
THE DEFINITIVE
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OF MEP
TO THE
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EU CORPORATE
Reporting format
Unlike the NFRD, the CSRD specifies the format of markets should use the European Single Electronic Companies targeted by the CSRD will be required to
disclosure and standards that companies will have to Format (ESEF) to prepare their annual financial reports prepare their management report in the electronic format
meet to draft their reports. for filing with the competent authority. The CSRD and tag their sustainability information based on the
extends this obligation to sustainability information and digital taxonomy.
Location to non-listed companies under the scope of the directive. EFRAG was tasked to develop the XBRL digital
The CSRD requires sustainability information to be located

in a particular section of the annual management report, The European Single Access Point (ESAP)
instead of a separate sustainability report. A more detailed
structure is set out by the ESRS in its Appendices D and The ESAP is designed to provide a single makes the information easily accessible for
F. It is made up of four parts: general, environmental, digital point of access to public financial other stakeholders.
social and governance information. Therefore, financial and non-financial information about EU Companies not covered by the scope
and sustainability information will be disclosed all at once. companies and investment products. of EU regulations (such as most of the
Companies should publish their management report on their It is built as a digital platform for the EU SMEs) will also be able to voluntarily
website or make a hard copy available upon request. Their centralized access to information already transmit information on the platform.
management report must be submitted to the appropriate published in accordance with existing In practice, companies will file their
authority in accordance with national regulations. European legislation, as well as future reports to national “collection bodies” (e.g.
European directives and regulations. a public authority specifically appointed
Language This includes financial regulations and for that role) and Officially Appointed
ESG-related disclosure regulations, such Mechanisms (e.g. appointed national stock
The language of the management report should be the as the Sustainable Finance Disclosure exchanges) that will check, approve, and
one of the Member State where the company is based, Regulation (SFDR) and CSRD. The make the data available via the ESAP.
or another language that said Member State’s authorities information will be accessible for free, Verifications shall be limited to assess that
accept. To avoid unnecessary costs, EU regulators decided and the system will be user-friendly and all the necessary documents have been
to lift the obligation to have the necessary translations located in one central place. handed in the correct reporting format.
certified, if the absence of certification is clearly stated. One of its objectives is to give The ESAP platform should be available
companies more visibility towards from summer 2027 and gradually phased
Electronic format investors and open more financing in. Information required by the CSRD shall
opportunities, especially for small be available from the first year on.
Since 2020, companies listed on European regulated companies in small capital markets. It also
Reporting format 22
taxonomy for sustainability reporting, including the

mark-up of the datapoints related the EU Taxonomy for
sustainable activities. The XBRL tagging is important
to ensure that the same sustainability-related data
are labeled consistently across organizations and
geographies. This computer-based language also
enables the electronic communication of structured
business data by providing machine-readable information,
which helps to delete the language barrier to access
the information. For instance, XBRL tagging will enable
the users to assemble data from documents written in
Finnish or Welsh. This consistency is crucial for accurate
benchmarking and comparative analysis of sustainability
practices and reporting, allowing investors and other
stakeholders to make more informed decisions.
FOR MORE INFORMATION ELECTRONIC FORMAT, CONSULT

THE GLOSSARY.
Based on EFRAG’s XBRL taxonomy, the European

Securities and Markets Authority (ESMA) will develop
regulatory technical standards to define the tagging
rules to be applied in digital reporting. The European
Commission will adopt these regulatory standards via
delegated acts.
Review clause of the directive

By April 2029, the Commission should assess
whether and how to ensure that sustainability reports
published by companies covered by the CSRD are
accessible to people with disabilities.
CSRD ESSENTIALS 23
WITH
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TO THE
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EU CORPORATE
Consolidation of subsidiaries
What is a subsidiary? controlled by the parent company, rather than looking at The CSRD further specifies that subsidiary
each entity in isolation. undertakings are exempted from the obligation to
A subsidiary is a company controlled by another It should be emphasized that thresholds for the include a full individual sustainability statement in their
company, known as the parent, or holding company. In application of financial and sustainability reporting own management report, if they are included in the
the accounting rules, a parent company, together will obligations, under the EU Accounting Directive, are consolidated management report of another (parent)
all its subsidiary companies, form a group. A parent determined on a consolidated basis. Therefore, a company drawn up in accordance with the CSRD and
company can also be controlled by another, higher-up subsidiary not listed or considered as large as per the ESRS.
company (still defined as parent). In that case that parent the CSRD thresholds may still be included in the In practice, this means that parent companies must
company included in the group is considered also as consolidation by the parent company of a group, – include subsidiaries in their consolidated sustainability
a subsidiary. In this context, the parent company has which exceeds the CSRD thresholds on a consolidated statement, and that such consolidated subsidiaries
the power to govern the financial and operating policies basis. The group’s report, including the data for that may use the exemption or may issue an individual
of the subsidiary to obtain benefits from its activities. subsidiary, will be subject to mandatory reporting and sustainability statement in their own management report,
For instance, different accounting standards, like the audit requierements. This underscores the importance in addition to being consolidated.
IFRS or the US GAAP, may define control differently. In of considering the consolidated financial position Therefore, a subsidiary within the scope of the CSRD
general, owning more than 50% of the voting rights in the when deciding on consolidation practices, as it directly needs to provide a sustainability statement and issue an
subsidiary, should enable control affects the obligation to report and audit the information individual report, or have this information consolidated
voluntarily included in the consolidation. The specific case at parent-company level – such as with an EU holding
What is consolidation? of subsidiaries with parent companies based outside the company. In this case, the subsidiary is exempted
EU is described in a following section. from publishing a stand-alone report. This exemption
Consolidating the financial and sustainability information does not apply to PIEs that are large, listed companies
of a EU subsidiary at the parent-company level, whether What does the CSRD change for on an EU regulated market. For those, whether they
based in or outside of the EU, refers to the process of consolidation? are consolidated by their parent company or not, a
combining the individual financial and sustainability sustainability statement in their own management report
statements of the parent company, and its subsidiary or The CSRD broadens the existing rules that govern the is still required.
subsidiaries into a single set of consolidated statements. disclosure and consolidation of sustainability information, The CSRD explicitly states that the exemption
These statements will become the formal record of the incorporating environmental, social, human rights, and regime for consolidated sustainability reporting
activities and position of a group, and will be audited or governance topics. Both financial and sustainability operates independently from the exemption to prepare
assured. information shall now be in the same consolidated consolidated financial statements and a consolidated
The purpose of consolidation is to present a management report, although the sustainability statement management report. This, for instance, means that
comprehensive and aggregated view of the group shall be presented in a dedicated section. a holding based in the EU and that consolidates
financial reports for its subsidiaries may not consolidate The specific case of subsidiaries with
sustainability reports. parent companies based outside the EU
If there are significant differences between the
sustainability risks or impacts of the group and those of A distinctive form of the subsidiary exemption is currently
its subsidiaries, the parent company should provide, in applicable (on a temporary basis) to EU subsidiaries
the consolidated sustainability statement, an adequate or subgroups, with a parent company headquartered
understanding of the risks or impacts of its subsidiaries outside the EU. Until 2030, these companies may be
– including information on their due diligence processes exempted from individual reporting requirements if they
(where appropriate). are incorporated into a report using ESRS and “artificial
During the CSRD transposition process by Member consolidation,” meaning that the EU subsidiaries and
States, national authorities have the discretion to restrict subgroups are consolidated. The entity responsible for
the use of reporting exemptions or to mandate distinct consolidating other EU-based subsidiaries is the one with
disclosures at entity or country level. This might involve the highest turnover within the EU. The purpose of this
obligating companies within the country to submit transitional provision is to reduce the burden for the non-
standalone reports. EU groups that do not have a single EU-based holding
entity that controls the group’s EU entities.
What is required from exempted The ultimate parent companies that are not based
subsidiaries which are individual in the EU may also consolidate their EU subsidiaries
companies or groups? in a global sustainability statement. However, such
consolidation exempts the EU subsidiaries from the
Exempted EU-based subsidiaries are subsidiaries that obligation to produce their own sustainability statements
will be consolidated; their sustainability information will be only if the global consolidated statement is drawn up in
incorporated in the report of their parent company. In this accordance with the ESRS, or in an equivalent manner.
case, they will still need to:
a) report the name and registered office of the parent
company that is reporting on the sustainability
information at group level;
b) publish the weblinks to the consolidated
management report of their parent company, with
clear information and instructions on how to access
the consolidated management report, especially if it
is not available online;
c) clearly state that they are exempted from
sustainability reporting, in their management report.
FIGURE 6 –Consolidation of a third-country parent group with subsidiaries or branches in the EU
Outside UE Inside UE
From 2026 After 2030
The subsidiary that has the largest The subsidiary that has the largest
turnover in the EU consolidates for the turnover in the EU can no longer
other EU subsidiaries in the same group consolidate for the other EU subsidiaries
in the same group
(using the full ESRS)
TCPG consolidates for its subsidiaries Or
which are large companies in the EU
TCPG publishes its management report
(providing it surpasses the CSRD
including the sustainability reporting of
thresholds on a consolidated basis)
its consolidated EU subsidiari(es)*
(providing it uses the full ESRS or
standards deemed equivalent to them)
2026 2027 2028 2029 2030 After 2030

Third-country parent group
(TCPG)
TCPG directly generates > €150 m net After 2028

turnover in the EU (for 2 consecutive The branch publishes the sustainability report
years at least)
(using either ESRS for third-country companies,
equivalent standards to ESRS
or the full ESRS)
TCPG has an EU branch

(that generated > €40 m net turnover
(*) In that case the EU subsidiaries are exempted from publishing a management report
per year)
that includes sustainability information unless they are large listed Public-interested
entities

FIGURE 7 –Consolidation of a third-country parent company that has listed subsidiaries in the EU
Outside UE Inside UE
Progressive application as of 2025

Those listed subsidiaries publish a stand-alone management report.
(It can use:
- full ESRS
- ESRS for listed SMEs if it is a listed SME)
TCPG has a small, medium or large
subsidiary with securities admitted to
trading on an EU regulated market TCPG can also publish a consolidated report that includes
(By consolidating it surpasses the CSRD its listed subsidiaries in the EU
thresholds) (it can use either:
- full ESRS
- equivalent standards to ESRS
2025 2026 2027 2028 2029 2030 After 2030

Third-country parent group
(TCPG)
TCPG directly generates > 150m After 2028

net turnover in the EU that are
independent of the activites of its The listed subsdiary publishes the sustainability
subsidiaries (for 2 consecutive years reporting of the third-country parent group
at least) (using ESRS for third-country companies),
TCPG can also publish a consolidated report
that includes its listed subsidiaries in the EU
and information at group level.
TCPG has a small, medium or large (it can use either:
subsidiary with securities admitted to
- full ESRS
trading on an EU regulated market
- equivalent standards to ESRS)

FIGURE 8 –Consolidation of a parent company in the EU that has subsidiaries listed or not
Inside UE
Progressive application as of 2026

Parent company (PC) PC publishes a consolidated report that includes its subsidiaries in the EU*
(it uses the full ESRS)
PC has subsidiaries which are either
large or listed SMEs in the EU
2026 2027 2028 2029 2030 After 2030
(*) In that case the EU subsidiaries are exempted from publishing a management report
that includes sustainability information unless they are large listed Public-interested
entities

CSRD ESSENTIALS 28
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EU CORPORATE
Reporting by third-country companies

The CSRD extends the scope of the reporting obligations ■ use the full sets of ESRS available to date; Stand-alone report for listed
to include international companies. It applies to: ■ use their own domestic reporting rules (for them, small, medium and large public-
exclusively on impact materiality), provided that interest entities
■ third-country companies with securities listed on an applicable standards set by those rules for third-
EU regulated market (about 100 companies as per the country companies are deemed equivalent to the EU companies exceeding the CSRD
European Commission’s estimate); ESRS by the European Commission. The same thresholds and that have their parent
■ non-EU companies that directly generate a net applies to parent companies outside the EU that want companies outside the EU cannot be
turnover of over EUR150 million in the EU and have a to consolidate the reporting of their EU subsidiaries. exempted from producing their sustainability
subsidiary or a branch, with no legal personality, with The European Commission assesses the equivalence statement on the account of being
a net turnover of at least EUR40 million in the EU, on a country-by-country basis, following a request by a consolidated by their parent company.
or a listed subsidiary in the EU which is an SME or a country to do so. The exemption only applies if their parent
large company. company issues a sustainability statement
The European Commission, based on the information drawn up in accordance with the ESRS,
While no official figure on the number of third-country received by EU Member States, should make publicly or standards for which an equivalence
companies with substantial EU business have been available on its website a list of the third-country status has been granted by the European
released, the global provider of financial market data companies that have published a sustainability report Commission through an implementing act.
Refinitiv estimated that 11,000 companies with their applying the ESRS. However, until 2030, the EU subsidiary of
headquarters outside the EU could be impacted by the a non-EU group with the highest turnover
reporting obligations, including about 1,000 in the UK and FOR MORE INFORMATION ON CONSOLIDATION OF within the EU can prepare a consolidated
more than 3,000 in the U.S3. PARENT COMPANIES, PLEASE READ OUR BRIEFING ON sustainability statement that includes all other
CONSOLIDATION OF SUBSIDIARIES.
The directive states that branches or subsidiaries are EU subsidiaries in this group and which are
responsible for publishing the sustainability report of their subject to the CSRD. Such consolidated
controlling company and, if they do so, that sustainability Which criteria guide the determination of subsidiaries can then benefit from the
report should be published in a language accepted by the equivalence with domestic standards? exemption unless they are listed.
Member State where they are registered.
Third-country companies meeting the above-mentioned While the CSRD provides the European Commission
conditions have the following options for reporting their with the possibility to allow in-scope third-country
sustainability information, from 2028 onwards: companies to use sustainability standards equivalent to
the ESRS, it has not yet decided which standards would 3 https://www.wsj.com/articles/at-least-10-000-foreign-companies-to-be-hit-by-eu-
■ use the standards for third-country companies; be deemed equivalent. Note that equivalent standards sustainability-rules-307a1406
Reporting by third-country companies 29
will only be available for reporting at the third-country Global standard-setting landscape
parent-company level; any reporting done at an EU-
company level must use the ESRS. The last few years have seen significant with the ESRS based on the high level of commonality
The criteria that the Commission will use, when developments in the regulatory landscape, due and technical cooperation on non-EU Standards.
assessing the equivalence of sustainability reporting to the recognition of the human-rights impacts of The IFRS-ISSB governance framework has
standards used by third-country issuers, shall ensure climate change, and environmental degradation at recently consolidated other frameworks and risk-
that those standards require: the international and national level. The increasing related standards, such as the SASB metrics and
demand for transparent information on companies’ tax the Climate Disclosure Standards Board (CDSB).
■ disclosing information on environmental, social payments and ensued practices has led governments Australia is at the forefront, incorporating ISSB into
and governance factors; and wanting to drive a positive agenda towards a more just their national standards. Several countries instead,
■ reporting the impacts the company has on and sustainable society, and to use legislative tools to including Brazil, Canada, Nigeria, and Japan, have
sustainability matters, as well how these change corporate behavior and market conditions. As expressed their intention to reference or mandate
sustainability matters affect the development, a consequence, this has driven a broader increase in ISSB, formal adoption has not yet occurred.
performance, and position of the company. corporate sustainability initiatives globally. But while The EFRAG serves as the technical advisor
stock exchanges play a particularly active role in Asia- to develop the ESRS for the EU. Under the EU
In other words, the second equivalence criterion shall Pacific and the Middle East, governments remain the mandatory regime, approximately 42,500 user
consider standards that incorporate double materiality. most active issuers of ESG & sustainability policies4. companies, along with several thousand non-EU large
Until equivalences are set, policymakers around Many companies around the world already companies with significant operations in the EU, are
the world, responsible for their own national report on their sustainability impacts, using globally affected.
reporting standards, can benefit from ensuring future accepted standards such as those developed by the Regional and globally recognized standard-
equivalence to the ESRS. They can also support their GRI, which provides the world’s most widely used setters actively engage in close collaboration
companies by building on globally widely adopted sustainability reporting standards. 73% of the world’s with the Taskforce on Climate Disclosure (TCFD),
standards, such as those from the GRI and ISSB. 250 largest companies by revenue use GRI guidelines now integrated into the ISSB, the Taskforce on
or standards and 67% of the top 100 companies by Nature-related Financial Disclosure (TNFD). This
TO LEARN MORE ABOUT THE IMPLEMENTING revenue in 52 countries and jurisdictions use GRI collaborative effort aims to establish a shared
DECISIONS PROCEDURES, PLEASE READ OUR guidelines or standards. The GRI offers the only methodological foundation for reporting on impacts
BRIEFING ON THE IMPLEMENTING & DELEGATED
ACTS.
reporting standards used by most surveyed companies and risks related to climate and nature.
in all regions (75% in the Americas, 68% in Asia-Pacific ISSB, ESRS and GRI form the triangle of
and Europe, 62% in the Middle East & Africa). 99% of sustainability reporting. While it would be ideal to
Review clause of the directive Singapore-registered companies use GRI standards. have a single international standard, having full
By April 2029, the Commission should provide an Organizations already using GRI standards in their compatibility would already be a huge step forward.
assessment of the implementation of the reporting reporting will maximize their chances of compliance
requirements on subsidiaries and branches of
third-country, including an assessment of the 4 Carrots & Sticks Database, GRI, Kings College London, the University of Edinburg, Stellenbosch Business School. The database covers 2,463 policies from 132
countries, 76 international and regional organizations, in 38 languages, from 1897 to 2023; with 36% ESG mandatory policies and 63% voluntary worldwide.
number of third-country companies. https://www.carrotsandsticks.net/#:~:text=Welcome%20to%20the%20Carrots%20%26%20Sticks,ESG)%20impact%20of%20businesses%20worldwide
CSRD ESSENTIALS 30
WITH
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THE SUPPORTGUIDE
OF MEP
TO THE
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EU CORPORATE
Audit & assurance

Both amended by the CSRD, the Audit Directive (Directive ■ the assurance requirements for companies in and concerns about the reliability of the sustainability
2006/43/EC) and the Audit Regulation (Regulation EU outside the EU; and information reported by companies. Although the
No 537/2014) establish laws and regulation for the ■ the organization of the audit market in Europe, objective is to have a similar level of assurance for
statutory audit of annual and consolidated financial and especially for the sustainability assurance services. financial and sustainability reporting, a progressive
sustainability statements in the EU. In addition, the Audit approach has been undertaken. The CSRD stages the
Regulation sets out specific requirements and rules The CSRD mandates the European Commission to introduction of mandatory auditing starting with a “limited”
governing the conduct and oversight of statutory audits of develop assurance standards that will outline technical assurance requirement and aiming to introduce EU-wide
public-interest entities. aspects of the assurance engagement of sustainability standards for limited assurance by October 1, 2026.
The CSRD introduces a mandatory assurance (audit) information, by auditors and independence assurance This represents a significant advance considering only
of sustainability information by an independent third party. service providers. These standards will be adopted by France, Italy and Spain previously opted for mandatory
This can either be the statutory auditor, who already means of delegated acts. In that context, the Committee independent assurance, based on limited requirements
audits financial information, or another auditor than the of European Auditing Oversight Bodies (CEAOB) has for reported sustainability information.
statutory auditor or an Independence Assurance Service been tasked by the European Commission to work on A “reasonable” assurance requirement is requested
Provider (IASP), if allowed by national public authorities. the adoption of non-binding assurance guidelines, to only as of October 1, 2028, pending a favorable
Notably, the directive introduces a limited assurance help independent assurance providers in the absence of assessment of the Commission on the introduction of
review in the European Single Market, with a planned EU standards. It should deliver technical advice for the this stricter assurance level. This marks the latest date
transition to reasonable assurance over time. drafting of the Delegated Act adopting limited assurance the Commission can adopt standards for reasonable
In a bid to promote diversity in the audit market, the before May 2025. assurance.
directive gives companies’ shareholders with more than Once the Commission has adopted EU-wide standards
5% voting rights or 5% capital the option to request the TO LEARN MORE ABOUT THE ADOPTION PROCEDURE for this level of assurance, the legal audit requirement in
involvement of an accredited third party, to prepare a OF DELEGATED ACTS, PLEASE READ OUR BRIEFING ON the CSRD will automatically become a requirement for
IMPLEMENTING AND DELEGATED ACTS.
report on some of the sustainability information. This reasonable assurance instead of limited assurance. Until
cannot be affiliated with the same audit firm or network as the adoption by the Commission of EU-wide assurance
the auditor conducting the statutory audit. Audit: What does the CSRD say about the standards, Member States may apply national assurance
audit of sustainability information? schemes, rules, and procedures.
The CSRD introduces:
The CSRD introduces a general EU-wide audit TO LEARN MORE ABOUT LIMITED AND REASONABLE
■ the level of assurance engagements (limited and (assurance) requirement for reported sustainability ASSURANCE DEFINITIONS, PLEASE READ OUR GLOSSARY.
reasonable); information, addressing investors’ and other stakeholders’

Audit & assurance 31
Sustainability assurance market Passporting system Review clause of the directive

By December 31, 2028, the Commission shall
The directive allows Member States to open the market of The CSRD also sets a so-called “passporting system” review and report on the level of concentration of the
sustainability assurance services to so-called “independent for IASPs. This allows accredited service providers sustainability assurance market and assess possible
assurance services providers” (IASP). This means that in one Member State to operate freely in another legal measures to ensure sufficient diversification of
a Member State can choose to allow firms other than Member State that has opted to accredit IASPs, without the sustainability assurance market and sustainability
the usual auditors of financial information to assure having to seek accreditation from each of the national reporting quality.
sustainability information. While this leaves the option competent authorities. So far, only France has granted
for Member States to provide fairer access to the audit this opportunity, while several other Member States
market for non-statutory auditors, it can also result in a less have announced their intention to grant authorizations.
consistent approach throughout the EU market. In practice, In practice, it is the Member State that has provided the set out on quality assurance systems, requirements on
accreditation of independent assurance providers operates accreditation (the “home” ) that will keep supervising the irregularities, investigation and sanctions. Nevertheless,
in the public interest across all market sectors. It provides independent assurance services providers operating at the implementation stage, the continuous evaluation
an attestation that accredited bodies offering assurance in another Member State (the “host”), unless the latter criteria may differ between IASPs and statutory auditors.
services have the technical competence and impartiality to indicates otherwise.
check the conformity of products and services, based on Equivalence with third-country audit
the relevant standards and regulations. Organization of the assurance profession companies
Member States willing to open their market to IASPs shall Member States that chose to authorize IASPs should The directive provides a mechanism for the recognition
appoint a public authority or any other body to undertake set out requirements equivalent to those applying of third-country auditors if their regulatory framework
the accreditation process of IASPs. This process should to the statutory auditors under the Audit Directive, is deemed equivalent to the EU’s, for statutory audits.
conform with the applicable requirements of the EU to be allowed to carry out assurance engagements Third-country auditors seeking to provide audit services
Regulation on accreditation and market surveillance, of sustainability reporting. Especially in terms of for entities based in the EU are required to register with
such as proper monitoring, as well as objectivity and professional ethics, independence, objectivity, the competent authority of the Member State where
impartiality of the rules and processes in place. The confidentiality, and professional secrecy regarding they intend to carry out the audit. In case they do not,
national accreditation body may be either the same as the assurance of sustainability reporting, existing their assurance report shall have no legal effect in that
or different from the entity issuing operating licenses for rules applying to statutory auditors shall apply mutatis Member State.
statutory auditors. mutandis to IASPs.
The creation of the IASP status is a positive step Moreover, statutory auditors are subject to
forward in terms of opening the market and the quality specific educational qualification requirements to
of assurance services. It should be noted that in case be allowed to carry out assurance engagements of
two assurance providers work together, it is the group sustainability reporting. IASPs should also meet specific
auditor in charge of auditing the consolidated reports who requirements on educational competences, training and
provides the final engagement. examination. Equivalent requirements should also be
CSRD ESSENTIALS 32
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Materiality and internal supervision

The importance of the materiality Steps to get there activities and business relationships as well as the
assessment context in which these take place; it would then try to
Companies seeking guidance on conducting a materiality understand which stakeholders are primarily affected.
The CSRD recognizes the wide range of users and uses assessment can use the guidance provided by EFRAG Subsequently, the company usually determines which
of reported information, and therefore states that the and GRI to inform their process. environmental, social, and governance matters are
company’s evaluation of materiality must consider both A materiality assessment in sustainability reporting significant enough to influence decision-making and
the impact and financial aspects of a company’s activities, starts with understanding the context of the company. impact the perceptions of stakeholders. It should aim to
while also acknowledging their interconnections. However, This means the company develops an overview of its identify the issues that are most relevant to its business
it doesn’t require separate and independent procedures.
Typically, identifying material impacts is the starting point,
as the financial evaluation benefits from this assessment.
This is because material impacts often lead to significant Materiality thresholds
risks, opportunities, and financial consequences.
The ESRS do not prescribe a specific method In the context of double materiality reporting, a Materiality thresholds on sustainability impacts
for conducting the materiality assessment, as one materiality threshold refers to the criteria (qualitative shall therefore be determined by severity for actual
approach may not suit all businesses due to variations in and/or quantitative), used both internally to the negative impacts, and severity and likelihood for
economic activities, organizational structures, operational company’s operations and externally to broader potential negative impacts. “Severity is based on
locations, and supply chains. Therefore, each company societal and environmental concerns. Setting factors that are scale, scope and irremediable
should develop a tailored process that fits its unique a threshold on sustainability matters is usually character for negative impacts, and scale and
circumstances, including the depth of the assessment. necessary to determine which topics are material scope for positive impacts. These factors should
Professional associations that represent a specific to the company. It helps to establish the boundary be the basis for determining the thresholds. Also,
profession in a particular sector of activities can also beyond which sustainability impacts, risks and when defining the threshold, the undertaking may
play an important role in helping companies determine opportunities (IROs) are considered material consider the overall number of potential impacts
the full range of impacts, risks and opportunities which and provide grounds for their inclusion in the across environmental, social and governance.”5
are recurring for the entire sector. These are particularly sustainability statement. In this regard, the ESRS are aligned with the GRI
relevant in the absence of sector-specific standards in The ESRS (in particular, ESRS 1) prescribe standards. For risks and opportunities, criteria
the EU. rules for the application of double materiality with shall be based on the magnitude and likelihood of
respect to the evaluation of materiality of IROs. financial effects for risks and opportunities.
TO LEARN MORE ABOUT THE CONCEPT OF MATERIALITY,
CONSULT OUR GLOSSARY. 5 EFRAG, Implementation guidance 1: materiality assessment
operations and stakeholders, focusing on those that sustainability impacts, risks, opportunities, leading to The responsibility of supervisory bodies
could affect financial performance and have a significant more effective sustainability reporting and decision- and audit committees
impact on society or the environment. making processes.
Effectively managing sustainability reporting
Key steps for stakeholder engagement in the materiality The importance of including value chain necessitates cohesive collaboration among various
assessment: Impacts, Risks and Opportunities teams and stakeholders within a company, including
top management and supervisory boards. The CSRD
■ identifying relevant stakeholders; The sustainability statement of the company needs to enhances the accountability of a company, as it
■ conducting stakeholder engagement to understand cover all significant impacts, risks, and opportunities mandates a collective responsibility for members of
their concerns and expectations; (IROs) related to all its activities, including IROs administrative, management, and supervisory bodies
■ mapping out potential sustainability issues based on stemming from its business relationships across the to ensure compliance with its requirements. This
industry standards, regulations and best practices; value chain. That relationship extends beyond direct encompasses preparing and publishing management
■ assessing the significance and potential impacts of contractual connections. While the disclosure of value reports with all the necessary sustainability disclosures,
these issues on the company’s operations and its chain information is not obligatory for all datapoints, consolidated reports, corporate governance statements,
stakeholders; it is required when associated with significant IROs and assurance reports according to the directive’s
■ prioritizing them based on their importance to the beyond the company’s own operations. The materiality specifications, including the application of electronic
business and its stakeholders. assessment should identify significant IROs within the formats (e.g., digital mark-ups and tags) to relevant data
value chain, focusing on their likely occurrence across points. While the CSRD did not amend the sanction
Identifying and assessing stakeholders’ expectations various aspects like geographies, activities, suppliers, regime for non-compliance with the requirements of the
is crucial in materiality assessment, particularly in and customers. directive, EU Member States remain free to introduce an
terms of determining the materiality of impacts, risks Even though topical standards (referring to the appropriate supervisory regime that includes possible
and opportunities for sustainability reporting. disclosures on environment, social and governance sanctions. Some countries, like France, have introduced
Stakeholders may include investors, customers, disclosures) may specify some value-chain data for criminal sanctions for company directors who fail to
employees, suppliers, local communities, non- certain metrics, additional entity-specific disclosures, appoint an auditor of sustainability information and for
governmental organizations (NGOs), regulators, and including metrics, are necessary if a material IRO in obstructing a sustainability audit. In Hungary, should
other parties affected by or interested in the company’s the value chain is not adequately addressed by ESRS undertakings fail to comply with the ESG reporting
activities. Companies should therefore understand how requirements. If primary value-chain information or obligations, the national Supervisory Authority for
stakeholders (workers, nature, etc.) are affected by the disclosure of material IROs cannot be collected despite Regulated Activities may impose financial penalties.
impacts. This may require direct engagement with them, reasonable efforts, the company should estimate
especially in case of severe impacts. This inclusive missing information using reasonable and supportable For companies listed on stock exchanges, the directive
approach enhances the credibility and relevance of data, including proxies and sector data. This ensures a bolsters the central role of audit committees and
sustainability reporting. thorough and accurate assessment and disclosure of extends their role to the supervision of the assurance
By diligently following these steps, companies the company’s significant impacts, risks, or opportunities of sustainability data. Those committees usually
can develop a comprehensive understanding of their across the value chain. consist of directors (non-executive members, with
at least one of them being independent), will monitor

the sustainability reporting process. It includes digital
reporting and adherence to standards, while providing
recommendations to maintain the accuracy of
sustainability information and ensuring the independence
of assurance providers throughout the process. Parallel
to audit committees, corporate sustainability reporting
committees within companies or professional sectoral
associations can serve as dedicated teams, or groups
tasked with coordinating and overseeing the collection,
analysis, and reporting to stakeholders sustainability
performance data. They play an important role in
defining “materiality thresholds”.
Thus, these two types of committees come at the
core of the internal companies’ supervision to meet the
new obligations introduced by the CSRD. Their role
should be considered as a strategic opportunity to gain
a competitive advantage, in a business environment that
needs more sustainable practices. Treating reporting as
a (costly) compliance exercise alone ignores the value
reporting can bring to the company, both in terms of
identifying ways to run a more efficient operation and to
identify new business opportunities.
FIGURE 09 –Materiality assessment of sustainability data
Double materiality assessment
Impact on stakeholders Sustainability

Impact on the company
& the environment matters
Impact Materiality Financial Materiality
Positive Negative Opportunities ! Risks
Actual Potential Actual Potential Potential Potential
Scale
Scale x
x Scope Magnitude Magnitude
Scope x
Irremediability
x x x x
Likelihood Likelihood Likelihood Likelihood

CSRD ESSENTIALS 36
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SMEs and the value chain

Small and Medium Enterprises (SMEs), unless listed, compel large companies to ask SMEs within their value customers, banks, and investors. To address this, the
are not covered by the CSRD. About 1,000 listed SMEs chains. This provision serves as an additional safeguard EFRAG is developing a simplified, voluntary standard
will therefore have to issue a sustainability statement against excessively burdensome reporting requirements tailored for non-listed SMEs, so that they can respond
according to the transposition schedule. Furthermore, trickling down to SMEs associated with larger companies to requests for sustainability information efficiently and
the ESRS encompass a substantial array of value- in value chains. The EFRAG called this measure the proportionately, thus facilitating their engagement in the
chain reporting obligations, prompting companies within “value chain cap”. transition towards a sustainable economy.
the directive’s scope to seek sustainability information Non-listed SMEs represent by far the largest number Large companies have been granted additional
from their value-chain partners, particularly their SME of SMEs in Europe and, although not mandated to flexibilities regarding specific environmental and
suppliers and customers. Essentially, large companies comply with sustainability reporting obligations under social disclosure requirements, which impact reporting
will issue comprehensive information requests to SME the Accounting Directive, they often face demands for throughout the value chain. By extending the preparation
suppliers and customers related to their material topics. sustainability data from various stakeholders such as time for reporting on certain environmental and social
Recognizing the potential additional burden on SMEs,
the directive addresses the need for proportionality and
relevance in information requests to suppliers. These
requests will need to consider the scale, complexity, SMEs and value chains supporting initiatives
capacities, and characteristics of companies within value
chains, with particular consideration for SMEs. SMEs play a crucial role in emerging economies cooperation with the Swiss Confederation’s State
Still, SMEs may not yet be ready or even able to report where they act as key engines of job creation and Secretariat for Economic Affairs (SECO), GRI
comprehensively on their sustainability performance in income generation, contributing to up to 45% of delivered the Corporate Sustainability and Reporting
the first years. This is why the CSRD provides for two total domestic employment and 33% of national for Competitive Business7 (CSRCB) program to
mechanisms to protect SMEs from excessive demands income6. In recent years, it has become obvious support SMEs in six countries: Colombia, Ghana,
from their customers and suppliers, who are often large that sustainability reporting is a critical competitive Indonesia, Peru, South Africa, and Vietnam. From
companies, and to support them in the collection of differentiator to enter global value chains, and 2016 to 2021, it trained over 2,500 entrepreneurs
reporting data. therefore an essential tool for SMEs to improve their from SMEs on sustainability reporting, through
competitiveness and market access possibilities. workshops events and one-to-one meetings.
A “value chain cap” To illustrate mechanisms to support SMEs, in
The CSRD stipulates that standards for listed SMEs will 6 International Finance Corporation (IFC) annual report 2010: where innovation meets impact (Vol. 2) : IFC financials, projects, and portfolio 2010 (English).
Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/970081468331866551/IFC-financials-projects-and-portfolio-2010
establish the maximum information that the ESRS can 7 https://www.globalreporting.org/public-policy/legislation-and-regulation/corporate-sustainability-and-reporting-for-competitive-business/
SMEs and the value chain 37
topics, the European Commission is also granting company explains the efforts made to obtain the
SMEs more time to prepare for future data collection necessary information about its value chain, the
requirements. For instance, companies or groups reasons why not all the necessary information could be
not exceeding on their balance sheet the average obtained, and its plans to retrieve them in the future;
number of 750 employees during the financial year ■ when disclosing information on policies, actions and
(on a consolidated basis, where applicable) may omit targets, the reporting company may limit value-chain
the datapoints on scope 3 emissions and total GHG information to those available in-house, such and
emissions, for the first year of preparation of their publicly available information;
sustainability statement. An additional delay of one or two ■ when disclosing metrics, the company is not required
years has been granted for the reporting of some data to include value-chain information, except for
related to social impacts. datapoints derived from other EU legislation.
In practice, additional flexibility has been introduced
to minimize the reporting effort from companies, In terms of implementation, EU Member States are
recognizing in some cases their limited capacity to responsible for assisting SMEs through financial and
collect complex data from their supplier and customers. organizational support measures (information programs,
The use of credible proxies has been made possible, one-stop shops, etc.)
to help organizations overcome challenges in data
collection and reporting while still providing stakeholders
with meaningful insights into their sustainability
performance. These can be particularly relevant for
suppliers trying to provide in-scope companies with
a fair response to their requests for information on
sustainability matters.
Three more years
The ESRS include a transition period of three years for

the reporting of sustainability information of value-chain
partners, with the aim of easing the initial reporting for
large companies and to help SMEs in the value chain
to prepare. During this transition period, the following
conditions apply:
■ if not all the necessary information regarding its value

chain is available, it is sufficient that the reporting
CSRD ESSENTIALS 38
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Implementing & delegated acts

EU delegated and implementing acts are considered as elements of the primary legislation within the limits set Scrutiny period
secondary legislation, as opposed to primary legislation by the legislator. These acts are crucial for the effective
(i.e., either regulations or directives). They aim to provide implementation of EU laws, as they provide detailed The scrutiny period for a delegated act in the
a flexible and efficient mechanism for the European rules and technical specifications necessary to ensure European Union is the specified timeframe
Commission to adapt and execute legislative measures. consistency and adaptability in various policy areas. The during which the European Parliament and
In some years, secondary legislation represented up to European Parliament and the Council have the power the Council can review, and potentially
90% of the legislative volume produced by the European to object to a delegated act proposed by the European object, to the act proposed by the European
Union8. Commission. In the European Parliament, this can Commission. Most of the delegated acts
happen through a resolution to object that needs to be stemming from the CSRD have a two-month
Delegation of power to the European adopted by the majority of the Members of the European scrutiny period, which can be extended to
Commission Parliament composing the assembly, and not only based four months upon request of the relevant
on the of votes expressed (majority based on half the committees of the Council of the EU and
In the context of EU law, the delegation of power refers number of elected MEPs). the Parliament. The delegated acts on the
to the authority granted by the EU legislator (usually the assurance level have a four-month scrutiny
European Parliament and the Council of the EU) to the Implementing act period.
European Commission to adopt legal acts in specific policy
areas. This delegation is outlined in primary legislation An implementing act is a secondary legislative act
and allows the Commission to supplement or amend adopted by the European Commission to ensure the If the Parliament believes that the Commission has
non-essential elements of the legislation. However, this uniform application of EU regulations or directives across exceeded its delegated powers or if there are concerns
delegation comes with clear limits and conditions to ensure all Member States. Unlike delegated acts, implementing about the legality or appropriateness of the implementing
accountability and transparency, and the Commission must acts are not delegated by the legislator but are directly acts, it can express its objections and potentially influence
act within the framework set by the legislator. mandated by the primary legislation. They contain specific the Commission’s course of action, but it has no direct
measures, such as technical details or procedural rules, role neither in amending nor in adopting implementing
Delegated act necessary for the practical implementation of EU laws. acts. As such, Parliament’s resolutions can only exercise
While the European Commission is responsible for an indirect influence on the Commission which is not
It is a secondary legislative act that the European proposing and adopting implementing acts, it is required bound by them.
Commission is empowered to adopt under the delegation to consult with a committee composed of representatives
of power from the EU legislator. Delegated acts allow from the Member States in a process called “comitology
8 D. Guéguen and V. Marissen, Handbook on EU Secondary Legislation, Brussels,
the Commission to supplement or amend non-essential committees”. Pact European Affairs, 2013, p. 20
Implementing & delegated acts 39
FIGURE 10 –Secondary legislations mandated by CSRD
DA: Delegated Act

IA: Implementing Act
Category Attribute Formal deadline Status Provided to the EU Commission Comment
DA ESRS SET 1 – Sector agnostic June 2023 Published EFRAG 12 standards

https://webgate.ec.europa.eu/regdel/#/
delegatedActs/2111
DA ESRS SET 2 – Sectoral standards June 2026* Early drafting EFRAG Standards progressively adopted, with 6
to 11 foreseen by June 2026
DA ESRS for listed SMEs June 2024 Public consultation EFRAG Drafts are being finalized; possible delay
on draft foreseen for Q1 2025 tbc.
DA ESRS for Third-country companies June 2026 Not started Being considered Shall focus on sustainability impacts
reporting only.
DA Limited Assurance standards October 2026 Not started Internal process at Directorate Based on technical advice by the
general level CEAOB
DA Reasonable Assurance standards October 2028 Not started Internal process at Directorate Pending a favorable assessment report
general level by the EU Commission
DA Digital taxonomy (tagging & XBRL No formal deadline Full ESRS datapoint EFRAG & ESMA Early draft foreseen for Q4 2024.
technical standards) released
IA Equivalence with third-country No formal deadline - Internal process at Directorate Lead by the European Commission
reporting regimes General level.
Guidelines Voluntary standards for SMEs June 2024 - EFRAG Drafts are being finalized; possible delay
foreseen for Q1 2025 tbc.
Guidelines Supervision of sustainability No formal deadline - ESMA Public consultation ended on March 15,
reporting for listed companies 2024
Guidelines Procedures for assurance - - CEAOB Guidelines to be developed by July

2024, for adoption by Q4 2024.
CSRD ESSENTIALS 40
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National implementation & penalties

The CSRD provides a harmonized framework for Scope and applicability: Member States must ensure of auditors, and the independence of auditors and
companies on transparency, accounting and audit, while that the directive’s requirements apply to the specified Independent Assurance Service Providers.
allowing flexibility for Member States to implement its companies, including public-interest entities (PIEs) Each Member State shall therefore empower a
provisions in their national legal systems. and others meeting certain size criteria. They are also National Competent Authority (NCA) to monitor possible
The directive shall be transposed by all Member States responsible for ensuring that companies comply with breaches of these provisions (e.g. in case of failure or
into their national law by 6 July 2024. the prescribed content and format of annual financial ethical misconduct), and to impose penalties including
Member States do not have much flexibility regarding and sustainability statements, including any electronic fines or other disciplinary measures. The fine amount may
the content of the reporting standards, as they are set at reporting requirements. vary depending on the severity of the violation. In case of
EU level; however, they are still required to incorporate serious misconduct, auditors could have their registration
the directive’s provisions into the national legal framework, Compliance oversight: to ensure compliance with withdrawn, which means that they could lose the authori-
and to publish the administrative provisions necessary to reporting requirements, Member States are required to zation to conduct statutory audits. In addition to, or instead
comply with the CSRD. When it comes to penalties for designate National Competent Authorities (NCAs) respon- of, financial penalties, NCAs may require audit firms and
non-compliance, the directive is not very prescriptive and sible for the oversight of the CSRD implementation. Under independent assurance service providers to take corrective
leaves it to Member States to define enforcing measures. the previous NFRD framework, these authorities were typi- measures to address identified deficiencies in their audit
cally financial regulators or relevant bodies, but their super- processes, quality control, or compliance with professional
Indeed, the CSRD does not introduce any new penalties to visory powers were limited to listed companies. With the standards. Similar requirements should apply to Indepen-
the existing provisions of the Accounting Directive (article integration of financial and sustainability information into dent Assurance Service Providers going forward.
51). Just like under the previous regime, Member States a unified management report, the supervisory measures
shall establish effective, proportionate, and dissuasive applicable to listed entities should now be extended to Public oversight and transparency: the directives
penalties for infringements of the directive, which now sustainability reporting. However, Member States retain emphasize the importance of transparency and may
includes sustainability disclosures. They are also in the flexibility to decide whether to extend administrative require NCAs to make certain information related to
charge of providing adequate resources for supervisory supervision by NCAs to non-listed companies, to opt for penalties publicly available, while respecting business
authorities that may control corporate sustainability another competent body, or to leave the handling of com- confidentiality. In that regard, the Committee of European
reporting practices. For instance, France has introduced pliance checks to the judicial system. Auditing Oversight Bodies (CEAOB) is in charge of
criminal sanctions for company directors that would fail to coordinating national audit oversight bodies at EU level,
appoint an auditor of sustainability information and for the Auditing requirements: the directive includes provisions including on certain aspects of cross-border enforcement
obstruction of a sustainability audit. A further instance is related to the audit of financial and sustainability and penalties. The CSRD also mandates the ESMA
Hungary: should undertakings fail to comply with the ESG statements. Member States are responsible for to issue guidelines on the supervision of sustainability
reporting obligations, the national Supervisory Authority for implementing rules on the statutory audit of annual reporting by national competent authorities.
Regulated Activities may impose financial penalties. and consolidated accounts, including the appointment
CSRD ESSENTIALS 41
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Glossary
Disclaimer: The following definitions aim to clarify, Assurance (external assurance): the process by assigns the relevant digital tags to each piece of data in
simplify, and explain key concepts of the briefings. which an independent third party assesses and provides its financial and sustainability statements. These digital
They do not replace legal acts, or definitions included assurance on the accuracy, reliability, or compliance tags provide a standardized way of identifying and
in guidance materials produced by EFRAG. of information or processes based on agreed-upon describing those elements, facilitating consistency and
assurance standards. This can include audits, reviews, comparability in financial reporting.
or certifications conducted by external parties to validate
Adverse impact: an adverse impact refers to a the credibility and trustworthiness of an organization’s Double materiality: the concept underpinning the CSRD,
negative or detrimental effect that a particular action, activities, reports, or systems. The CSRD requires the which states that companies need to consider and report
decision, policy, or event has on individuals, groups, sustainability reporting to be audited by a statutory auditor both their impacts on the world and how sustainability
organizations, or the environment. These impacts or an Independent Assurance Service Provider. The issues impact the financial well-being of the company.
include human-rights issues such as forced and required audit corresponds to an assurance service, and The European Commission and EFRAG are developing
child labor, inadequate workplace health and safety, it has two levels of engagement: limited or reasonable additional guidance on materiality assessment.
exploitation of workers, environmental impacts assurance.
(greenhouse gas emissions, pollution), or biodiversity Due Diligence: the concept of environmental and human-
loss and ecosystem degradation. However, rather Branch: in EU law, a branch refers to an establishment rights due diligence can be described as the practical
than specifying the adverse impact by way of new set up by a company in a Member State, but outside its steps to help companies identify, prevent, mitigate,
definitions or criteria, the European Commission has main place of business. Essentially, it’s like a satellite account for and bring to an end the actual and potential
taken the approach of referring to various instruments of office or facility of a company operating in another country adverse human-rights and environmental impacts. This
conventions and guidelines. The identification of impacts within or outside the EU. Branches allow companies to regards their operations, value chains and other business
as adverse is usually driven by an analysis carried expand their presence and conduct business in various relationships. The concept of due diligence is also
out by the company on the severity of the impacts, EU countries while still being part of the same legal entity. embedded in the recommendations of the International
which includes the scale of damage to the environment Labour Organisation (ILO) Tripartite Declaration of
and of affected or potentially affected individuals, the Captive insurance companies: a wholly owned Principles, concerning multinational enterprises and
irremediability and the likelihood of the negative impact subsidiary created to provide insurance to its non- social policy, and was specified and further developed in
on human rights and the environment. insurance parent company (or companies). Captives are the OECD Guidelines for Multinational Enterprises and
a form of self-insurance. OECD Guidance on Responsible Business Conduct.
Annual management report: a document that provides The European Union has agreed on a joint text of
a summary of a company’s performance, activities Digital tag: a specific label or identifier assigned to a the Corporate Sustainability Due Diligence Directive
challenges and future plans, over the course of a fiscal single piece of financial or sustainability information. (CSDDD), which sets obligations for large companies
year. When a company reports its information using XBRL, it based and operating in the EU regarding actual and
Glossary 42
potential adverse impacts on human rights and the the national level when it comes to implementing the from an impact perspective when it pertains to the
environment, with respect to their own operations, those amendments to the Accounting Directive. company’s actual or potential, positive or negative
of their subsidiaries, and those carried out by their impacts on people or the environment over the short-,
business partners. The directive was formally adopted by European Single Electronic Format (ESEF): the medium- and long-term. Material sustainability matters
European policymakers in April 2024. regulatory framework introduced by the European include impacts caused or contributed to by the company
Securities and Markets Authority (ESMA) as part of the and impacts which are directly linked to the company’s
Company downstream from the reporting company: European Union’s efforts to enhance transparency and operations, products, and services through its business
any company (for instance, distributors, customers) that accessibility of financial information. The ESEF requires relationships.
receives products or services from the the company. companies listed on EU regulated markets to prepare their
annual reports in a specific electronic format, known as Impact: the effect the company has or could have
Company upstream from the reporting company: Inline XBRL (eXtensible Business Reporting Language). on the environment and people, including effects on
any company (for instance, suppliers) which provides Inline XBRL combines traditional human-readable financial human rights, connected with its own operations and
products or services that are used in the development of statements with machine-readable XBRL data, allowing for upstream and downstream value chain, including
the reporting company’s own products or services. easier analysis and retrieval of financial information. through its products and services, as well as through its
business relationships. Impacts indicate the company’s
Net turnover: it refers to the total revenue generated by European Single Access Point (ESAP): a single digital contribution, negative or positive, to sustainable
a company after deducting certain items, such as sales point of access to public financial and non-financial development over the short, medium or long term.
rebates and value added tax and other taxes directly information about EU companies and investment
linked to turnover. products. It will provide for a single digital platform for the Independent Assurance Services Provider (IASP): a
centralized collection, storage and access to information firm other than the usual auditors of financial information
EFRAG: a public private organisation that provides already published in accordance with existing European that is allowed by Member States to audit sustainability
technical expertise and advice to the European legislation, as well as future European directives and information. Depending on the local legal frameworks,
Commission on accounting matters, particularly on the regulations. This includes financial regulations and ESG- IASPs can be sustainability specialists, certification
development and endorsement of International Financial related disclosure regulations such as the SFDR and the bodies, lawyers, or any other entity that received an
Reporting Standards (IFRS) and the development of CSRD. The ESAP platform should be available from Q3 accreditation to provide sustainability assurance.
European Sustainability Reporting Standards (ESRS). 2027 and gradually phased in.
Impacts, Risks and Opportunities (IRO): specific
European Directive / European Regulation: legal Financial materiality: a sustainability matter is material disclosures in the ESRS that capture companies’ impacts,
instruments issued by the European Union that set out from a financial perspective if it generates risks or risks and opportunities.
specific objectives that all Member States are required opportunities that do, or could reasonably affect, the
to achieve and/or implement. Unlike a regulation, which company’s financial position, performance, cash flows, Key intangible resources: non-physical resources
has a direct and immediate legal effect, a directive access to finance or cost of capital - over the short, which, either alone or in conjunction with other physical
provides a framework for Member States to develop their medium or long term. or non-physical resources, can generate a positive or a
own national laws to meet the directive’s objectives. In negative effect on the value of the company in the short,
the case of the CSRD, little flexibility has been given to Impact materiality: a sustainability matter is material medium and long term. In practical terms, intangibles
Glossary 43
usually refer to human, intellectual, and social capital of based on the financial statements or the sustainability provided by the company, it would be too complex and
a company, such as trademark(s), brand/logo, customer reporting of the company. costly. Therefore, a level of professional judgment is
directory, reputation, etc. The CSRD adds a qualification required, based on competence and experience. There
of “key intangible”, which refers to a level of dependency Materiality threshold: in the context of double materiality will always be a few uncertainties, or inherent limitations
of the company’s business model to these intangible reporting, it refers to the criteria (qualitative and/or due to subjective elements such as estimates, hence the
resources. quantitative) used both internally to the company’s wording “high”, but not “absolute”.
operations and externally to broader societal and
Limited assurance: the level of assurance in relation to environmental concerns. Setting a threshold on Proxy: it refers to a substitute or indicator used to
information that is disclosed based on the ESRS. When sustainability matters is therefore necessary to determine represent a specific aspect of sustainability performance
auditors provide limited assurance, they are stating that, which topics are material to the company. It establishes or impact when direct measurement or data collection
based on their procedures and assessments, nothing the boundary beyond which sustainability impacts, risks is difficult or impractical. For example, in environmental
has come to their attention that indicates the information and opportunities are considered material and provide sustainability reporting, a company might use electricity
reviewed is materially misstated. A risk assessment based grounds for their inclusion in corporate reporting. In EU consumption as a credible proxy for carbon emissions,
on limited assurance focuses on the detailed assurance law, materiality thresholds shall be determined by severity when these cannot be measured directly. Similarly, in
activities on topics or data that have a higher risk of error for actual negative impacts and severity and likelihood for social sustainability reporting, metrics like employee
or omissions, and/or are of significant interest to the potential negative impacts. turnover rate or employee satisfaction scores might
user or stakeholder. As the workload for auditors is less serve as credible proxies for overall employee well-being
for limited assurance than for reasonable assurance, Opportunities: sustainability-related opportunities with or engagement. The credibility of a proxy depends on
and more reliance is placed on inquiry and analytical positive financial effects. several factors, including its relevance to the sustainability
procedures, there is an increased risk that errors or issue being measured, the reliability of the data source,
omissions in the report will not be discovered. As a Preparers: an individual or a company responsible for the accuracy of the proxy in reflecting the underlying
result, the assurance provider issues a conclusion with preparing and presenting financial or sustainability reports phenomenon, and transparency in how it is selected and
the “double negative” wording that nothing has come to either voluntarily or legally. applied in reporting.
his/her attention to indicate the information is not fairly
presented, in accordance with the reporting criteria. In Reasonable assurance: the level of assurance Risks: potential or actual sustainability-related negative
the case of limited assurance, the assurance provider will describing a higher level of confidence in the ESRS- financial effects arising from environmental, social or
often undertake sampling of underlying source data on based reported information. When auditors provide governance matters that may negatively affect the
business sites - but the sample will be smaller than for reasonable assurance, they are stating that, based on company’s financial performance.
reasonable assurance. their audit procedures and assessments, the financial
statements are free from material misstatement. Small and non-complex institutions: banks which do
Material information: any information that could It requires the provider to undertake an initial risk not exceed certain thresholds, such as a total asset value
influence the decisions of users, including investors and assessment and then perform an in-depth investigation, of less than EUR30 billion and/or a low ratio of cross-
other stakeholders. Information is material where its collecting sufficient evidence to be able to give a high, but border assets in more than one Member State, and which
omission or misstatement could reasonably be expected not absolute, level of assurance in the form of a positively usually do not receive direct public financial assistance.
to influence decisions that users of that information make, worded “clean opinion”. Auditors don’t check every detail
Glossary 44
Stakeholder: those who have an interest in the company, Sustainability reporting: the process of mandatorily or Value chain: the full range of activities, resources and
and who can affect or can be affected by the company’s voluntarily reporting information related to sustainability relationships involved in the creation and delivery of
activities. There are two main groups of stakeholders: matters, in accordance with the ESRS). the products or services of the company. A value chain
encompasses the activities, resources and relationships
■ Affected stakeholders: individuals or groups whose Sustainability reporting format: the specifications of a the company uses and relies on to create its products
interests are or could be affected – positively or single electronic reporting format and the format, structure or services from conception to delivery, consumption
negatively – by the company’s activities and its direct and and language of the management report. and end of life. The value chain includes companies (or
indirect business relationships across its value chain; suppliers) upstream and downstream from the company.
■ Users of sustainability statements: primary users Transition plan for climate change mitigation: a plan
of general-purpose financial reporting (existing and that outlines the structured roadmap for a company to Relevant activities, resources and relationships include:
potential investors, lenders and other creditors, convert its environmental goals into actionable steps
including asset managers, credit institutions, insurance and investment strategies, with the aim of shifting its ■ those in the company’s operations, such as human
companies), as well as other users, including the operations toward a greener, lower-carbon model. resources;
company’s business partners, trade unions and The plan should align with global warming targets ■ those along its supply, marketing and distribution
social partners, civil society and non-governmental set by the Paris Agreement and the goal of achieving channels, such as materials, service sourcing, product
organizations, governments, analysts and academics. climate neutrality by 2050, as outlined in the European and service sale and delivery;
Some stakeholders may belong to the two groups. Climate Law. By engaging in this company-wide ■ the financing, geographical, geopolitical and regulatory
process, companies can mitigate strategic and financial environments in which the company operates.
Supply chain: the full range of activities or processes risks associated with the transition, identify business
carried out by suppliers upstream from the reporting opportunities, and enhance transparency for investors Users: (of sustainability statements) are primary users of
company, which provide products or services used in the and financial markets. While the EU has not yet provided general-purpose financial reporting (existing and potential
development of the reporting company’s own products a legal definition for transition plans, frameworks like the investors, lenders and other creditors including asset
or services. This includes upstream suppliers with which CSRD and the ESRS offer detailed guidelines. managers, credit institutions, insurance companies), as
the reporting company has a direct relationship (often well as other users, including the company’s business
referred to as a first-tier supplier), or an indirect business Transition plans encompass various elements, such as: partners, trade unions and social partners, civil society
relationship. and non-governmental organizations, governments,
■ greenhouse-gas reduction targets; analysts, and academics.
Sustainability matters: environmental, social, economic ■ decarbonization strategies;
and employee matters, respect for human rights, anti- ■ investment plans tied to the EU environmental XBRL: XBRL-tagged data is machine-readable, making it
corruption and anti-bribery matters, as well as other Taxonomy-aligned Key Performance Indicators; easier for stakeholders to access, analyze, and integrate
specific entities’ governance matters. These topics are ■ alignment with overall business strategies and financial sustainability information into various platforms and
more precisely defined in the European Sustainability planning; systems.
Reporting Standards (ESRS) – e.g., diversity policies ■ internal and external approval processes;
or child labor when it comes to governance and human ■ monitoring of implementation progress and
rights respectively. assessment of emissions.
CSRD ESSENTIALS 45
WITH
THE DEFINITIVE
THE SUPPORTGUIDE
OF MEP
TO THE
PASCAL
EU CORPORATE
References
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■ Directive 2013/36/EU of the European Parliament 401/2009 and (EU) 2018/1999, European Climate Law 2019/2088, Taxonomy Regulation.
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the activity of credit institutions and the prudential TXT/?uri=CELEX%3A32021R1119 TXT/?uri=celex%3A32020R0852
References 46
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of the Council of 19 July 2002 on the application of Parliament and of the Council of 25 November 2009 Parliament and of the Council of 24 November
international accounting standards. on the voluntary participation by organisations in 2010 establishing a European Supervisory Authority
https://eur-lex.europa.eu/legal-content/EN/ a Community eco-management and audit scheme (European Securities and Markets Authority),
ALL/?uri=celex%3A32002R1606 (EMAS), repealing Regulation (EC) No 761/2001 and amending Decision No 716/2009/EC and repealing
■ Commission Delegated Regulation (EU) 2020/1816 of Commission Decisions 2001/681/EC and 2006/193/EC. Commission Decision 2009/77/EC, Establishing
17 July 2020 supplementing Regulation (EU) 2016/1011 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/ ESMA.
of the European Parliament and of the Council as ?uri=CELEX:32009R1221&from=en https://eur-lex.europa.eu/legal-content/EN/
regards the explanation in the benchmark statement of ■ Directive (EU) 2019/1937 of the European Parliament TXT/?uri=CELEX%3A32010R1095
how environmental, social and governance factors are and of the Council of 23 October 2019 on the protection ■ Regulation (EU) No 537/2014 of the European
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https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/ https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/ specific requirements regarding statutory audit of
?uri=CELEX:32020R1816&from=EN ?uri=CELEX:32019L1937&from=en public-interest entities and repealing Commission
■ Commission Delegated Regulation (EU) 2020/1817 of ■ Commission Delegated Regulation (EU) 2018/815 of Decision 2005/909/EC.
17 July 2020 supplementing Regulation (EU) 2016/1011 17 December 2018 supplementing Directive 2004/109/ https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/
of the European Parliament and of the Council as EC of the European Parliament and of the Council ?uri=CELEX:32014R0537&from=EN
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https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/ https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/ Directive 2011/61/EU (recast).
?uri=CELEX:32020R1817&from=EN ?uri=CELEX:32019R0815&from=EN https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/
■ Commission Delegated Regulation (EU) 2020/1818 of ■ Directive (EU) 2017/1132 of the European Parliament ?uri=CELEX:32014L0065&from=EN
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?uri=CELEX:32020R1818&from=EN ■ Directive 2006/43/EC of the European Parliament and ■ Commission Delegated Regulation (EU)
■ Directive 2003/87/EC of the European Parliament of the Council of 17 May 2006 on statutory audits of supplementing Directive 2013/34/EU of the European
and of the Council of 13 October 2003 establishing annual accounts and consolidated accounts, amending Parliament and of the Council as regards sustainability
a scheme for greenhouse gas emission allowance Council Directives 78/660/EEC and 83/349/EEC reporting standards, Delegated act on the ESRS.
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Notes 48
Notes 49
Notes 50
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Address Barbara Strozzilaan 101

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CSRD ESSENTIALS

THE DEFINITIVE GUIDE TO THE EU CORPORATE

We are grateful for their valuable inputs and for

KEY CONTRIBUTORS OBSERVERS

CSRD ESSENTIALS Table of content

NFRD vs CSRD: What’s new?

NFRD Non-Financial Reporting Directive

Disclosure Assesment Audit Reporting Located

CSRD Corporate Sustainability Reporting Directive

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

Companies with their headquarter outside the EU and

■ the large, small or medium, subsidiary, is a public-

Review clause of the directive

FIGURE 2 –CSRD: Who and When?

2025 2026 2027 2028 2029

with balance sheet (total) in excess of €25m;

with balance sheet (total) in excess of €25m;

Exceeding at least two of the following three criteria on a consolidated basis:

Small, non-complex credit institutions that are listed SMEs

Captive insurance or reinsurance companies if they are listed SMEs

with net consolidated turnover of more than €150m in the EU;

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

2023 2024 2025 2026 2027 2028 2029 2030

05/01 Entry into force of the CSRD

06/07 End of transposition period for the Member States

First report (based on limited assurance) Evaluation report on the directive

Listed SMEs (but possible to opt out during 2 years)

For which Non EU-companies if net consoli-

End of exemption for Listed SMEs

31/07 Sector-agnostic standards

By October Standards on limited assurance

First revision of the standards By October Standards

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

European Sustainability Reporting Standards (ESRS)

reporting according to the ESRS (ESRS1). They Terminology of the standards

TO LEARN MORE ABOUT THE DIFFERENT TYPES OF SMEs

Voluntary standard (for SMEs): this standard can be

FIGURE 4 –Sustainability matters covered in topical ESRS – 1/2

Climate change adaptation

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

FIGURE 4 –Sustainability matters covered in topical ESRS – 2/2

Rights of indigenous peoples Free, prior and informed consent

Corruption and bribery Prevention and detection

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

FIGURE 5 –Legal interconnections

Linked to the CSRD Modified by the CSRD

EU Taxonomy Regulation Graph legend

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

The CSRD requires sustainability information to be located

taxonomy for sustainability reporting, including the

FOR MORE INFORMATION ELECTRONIC FORMAT, CONSULT

Based on EFRAG’s XBRL taxonomy, the European

Review clause of the directive

FIGURE 6 –Consolidation of a third-country parent group with subsidiaries or branches in the EU

2026 2027 2028 2029 2030 After 2030

TCPG directly generates > €150 m net After 2028

TCPG has an EU branch

Lefebvre Sarrut’s infographic in association with GRI (Global Reporting Initiative)

Progressive application as of 2025