Step-by-Step: Corporate Sustainability Reporting In The EU

The European Union has made significant moves to standardise and regulate the criteria by which companies report on their sustainability impact. It aims to create a single framework to regulate the reporting on environmental, social and governance (ESG) matters. The European Commission states that “this helps investors, civil society organisations, consumers and other stakeholders to evaluate the sustainability performance of companies.”

As well as the Corporate Sustainability Reporting Directive (CSRD), there is a range of other pieces of legislation and guidelines that inform how companies should evaluate their actions relating to sustainability and report them to customers, investors and regulators. 

This guide explains the state of corporate sustainability reporting in the EU and the reporting requirements under CSRD. It also provides a step-by-step guide to creating your own sustainability report. 

How has corporate sustainability reporting changed in the EU?

The Non-Financial Reporting Directive (NFRD) came into effect in December 2014 and required large public interest entities (PIE) to report on their ESG strategy, as well as making disclosures on their non-financial performance. 

This affected around 11,700 companies across the union. However, lawmakers agreed that, in order to broaden the scope of sustainability regulation, there needed to be an update to the legal landscape. In April 2021, the European Commission adopted a proposal for the CSRD, which would apply to more than 50,000 entities. 

What is the corporate sustainability reporting directive (CSRD)?

The CSRD requires in-scope companies to report on the impact the organisation has on a range of ESG concerns as well as the risks and opportunities for the company in relation to those concerns. 

The companies that were already reporting for NFRD became the first to collect data for the European Sustainability Reporting Standards (ESRS) relevant to their operations, with the first reports being issued alongside companies’ annual reports in 2025. More businesses will come into scope over the following years. 

What other legal acts have been introduced?

Corporate sustainability reporting requirements under the CSRD

Those companies in the scope of CSRD must report on sustainability matters that fall into 12 sector-agnostic European Sustainability Reporting Standards (ESRS). They cover these topics: 

• Cross-cutting standards
  • An overview of how the ESRS work
  • General business disclosures
• Environmental standards
  • Climate
  • Pollution
  • Water and marine resources
  • Biodiversity
  • Circular economy
• Social standards
  • Workforce
  • Value chain
  • Affected communities
  • Consumers and end-users
• Governance standards
  • Business conduct matters

Within these standards, there are 1,178 data points, of which the company must report on those that are material to that individual business. In addition, there will be sector-specific standards for those industries deemed high-risk in terms of their impact, such as those related to fossil fuels and mining. 

Companies are also encouraged to report on entity-specific issues that are not featured in the sector-specific and sector-agnostic standards, but which they believe may have an impact on ESG matters or where sustainability factors may impact the business. 

Double materiality

To understand which sector-agnostic data points a company should include in its reports, it should undertake a double materiality analysis. This includes assessing each point from two perspectives: 

If there is significant impact on either side, you should report on that data point in your sustainability assessment. 

Step-by-step guide to creating a corporate sustainability report

1. Engage stakeholders

Internal and external stakeholders will help you gain a better understanding of which data points are material to your business, so make sure you consult them early on. This will help you form an idea of the task ahead with regard to your sustainability reporting. 

Consider your entire value chain, including employees, suppliers, clients and communities in which you or your partners work. Your company’s sustainability efforts are not restricted solely to your individual entity. Additionally, engage with NGOs, workers’ representatives and industry bodies to discover some areas of impact you might previously have considered. The Sustainability Accounting Standards Board (SASB) can also steer you towards the types of data you might need to report. 

Conduct surveys with the different types of stakeholders, ensuring you gain representation from potentially vulnerable and marginalised groups that might not otherwise be heard. Use this information to guide your analysis. 

2. Analyse the ESG reports of peers

ESG reporting is not a new phenomenon and, even if you and your peers are yet to come into the scope of CSRD, there is likely still to be a wealth of information on competitors’ sustainability performance. 

Analyse these reports to find out what they deem to be material to their organisation, as this may also apply to your organisation, too. It will also offer insight into how to quantify some metrics where the methodology may not be immediately obvious. 

As a result, you gain an overview of where your organisation is in terms of performance in some key ESG initiatives. If there are areas in which peers are outperforming your business, you could shift your ESG strategy accordingly before you begin your CSRD reporting. 

3. Define your impacts, risks and opportunities

After consulting with stakeholders and analysing peers’ ESG reports, you may have a better idea of which of the ESRS data points will apply. You now need to create a list of the impacts, risks and opportunities (IRO) that you believe may be relevant to your business operations using the inside-out and outside-in perspectives.

Remember to look at short-, medium- and long-term impacts as well as those that are yet to happen and factor in both potential and actual impacts. Also, consider both positive and negative outcomes as either would need reporting if they were to be considered material. 

4. Rank your impacts, risks and opportunities

Once you have the significant IROs listed, you must collect the relevant data to consider how much of an effect they could have from either perspective and how likely they are to occur. For example, think about the environmental damage of polluting a stretch of water as well as the reputational damage such an incident would cause. Quantify both impact and financial outcomes. 

This will allow you to rank the IROs in order of most impactful to least impactful. However, it does not mean that they are all material. This is a decision that you must make internally and be able to justify to regulators. Consult with the senior management team and compliance and legal representatives to establish a defined threshold above which you consider the IROs to be material. 

Apply this threshold to your list of IROs and that will leave you with the list of data points on which you should report for CSRD.

5. Develop a strategy

CSRD is not just concerned with companies reporting where they stand in terms of sustainability, but also with how they intend to rectify any negative impacts or financial risks. This requires the company to create a mitigation strategy that explains how it will repair environmental damage, aid affected communities and protect shareholders’ investments in relation to ESG performance. 

Create targets for those negative IROs and state the procedures you have in place to make sure you improve the situation.  

Challenges to corporate sustainability reporting in the EU

• Data collection and management obligations mean that you need to find and report granular details on the company’s activities, which can be time-consuming and complicated. This requires new systems to collect and manage your ESG data effectively. 
• Mandatory audits will take place, meaning companies must be prepared for independent verification of their reporting. At first, this will include a limited assurance opinion, but that will transition to a more in-depth reasonable assurance basis over time. 
• Presenting the report means ensuring it is consistent with the company’s financial reporting and connects with it to give an overview of the organisation’s overall performance. You should report both at the same time. 

FAQs

How is the CSRD different from the NFRD?

The CSRD extends the scope of the NFRD, meaning more companies report under the legislation. It also introduces more comprehensive reporting requirements and introduces external auditing for organisations. 

How will CSRD requirements impact your sustainability reporting strategy?

CSRD requires a standardised and more detailed approach to sustainability reporting than individual companies’ current sustainability reporting may contain. This provides transparency over ESG strategies and usually requires a new plan.  

How frequently should sustainability reports be published?

In-scope businesses are required to submit their CSRD sustainability reports annually alongside their financial reports. This provides stakeholders with a holistic view of the organisation’s performance. 

Are there sector-specific reporting guidelines that companies need to follow?

The sector-specific reporting guidelines for CSRD will come into force on the 30th of June 2026, when companies in high-risk industries will have additional reporting requirements to remain compliant.