CSRD Timeline: Steps For Issuers To Prepare For The Upcoming Directive

The Corporate Sustainability Reporting Directive (CSRD) has begun its phased implementation, forming part of the European Union’s (EU) drive to create a “modern, resource-efficient and competitive economy.” The European Green Deal has the triple aim of:

• Ensuring no net emissions of greenhouse gases by 2050
• Decoupling economic growth from resource use
• Leaving no person and no place behind. 

Over the forthcoming four years, in-scope businesses will need to collect data on a range of environmental, social and governance (ESG) impacts that their operations have on communities and the ESG impacts on their company’s performance. The idea is to present standardised sustainability data to stakeholders such as customers and investors, and therefore, encourage issuers to improve their ESG performance to help the EU reach its goals. 

This article describes the CSRD timeline and how the directive relates to other EU sustainability legislation. 

What is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive (CSRD) stipulates a range of requirements for extra-financial performance reporting by issuers based in the EU or with subsidiaries or branches of qualifying size within the union. 

In-scope entities must conduct a double materiality assessment against 1,178 data points known as the European Sustainability Reporting Standards (ESRS). For those data points where the company has a significant impact or is significantly impacted, it should collect the required data and report it on an annual basis alongside its financial reporting. 

In addition, there will be sector-specific reporting requirements for businesses in high-risk industries such as agriculture and fossil fuels to be introduced in June 2026. 

The aim is to create a standard reporting framework to allow for easier comparison between organisations’ sustainability efforts and provide transparency over the risks and opportunities for businesses in relation to their ESG strategy. 

The CSRD timeline at a glance

The CSRD timeline in detail

Companies that are within the scope of the Non-Financial Reporting Directive (NFRD) automatically entered into the scope of CSRD from the start of the financial year 2024. These are large public interest entities (PIE) with more than 500 employees and who have either a balance sheet total of more than €25,000,000 or a net turnover of more than €50,000,000.

These organisations should collect information on the ESRS data points relating to the impact of companies on them or where the business is impacted. The first CSRD report is due with the companies’ financial reporting during the financial year 2025. 

Here are the other significant dates for the implementation of CSRD:

Unlisted SMEs and micro undertakings – listed or unlisted – with fewer than ten employees, €250,000 or less on the balance sheet and revenue of €700,000 or less are not obligated to report. However, they can report voluntarily to provide transparency over their sustainability efforts. 

Transitional and grace periods

Value chain reporting

Companies are expected to report not only on their own sustainability matters but also on those of the partners in their value chain. As this is a considerable undertaking for many entities, particularly those that will have to request data from supply chain partners that are not in-scope of CSRD themselves, there is a three-year grace period following the company coming into scope before it must include full value chain reporting, too. During these three years, they must record their efforts to find the information and the reasons for not being able to supply any missing data. 

Non-EU companies

Initially, non-EU companies with turnover greater than €150,000,000 and at least one branch or subsidiary in the EU were due to start their data collection in financial year 2024. However, the EU Council and Parliament agreed to delay this for two years until 2026, with the first reports due in financial year 2028. This decision gave these companies more time to put in place procedures for analysing their exposure to the various data points and reporting on them. 

SME opt-out

Listed SMEs enter the scope of CSRD in 2026, but they can opt out of the requirements in 2026 and 2027 if they wish. However, they must explain why in their annual report and begin collecting data no later than financial year 2028, with a report due in 2029. 

Transposition by EU member states

The deadline for EU member states to transpose CSRD is 6 July 2024. Each country has the option to goldplate their interpretation of the law, meaning that they can lower thresholds so that more companies enter the scope, they can add specific reporting requirements for their jurisdiction and can bring forward implementation deadlines for example. 

How is the EU Taxonomy related? 

CSRD and the EU Taxonomy are both part of the EU’s drive towards better reporting on sustainability issues. The EU Taxonomy provides a classification system that defines which economic activities can be considered environmentally sustainable. It aims to guide investors, companies and policymakers in making environmentally sustainable decisions.

Under the CSRD, companies are required to report how and to what extent their activities align with the criteria set out in the EU Taxonomy. This includes providing information on the proportion of their turnover, capital expenditures (CapEx), and operational expenditures (OpEx) related to environmentally sustainable activities as defined by the Taxonomy. The ESRS are also aligned with the criteria of the EU Taxonomy.

How is the CSDDD related? 

The Corporate Sustainability Due Diligence Directive (CSDDD) interlinks with the CSRD and the EU Taxonomy. It requires in-scope organisations to implement a robust due diligence process into their environmental and human rights efforts as well as those of their subsidiaries and the entire value chain. 

Companies are responsible for reporting on the performance of both themselves and their value chains under the CSRD. CSDDD requires in-scope entities to identify actual and potential adverse social, governance and environmental impacts of their operations and those of their value chain, stopping, mitigating and preventing them. This will feed into their reporting through CSRD, too. 

What should the report include?

A company’s CSRD report should include data on all areas in which there is a material impact by or on the company within the following topic areas: 

Cross-cutting standards

Environmental standards

Social standards

Governance standards

FAQs

How do CSRD obligations differ from those under the NFRD?

The CSRD expands the scope of reporting to include all large companies and listed SMEs, unlike the NFRD, which applied only to large public-interest entities with more than 500 employees. Additionally, the CSRD introduces more detailed reporting requirements relating to environmental issues, social responsibility and other areas. 

What are the specific reporting deadlines for companies transitioning from the Non-Financial Reporting Directive (NFRD) to the Corporate Sustainability Reporting Directive (CSRD)?

Companies subject to NFRD must begin collecting data under the CSRD for the financial year 2024. The first report must be delivered with each company’s financial results in 2025. For specific reporting requirements, please refer to the text above.

How does the phased implementation of the CSRD affect non-EU companies with significant operations within the EU?

Non-EU companies with operations in the union that meet the requirements for reporting will have to meet the same deadlines as those headquartered in Europe. For those large non-EU companies with turnover in EU-regulated markets greater than €150,000,000 in two consecutive years, they will come into scope in 2026, with reports due in 2028.