CSRD: the European Corporate Sustainability Reporting Directive changing the ESG landscape

The new corporate sustainability reporting for companies

On January 5, 2023, the Corporate Sustainability Reporting Directive (CSRD) came into force

an EU directive that transforms corporate sustainability reporting.

The objective of the CSRD

The aim of the CSRD is to drive the transition towards a fully sustainable and inclusive economic and financial system by requiring companies to increase transparency and accountability in reporting their impacts. This is a significant shift for companies, which must adapt to the regulatory requirements while having the opportunity to integrate sustainability more deeply into their business and create long-term strategic value.

What does the directive entail? Which companies are subject to the CSRD? What benefits does it bring to businesses?

Discover all the details!

What is the CSRD?

Regulatory context of the CSRD directive

The Corporate Sustainability Reporting Directive (CSRD) is the EU’s new sustainability reporting directive. Effective in 2023 and adopted in Italy in 2024, it draws from the most advanced studies on environmental, business, and corporate management practices. Part of the Green Deal, it’s one of the policy strategies implemented by the EU to initiate the transition to a sustainable paradigm.

Differences from the Non-Financial Reporting Directive (NFRD)

The CSRD expands and replaces the previous Non-Financial Reporting Directive (NFRD), establishing stricter requirements for corporate sustainability communication and promoting greater transparency and accountability. This transformation of European corporate reporting is even reflected in the language shift: from 2025, “non-financial reporting” will be referred to as “sustainability reporting.” 

Why was the CSRD Introduced?

Ensuring greater transparency on corporate ESG impacts

The goal of the CSRD is to improve the quality and comparability of sustainability information provided by companies, enhancing understanding of the environmental, social, and governance (ESG) impacts they generate. This increased transparency allows investors and other stakeholders to engage with companies in a more informed manner. 

Encouraging the integration of social and environmental factors into corporate strategy

The CSRD aims to encourage companies to embed sustainability within their business strategy, recognizing the impact of environmental and social factors on business competitiveness and positioning. The CSRD urges companies to rethink their approach to sustainability, as the economic value they generate is closely intertwined with social and environmental value; economic performance can no longer be analyzed separately from sustainability criteria. 

Scope and timeline

Which companies are subject to the CSRD?

Initially, the CSRD applies to all large companies and listed companies in the EU, including multinational groups, and will cover an increasing number of companies over time. 

CSRD implementation timeline

The implementation of the CSRD is gradual, following this timeline:

• • January 1, 2024

    Large public-interest entities (with an average of 500 employees over the fiscal year) already subject to the NFRD. Reporting begins with reports published in 2025 for the previous fiscal year.

  • January 1, 2025

    Large companies not currently subject to the NFRD (with more than 250 employees and/or net revenue over €50 million and/or assets over €25 million). Reporting begins with reports published in 2026 for the previous fiscal year.

  • January 1, 2026

    Small and medium-sized listed enterprises and other entities defined by the regulation. Reporting begins with reports published in 2027 for the previous fiscal year. SMEs can defer reporting until 2028.

  • January 1 2028

    Non-EU companies with parent companies outside the EU that have generated net revenues exceeding €150 million in the EU in each of the past two consecutive fiscal years.

Reporting obligations

What does the CSRD require?

The CSRD requires companies to report detailed information on:

• • Environmental, social, and governance impacts;
  • Sustainability-related risks and opportunities;
  • Sustainability strategies and objectives;
  • Governance models and processes for managing ESG issues.

The ESRS: the new European reporting standards under the CSRD

The CSRD is designed to ensure that sustainability information is relevant and comparable at both the European and international levels, supporting impact assessments by investors and rating systems. Companies will therefore be required to adopt the ESRS (European Sustainability Reporting Standards). To date, the European Financial Reporting Advisory (EFRAG) has published the first 12 standards, divided as follows: 

• • 2 Cross-cutting Standards: covering general requirements and mandatory disclosure requirements for all companies—governance, strategy, risk and opportunity management, and objectives.
  • 5 Environmental Standards: climate change, pollution, water and marine resources, biodiversity and ecosystems, resource use, and circular economy.
  • 4 Social Standards: own workforce, workers in the value chain, communities, consumers.
  • 1 Governance Standard.

Standards for listed SMEs and sector-specific standards are still being developed, covering certain specific industries.

Another innovation: Double Materiality Analysis

With the CSRD, companies must report impacts on issues identified through a double materiality analysis. Materiality analysis, which involves engaging stakeholders to gather qualitative and quantitative information, will now need to be conducted from two perspectives:

• • Inside-out: how the company’s activities impact society and the environment;
  • Outside-in: how sustainability issues affect the company’s strategy and financial performance.

Double materiality analysis more deeply engages stakeholders, allowing them to express which impacts are most important to people and the planet, as well as the risks and opportunities associated with major global and local environmental issues that may have a financial impact on the company.

Annual reporting required by the CSRD

The directive does not require a separate sustainability report. Instead, annual reporting must be carried out within a dedicated section of the management report, following this structure: general information, environmental information, social information, and governance information. 

Benefits of the CSRD

CSRD: an opportunity for Europe and businesses

While “CSRD” may evoke the idea of a strict regulatory framework (and it often is interpreted that way), the directive can actually strengthen companies’ competitiveness and commitment to sustainability, thus facilitating Europe’s transition.

Evolving and improving resilience through stakeholder engagement

The CSRD encourages companies to broaden their perspective beyond their own boundaries, embracing an ecosystem view and engaging the value chain. This represents an opportunity to deepen relationships with stakeholders and more clearly identify the internal and external forces that influence the company’s impact and economic performance. Reducing risks and maximizing opportunities identified through double materiality analysis facilitates the company’s continuous evolution towards sustainability, potentially improving economic resilience. 

Our experience alongside businesses reaffirms how entities that invest in stakeholder inclusion re-inject value into the business system, as highlighted by the first National Research on Benefit Corporation (Società Benefit).

The real opportunity lies beyond compliance

The CSRD allows companies to go beyond mere compliance and reporting, representing a valuable opportunity to strengthen their overall sustainability strategy. Gathering and integrating information, when properly directed, enables companies to reinforce goals and guide concrete actions taken, with a view to improving impacts and creating a competitive advantage in the market. 

What does NATIVA offer you?

Compliance and value creation for Your company

NATIVA offers specialized consulting to help you comply with the CSRD and integrate sustainability reporting into your business strategy. We bring deep expertise in sustainability and business transformation, built over 10 years of supporting some of the most prominent Italian and European companies on sustainable evolution paths.

The CSRD is complex, but it doesn’t have to be complicated 

Our approach involves the direct engagement of people within the company, offering targeted training to make the process streamlined and efficient, and planning activities to avoid undue pressure on company operations and personnel. 

We believe in an integrated approach

Complying with CSRD requirements involves expertise in finance, legal and management mechanisms, policy, strategy, and data monitoring and evaluation. Leveraging our technical-scientific, regulatory, taxonomic, and sustainability practices, we can guide you through each phase of the CSRD in a single, linear, and continuous process.

For us, the CSRD is more than just a regulatory requirement 

The directive can and should create strategic value for your business in the long term. Our approach provides you with a secure, measured, and detailed pathway to allow your professionals to pursue compliance goals while contributing to stimulating the company’s sustainable evolution.

Want to learn more? Contact us!

Do you have further questions about the CSRD? Want to discuss how we can help you not only meet regulatory requirements but also leverage this opportunity for your business? Contact us!