ESG Emerging Regulations & Standards

Corporate SustainabilitySustainability Reporting Directive (CSRD)

T3’s expertise in ESG policies provides in-depth guidance on navigating the complexities of the CSRD, ensuring your compliance while demonstrating a genuine commitment to sustainability excellence.


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1. What is CSRD Reporting?

The European Union (EU) has reached a pivotal point with the final adoption of the Corporate Sustainability Reporting Directive (CSRD) in December 2022 and the subsequent European Sustainability Reporting Standards (ESRS). This new framework revolutionizes sustainability reporting, shifting from arbitrary and disparate practices to standardized reporting and transparency, and replaces the previous Non-Financial Reporting Directive (NFRD), expanding the scope of companies required to report on their environmental and social impact, as well as related financial risks and opportunities.

The CSRD aims to standardize sustainability reporting across the EU, moving away from inconsistent practices and ensuring that companies provide transparent and comparable information. This information is essential for stakeholders, such as investors, consumers, and regulators, who need accurate data to assess a company’s sustainability performance and make informed decisions.

To achieve this standardization, the CSRD mandates the use of the ESRS, a set of detailed reporting guidelines that cover various aspects of sustainability. Additionally, the directive requires independent assurance of reported information to guarantee its accuracy and reliability.

While the CSRD primarily applies to EU companies, it also affects certain U.S. parent companies with operations in the EU. These companies will need to comply with reporting requirements at both the consolidated parent level and the EU subsidiary level.

The CSRD marks a crucial milestone in the EU’s commitment to a sustainable future. It fosters transparency and accountability, encouraging businesses to consider their long-term impact and promoting responsible business practices. As the world faces growing environmental and social challenges, the CSRD serves as a model for other regions to follow, paving the way for a more sustainable and equitable global economy.



2.1 NFRD vs CSRD: What’s new?

The CSRD is a significant advancement in sustainability reporting, building upon the foundation laid by the NFRD, which was adopted in 2014. The NFRD was a pioneering regulation aimed at increasing transparency and accountability by requiring large public-interest entities (PIEs) with over 500 employees to disclose non-financial information. This included data on environmental impact, social responsibility, treatment of employees, human rights, and anti-corruption measures.

While the NFRD represented a critical step forward, its limitations became evident over time. The scope was confined to a relatively small group of companies, and the reporting requirements lacked the detail and standardization necessary for comprehensive assessments and comparisons. Additionally, the NFRD did not mandate external assurance of the reported information, raising concerns about the accuracy and reliability of the data.

The CSRD addresses these shortcomings by significantly broadening the scope of reporting entities and introducing more detailed and standardized reporting requirements. It covers a much wider range of companies, including all large companies (with over 250 employees and/or €40 million in turnover and/or €20 million in total assets) and all listed companies (except listed micro-enterprises). These companies are required to disclose detailed information on various ESG topics, including climate change, biodiversity, human rights, and social responsibility, using a set of mandatory ESRS.

Furthermore, the CSRD mandates external assurance of sustainability information, ensuring the accuracy and reliability of reported data. It also introduces a “double materiality” perspective, requiring companies to report on both the impact of their activities on the environment and society, as well as the impact of sustainability matters on their financial performance. This comprehensive approach aims to provide stakeholders with a complete picture of a company’s sustainability performance and its potential financial implications.

Graph 1: NFRD vs. CRSD comparison

Nfrd vs Csrd


The CSRD interacts with the other frameworks in several ways:

Building on and Aligning with Existing Frameworks:

CSRD Alignment

Expanding and Deepening Disclosure Requirements:


Supporting the EU’s Sustainable Finance Agenda:

CSRD Complements


The CSRD acts as a central pillar in the EU’s sustainable finance framework. It builds upon and aligns with existing frameworks like TCFD and GRI, while expanding and deepening disclosure requirements. By requiring comprehensive and standardized sustainability reporting, the CSRD aims to enhance transparency, comparability, and accountability, ultimately contributing to a more sustainable economy.

Graph 2: NFRD vs. CRSD comparison

CSRD Compliance

Graph 3: How it all fits together in EU

CSRD How it fits

3. Scope of CSRD

Eligibility Criteria for companies

Companies Already Under the NFRD:

Large EU public interest companies already reporting under the NFRD must continue to do so if they meet the following criteria:

    • Listed
    • More than 500 employees
    • Balance sheet exceeding €25 million or net turnover exceeding €50 million

Reporting due: Calendar year 2025, based on data from the financial year 2024

Large Companies:

All large companies must report if they meet at least two of the following updated criteria:

  • Balance sheet exceeding €25 million
  • Net turnover exceeding €50 million
  • More than 250 employees

Reporting due: Calendar year 2026, based on data from the financial year 2025

Phased-in reporting from 2025 to 2029 for large companies, based on specific criteria

Non-EU Companies:
  • Non-EU companies with securities listed on EU-regulated markets, large undertakings, SMEs, or a branch/subsidiary in the EU (excluding micro-enterprises) may be in scope.
  • Refinitiv analysis suggests over 10,000 non-EU companies could be impacted, primarily in the US, Canada, and the UK.
  • Reporting due: May vary between 2025 and 2029, depending on specific circumstances.
Listed Small and Medium-Sized Enterprises (SMEs):

All listed SMEs are required to report, unless they choose to opt out for two years.

SMEs meet a maximum of two of the following updated criteria:

  • Fewer than 50 employees
  • Balance sheet under €5 million
  • Net turnover under €10 million

Reporting due: Calendar year 2027 (or 2029 if opted out), based on data from the financial year 2026 (or 2028 if opted out)

Subject to a simplified set of ESRS standards

For smaller undertakings, the ESRS offers flexibility in financial thresholds. While Member States have the authority to set their own specific limits, these cannot exceed:

  • Balance sheet total: €7.5 million
  • Net turnover: €15 million

Graph 4: Summary of entities within the scope of CSRD


Important Considerations:
  • Micro-enterprises are exempt from the CSRD.
  • The timeline for non-EU companies may vary depending on their specific circumstances.
  • The updated size criteria will impact the classification of companies as SMEs or large enterprises, affecting their reporting obligations.

This overview provides a comprehensive understanding of the entities covered by the CSRD and their respective reporting timelines, considering the recent adjustments to the Accounting Directive’s size criteria.

Graph 5: Applicable standards for CSRD entities

Applicable Standards CSRD

4. CSRD Process (Double materiality)

4.1 CSRD Checklist: 10 Steps for Successful Reporting

CSRD Steps

4.2 Materiality & Double Materiality Assessment

The introduction sets the stage for understanding the significance and impact of the Double Materiality Assessment, highlighting its relevance under the CSRD and its extensive reach.

The Double Materiality Assessment is a core component of the Corporate Sustainability Reporting Directive (CSRD), set to significantly change corporate sustainability reporting. This guide aims to help companies understand and implement this comprehensive reporting framework, which will impact around 50,000 companies. The CSRD mandates that companies report on how various sustainability issues affect ESG topics and vice versa, reflecting a comprehensive view of their environmental and social responsibilities.

Key Concepts

These key concepts form the foundation of the Double Materiality Assessment, explaining the dual focus on outward impacts on society and inward impacts on financial performance.

Double Materiality:

  • Impact Materiality: Evaluates how a company’s operations affect the environment and society. This includes contributions to climate change and human rights issues.
  • Financial Materiality: Assesses how external environmental and social changes impact the company’s financial performance, including its short, medium, and long-term profitability.

Graph 6: What is Double Materiality

Double-Materiality CSRD

Frameworks and Standards

This section contextualizes the Double Materiality Assessment within existing frameworks and standards, showcasing its evolution and the role of established guidelines.

  • Global Reporting Initiative (GRI): Provides sustainability reporting guidance since 2006, helping organizations identify significant sustainability issues.
  • Sustainability Accounting Standards Board (SASB): Offers standards for prioritizing sustainability issues since 2018.
  • European Financial Reporting Advisory Group (EFRAG): Develops European Sustainability Reporting Standards (ESRS) under the CSRD, emphasizing materiality’s role in guiding companies to report on significant ESG matters.
Assessment Process : step by step on Double Materiality

The Double Materiality Assessment is a core component of the Corporate Sustainability Reporting Directive (CSRD), set to significantly change corporate sustainability reporting. This guide aims to help companies understand and implement this comprehensive reporting framework, which will impact around 50,000 companies. The CSRD mandates that companies report on how various sustainability issues affect ESG topics and vice versa, reflecting a comprehensive view of their environmental and social responsibilities.

Double Materiality Step-by-Step Guide

Step by Step Double Materiality CSRD


By following this comprehensive step-by-step guide, companies can effectively conduct a Double Materiality Assessment, ensuring they meet regulatory requirements and enhance their sustainability practices. Engaging stakeholders, using robust methodologies, and maintaining transparency throughout the process will contribute to a more resilient and responsible business strategy. For more detailed guidance and tools, companies can refer to resources provided by GRI, SASB, EFRAG, and CSRD.

Materiality Characteristics

Understanding these characteristics helps companies effectively assess the significance of various impacts and their implications.

  1. Scale: Severity of the impact on basic life necessities or freedoms.
  2. Scope: Extent of the impact, such as the number of individuals affected or environmental damage.
  3. Irremediability: Difficulty in mitigating the impact, such as through compensation or restitution.
  4. Likelihood: Probability of the impact occurring, measured qualitatively or quantitatively.
  5. Magnitude: Extent to which a financial risk or opportunity affects the company’s operations.

Graph 7: Double materiality Illustration

CSRD Reporting

Practical Implementation

Implementing these assessments involves using both quantitative data and qualitative insights to evaluate materiality comprehensively.

  • Impact Materiality Assessment: Evaluates both positive and negative impacts, considering scale, scope, irremediability, and likelihood. Companies should use available data, such as carbon emissions and water usage statistics, for quantitative assessment, and qualitative information from stakeholder interviews where data is scarce.
  • Financial Materiality Assessment: Involves analyzing sustainability risks and opportunities in the short (<1 year), medium (1-5 years), and long-term (>5 years). Companies should consider how factors like global warming and regulatory changes might affect their financial performance.

This process requires a thoughtful methodology, including stakeholder engagement to identify and evaluate material impacts, risks and opportunities. It ultimately determines the ESRS that are applicable to the company and informs substantial parts of the company’s reporting.

Graph 8: Materiality assessment of sustainability data

CSRD Reporting

This dual approach of the double materiality assessment ensures a thorough evaluation of both how a company affects the environment and society and how environmental and social factors, in turn, could impact the company.

Important considerations for Double Materiality:

Not All ESRS Need to be Included

Clarifying that not all ESRS topics need to be included ensures companies focus on the most relevant and significant issues.

Companies are required to assess each of the 10 ESRS topics but are not obligated to include all in their sustainability reports. The Double Materiality Assessment helps determine which ESRS topics are material to the company’s operations and strategy. These topics are broken down into sub-topics and sub-sub-topics to ensure a thorough evaluation. For example:

  • ESRS S1 (Own Workforce): Includes sub-topics like working conditions, which further break down into areas such as working time and work-life balance.
  • Companies must assess these at the topic, sub-topic, and sub-sub-topic levels for both impact and financial materiality.

This detailed assessment ensures that only the most relevant and significant topics are included in the company’s annual sustainability report, aligning with both the company’s strategic goals and regulatory requirements.

integration with ESRS:

To ensure a seamless integration between the results of the Double Materiality Assessment and reporting under the European Sustainability Reporting Standards (ESRS), companies should thoroughly analyse the ESRS developed by EFRAG. Determining the applicable CSRD requirements involves following a specific methodology and necessitates a comprehensive understanding of the guidelines.

The CSRD introduces new sustainability aspects that may be complex for organizations to fully comprehend, such as the inclusion of transition plans and the key performance indicators (KPIs) outlined in the EU Taxonomy.

Moreover, ESRS reports require handling a substantial amount of data, with up to 1,200 data points and over 80 disclosure requirements that can interact with one another. Understanding these interactions is crucial for the successful execution of reporting obligations.

CSRD Reporting

European Sustainability Reporting Standards (ESRS) Framework

The ESRS are the detailed reporting standards that companies must adhere to in order to comply with the Corporate Sustainability Reporting Directive (CSRD). They provide a standardized framework for disclosing environmental, social, and governance (ESG) information, promoting transparency and comparability across the EU.

Summary of CSRD Disclosure Requirements

The CSRD mandates the disclosure of information across five key areas:


Structure of the ESRS:

The ESRS are organized into different sets tailored for specific types of companies:

  • Full ESRS: For listed and large companies
  • Standard for Listed SMEs: Simplified standards for listed small and medium-sized enterprises (SMEs)
  • Standard for Third-Country Companies: For companies based outside the EU but with significant operations within the EU

The full ESRS set comprises three categories:

  • Cross-Cutting Standards: Define general reporting principles and disclosures applicable across all sectors.
  • Topical Standards: Cover specific ESG topics, such as climate change, pollution, biodiversity, resource use, the workforce, affected communities, consumers and end-users, and business conduct.
  • Sector-Specific Standards: To be developed and applied from 2027 onwards, these standards will address sector-specific impacts, risks, and opportunities.

Key Points to Note:

  • ESRS 1 and ESRS 2 (cross-cutting standards) apply to all sustainability matters and are mandatory for all companies.
  • The remaining standards are subject to a materiality assessment, meaning companies only need to report on topics that are relevant and significant to their business.
  • Standards for listed SMEs are under development and will be simpler than the full ESRS set.
  • A voluntary standard is available for non-listed SMEs.
  • The CSRD allows for the potential use of equivalent sustainability standards from non-EU jurisdictions, subject to approval by the European Commission.

By understanding the structure and requirements of the ESRS, companies can prepare for compliance with the CSRD and effectively communicate their sustainability performance to stakeholders.

Graph 9: High level CSRD reporting standards

CSRD Reporting

**Regardless of the double materiality assessment results, CSRD requires disclosure against these topics

5. Timeline & Reporting Exemptions

5.1 Timelines

The CSRD will be phased in over several years. Larger companies already covered by the NFRD will start reporting from the fiscal year 2024. SMEs will begin reporting from 2026, and non-EU companies with significant EU operations will follow from 2028.

Graph 10: When do in scope companies need to report?

CSRD Reporting

Informal terminology :

While the CSRD implementation is phased in, the official documentation and guidelines do not refer to these phases as “Tranche 1,” “Tranche 2,” and “Tranche 3.” Instead, they typically refer to them by the year they come into effect or the specific types of companies included in each phase.

However, for ease of reference, some stakeholders might informally refer to them as tranches. In that case, the breakdown would be:

  • “Tranche 1” (2025): Large public-interest companies already reporting under the NFRD.
  • “Tranche 2” (2026): All other large companies meeting the updated size criteria.
  • “Tranche 3” (2027-2029): Listed SMEs (with a potential opt-out until 2029), and non-EU companies with varying timelines depending on their specific circumstances.

Remember that this is not official terminology but rather a way some might simplify the different phases of implementation.

5.2 Year 1 Exemptions

 In the first year of reporting under the Corporate Sustainability Reporting Directive (CSRD), certain exemptions and transitional provisions are available to facilitate a smoother transition for companies. Here are the key exemptions:   

1. Phased Implementation
  • Gradual Inclusion of Companies: The CSRD introduces a phased approach to reporting, meaning not all companies will be required to report from the first year. The directive will initially apply to large public-interest entities (PIEs) with more than 500 employees, with other large companies and SMEs following in subsequent years. 
2. Simplified Reporting Requirements
  • Reduced Disclosure: In the first year, companies may be allowed to provide reduced disclosures compared to full CSRD requirements. This includes partial reporting on certain sustainability matters while fully implementing other required disclosures over time.  Please see Graph 9 below 
3. Limited Assurance
  • Audit Requirements: For the initial years, the CSRD requires only limited assurance on sustainability information. This means that auditors will review the information provided but will not conduct a full audit. The requirement for reasonable assurance is expected to be phased in by 2028. 
4. Scope and Boundary Adjustments
  • Flexibility in Reporting Boundaries: Companies may have some flexibility in determining the scope and boundaries of their reports, especially concerning subsidiary and value chain reporting. They might not need to include all subsidiaries or the full value chain in the first year if it poses significant challenges. 
5. Use of Existing Reports
  • Leverage Existing Disclosures: Companies already producing sustainability reports under other frameworks (such as GRI or TCFD) may use these existing disclosures to meet CSRD requirements, provided they align with the new standards. 
6. Gradual Data Collection
  • Data Gap Analysis and Gradual Improvement: Companies can perform a data gap analysis to identify missing information and gradually improve their data collection and reporting processes. The focus in the first year can be on setting up systems and processes rather than providing complete data. 
7. Technical Guidance and Support
  • Support from Regulatory Bodies: Regulatory bodies like EFRAG (European Financial Reporting Advisory Group) are expected to provide technical guidance and support to help companies understand and comply with CSRD requirements.

Graph 11: Data exemptions CSRD in early years

Data Exemptions CSRD

6. Audit & Assurance

The Corporate Sustainability Reporting Directive (CSRD) introduces significant changes to the Audit Directive and Audit Regulation, impacting statutory audits and assurance of sustainability information.

Mandatory Assurance:

The CSRD mandates independent third-party assurance (audit) of sustainability information. This can be performed by the statutory auditor, another auditor, or an Independent Assurance Service Provider (IASP), if permitted by national authorities. Notably, the directive introduces a phased approach, starting with limited assurance and transitioning to reasonable assurance over time.

Promoting Market Diversity:

To enhance competition and diversity in the audit market, the CSRD allows shareholders with a significant stake to request an accredited third party, unaffiliated with the statutory auditor’s firm, to prepare a report on specific sustainability aspects.

Key Changes Introduced by the CSRD:
  • Levels of Assurance: Defines limited and reasonable assurance engagements.
  • Assurance Requirements: Specifies requirements for companies within and outside the EU.
  • Audit Market Organization: Regulates the European audit market, particularly for sustainability assurance services.
Development of Assurance Standards:

The CSRD tasks the European Commission with developing assurance standards outlining technical aspects of sustainability information assurance engagements. The Committee of European Auditing Oversight Bodies (CEAOB) is also involved in developing non-binding guidelines to support independent assurance providers until EU standards are established.

Audit of Sustainability Information:

The CSRD introduces a progressive approach to mandatory audits, starting with limited assurance and aiming for reasonable assurance by October 1, 2028. Until EU-wide standards are adopted, Member States may apply national schemes.

Sustainability Assurance Market:

The directive allows Member States to open the market to IASPs, which are firms other than statutory auditors that can provide sustainability assurance services. This aims to increase competition and access to the market for non-statutory auditors.

Passporting System:

The CSRD establishes a “passporting system” enabling accredited IASPs to operate freely in other Member States that have also opted to accredit IASPs.

Organization of the Assurance Profession:

Member States authorizing IASPs must set equivalent requirements to those for statutory auditors, particularly concerning professional ethics, independence, and educational qualifications.

Equivalence with Third-Country Audit Companies:

The directive provides a mechanism for recognizing third-country auditors if their regulatory framework is deemed equivalent to the EU’s.

7. Submission of CSRD report

Where to Submit

CSRD reports should be submitted to the relevant national authorities in the EU member state where your company is registered. These authorities are typically national financial regulators or bodies responsible for corporate reporting and sustainability.

How to Submit
  1. Identify the Relevant Authority: Determine which national authority in your country handles CSRD reports. This could be the national financial regulator, the corporate reporting authority, or a specific sustainability reporting body.
  2. Prepare the Report:
    • Ensure the report complies with the European Sustainability Reporting Standards (ESRS) developed by EFRAG. Unlike the NFRD, the CSRD mandates a specific format for sustainability disclosures and requires that information be included within the annual management report, not as a separate document. This integrated approach combines financial and sustainability information for a comprehensive overview of company performance.
    • Include all required information on environmental, social, and governance (ESG) issues as per the CSRD guidelines.
    • Ensure the report is clear, accessible, and understandable to a broad audience.
  3. Submission Format:
    • Reports are usually submitted electronically. Check with the relevant authority for specific format requirements (digital format using the European Single Electronic Format (ESEF). 
    • Ensure that all necessary digital signatures and verifications are in place if required.
  4. Submission Process:
    • Log into the designated portal or system provided by the national authority.
    • Upload the CSRD report and any supporting documents.
    • Fill out any required forms or fields related to your submission.
    • Review all entered information for accuracy and completeness.
  5. Confirmation:
    • After submission, you should receive a confirmation receipt from the authority.
    • Keep this receipt and any submission-related correspondence for your records.
  6. Publication:
    • Publicly disclose the CSRD report on your company’s website or through other communication channels to ensure transparency and accessibility to stakeholders.


Example: Submitting in Germany

In Germany, the responsible body for CSRD reports is the Federal Financial Supervisory Authority (BaFin). Companies would submit their reports via the BaFin portal. Here’s a simplified process:

  1. Access the BaFin Portal: Log into BaFin’s electronic submission system.
  2. Upload the Report: Follow the instructions to upload the CSRD report.
  3. Complete Required Fields: Provide additional information as required by BaFin.
  4. Submit: Finalize and submit your report. Ensure you receive a confirmation.


Example: Submitting in France

In France, the Autorité des Marchés Financiers (AMF) handles CSRD reports. The process is as follows:

  1. Access the AMF Portal: Use the AMF’s electronic submission system.
  2. Upload the Report: Follow the portal’s instructions to upload the CSRD report.
  3. Submit: Complete any required forms and submit the report, ensuring you receive a confirmation.


  • EFRAG: Provides detailed guidance and resources on the CSRD and ESRS.
  • National Authorities: Contact your national financial regulator or reporting authority for specific submission guidelines.


European Single Access Point (ESAP):

A key development is the creation of the ESAP, a centralized digital platform that provides free access to public financial and non-financial information about EU companies. This platform aims to enhance transparency, give companies greater visibility to investors, and streamline access to information for all stakeholders. Companies will file their reports to national bodies, which will then make the data available through the ESAP, starting in summer 2027.

easiest way to comply with csrd?

T3 can assits you with you CSRD compliance in several ways:


Scope Determination

T3 will help you determine if your company falls under the CSRD’s scope. This involves assessing the company’s size, turnover, balance sheet, and employee count against the thresholds set by the directive. For example, we would evaluate if a company is a ‘large’ undertaking or a listed entity that requires reporting from 2025 for FY 2024 or in subsequent years. Small and medium-sized public-interest entities


The CSRD: Data-Driven Sustainability Transformation


The CSRD: Data-Driven Sustainability Transformation

The CSRD isn’t just about compliance – it’s a catalyst for change. Success starts with data. Companies face a vast array of ESG disclosure demands – over 1,000 data points across 10 key topics like pollution, resources, and biodiversity. This data must be qualitative and quantitative, spanning your entire value chain with short, medium, and long-term views.

The Double Materiality Advantage

The CSRD mandates reporting both on how sustainability impacts your business and how your business impacts the world. This deep analysis isn’t a burden – it’s a strategic advantage. Management gains a 360-degree view, pinpointing how environmental and social factors drive performance. Investors get the transparency needed for informed decisions.


Materiality Assessment

T3 will consequently conduct a materiality assessment to identify the ESG topics that are most significant to your company’s stakeholders and operations. This step is crucial to aligning the company’s sustainability report with the CSRD’s focus on double materiality, which considers both the impact on the company and the company’s impact on society and the environment.


Existing Disclosures Review

T3 will also review any existing disclosures, such as those made under the Task Force on Climate-Related Financial Disclosures (TCFD), to evaluate their alignment with the CSRD. This step will identify gaps and T3 will advise on additional disclosures needed, ensuring that the company’s reporting also meets the broader ESRS requirements.


Report Publishing

T3 will provide you expertise in sustainability reporting, help you navigate this regulatory requirement, and ensure that the company not only complies with the CSRD but also capitalizes on the opportunity to showcase its commitment to sustainability to stakeholders.

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