What you need to know about the EU’s CSRD reporting requirements

Executives around the world are scrambling to comply with the European Union’s Corporate Sustainability Reporting Directive (CSRD): mandated disclosures are due in 2025 based on the 2024 financial year. The required reporting is complicated, with companies needing to comply with the European Sustainability Reporting Standards (ESRS), which fall under the CSRD. To provide clarity for both EU and internationally based corporations, the EU Commission has published frequently asked questions (FAQs) that cover topics including:

• Sustainability reporting requirements introduced by the CSRD;
• Guidance on obtaining verified third-party assurance of sustainability reporting;
• What qualifies as a key intangible resource;
• Requirements for companies not based in the EU; and
• Details on the Sustainable Finance Disclosure Regulation (SFDR). 

The goal of the FAQs, according to the introduction language, is to “facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way and to ensure the usability and comparability of the reported information on sustainability.”

CSRD vs ESRS

Before reading the FAQs, it’s important to understand the differences and connections between CSRD and ESRS. The CSRD is the overarching legal framework of the law, mandating corporate disclosure. The ESRS — of which there are 12 — are the different reports corporations must submit to comply with CSRD. 

Digging into the FAQs

• Sustainability reporting requirements introduced by the CSRD:

This section clarifies how a company can determine if it is required to disclose information. Specifically, answers are provided for questions pertaining to how to calculate a company’s average number of employees, whether credit and insurance institutions are required to comply (Yes!), and which companies can opt out of sustainability reporting.

• Guidance on obtaining verified third-party assurance of sustainability reporting:

This section includes approval detail on third-party statutory auditors and firms, for companies searching for a third-party certification and for auditors seeking accreditation to provide the service. 

• What qualifies as a key intangible resource:

This section specifies what constitutes an intangible resource — resources without physical substance that are fundamental to the company and create value — and why companies must include them. 

• Requirements for companies not based in the EU:

Countries not based within the EU have more wiggle room when it comes to compliance. Small and medium sized entities (SMEs) not based on the continent, for instance, can opt out of sustainability reporting before January 2028.

• Details on the Sustainable Finance Disclosure Regulation (SFDR):

The Sustainable Finance Disclosure Regulation (SFDR) mandates that all financial advisors and financial market participants disclose advance details on ESG and sustainability claims. The single FAQ provided by the EU in this section clarifies that anything labeled as “nonmaterial” in a company’s ESRS does not need to be included within specific sections of the SFDR.