CSRD: Sustainability reports mandatory for large companies

What is changing?

The European Corporate Sustainability Reporting Directive (CSRD) intends to ensure transparency regarding:

• the sustainability risks companies face
• the impact companies have on their environment

The European Corporate Sustainability Reporting Directive (CSRD) is the successor to the Non-Financial Reporting Directive (NFRD). This directive aims to ensure more transparency on sustainability, and a better quality of information on sustainability. The CSRD provides companies with a framework for reporting on non-financial data.

The sustainability report covers 3 main themes: Environment, Social, and Governance.

Additionally, companies have to report on the sustainability themes that are the most relevant to their organisation and its stakeholders. These sustainability themes are called material themes. For example, if climate change is a material sustainability theme, the business must also report on its own carbon dioxide emissions (CO2 emissions).

European Sustainability Reporting Standards (ESRS)

Exactly what companies must report is detailed in the European Sustainability Reporting Standards (ESRS). The ESRS are the standards for sustainability reporting that complement the Corporate Sustainability Reporting Directive (CSRD). You can find more information in EFRAG's Implementation support European Sustainability Reporting Standards (ESRS).

To help you familiarise yourself with the ESRS, the Netherlands Enterprise Agency (RVO) offers the ESRS Navigator tool (in Dutch).

Supervision

The CSRD requires businesses to disclose the environmental and social impact of their activities. An external auditor must assess the sustainability report of large and listed companies. 

The Dutch Authority for the Financial Markets (AFM) checks whether listed companies comply with the CSRD properly. They may ask for further explanations.

For whom?

• large and listed companies will be directly affected
• entrepreneurs doing business with large companies will be indirectly affected by the CSRD

When?

The mandatory reporting enters into effect step-by-step. For financial years starting on or after:

• From 1 January 2025 companies that were already subject to the Non-Financial Reporting Directive (NFRD) have to meet the reporting requirements on financial years from 2024
• From 1 January 2028 large companies must comply with the new reporting requirements for financial years starting on or after 1 January 2027, if they meet at least 2 of the 3 criteria:

  • they have a net turnover of more than €50 million
  • they have a balance sheet total exceeding €25 million
  • they have more than 250 employees
• From 1 January 2029 listed SMEs must meet the reporting requirements for financial years from 1 January 2028.
• Later on, non-EU businesses that fall under the CSRD on a consolidated basis will have to report. 

Please note: these thresholds may yet change as a result of the Omnibus proposal.

Medium-sized and small businesses are exempted from the CSRD. However, they will have to deal with demands from their CSRD-compliant customers or suppliers.