Understanding the CSRD.

The Corporate Sustainability Reporting Directive (CSRD) is a transformative regulation introduced by the European Union to elevate the standards and consistency of sustainability reporting across companies. Enacted in 2021, the CSRD supersedes the Non-Financial Reporting Directive (NFRD), significantly expanding the scope and depth of mandatory disclosures on environmental, social, and governance (ESG) factors. The directive aims to improve transparency, enable comparability, and encourage sustainable business practices, ultimately advancing the EU’s broader goals around sustainability and climate impact.

The CSRD consists of European Sustainability Reporting Standards (ESRS) that specify the reporting requirements. ESRS standards consists of:

• Sector-agnostic (12 ESRS: 2 cross-cutting mandatory standards and 10 topical standards subject to the double materiality assessment);

• Sector-specific (expected as of 2026);

• Specific for listed small and medium-sized companies (SMEs);

• Specific for reporting concerning non-EU companies (with application in 2028).

Who is impacted?

Unlike the NFRD, which only applied to large, listed companies and financial institutions, the CSRD has a much broader reach. Under the CSRD, around 55,000 companies will be in scope – a significant expansion of the 11,000 companies under the NFRD. Companies have to issue their CSRD reports in: 

• 2024 for large undertakings with more than 500 employees being either European Public Interest Entity or entities listed on a EU regulated market; 

• 2025 for all large companies (public and private) that meet at least two of the following criteria: more than 250 employees, over €50 million in revenue; or, total assets exceeding €25 million;

• 2026 for listed SMEs on a EU regulated market; 

• 2028 for non-EU domiciled companies that generate significant revenue within the EU in two most recent years and have either one "large" subsidiary in the EU or subsidiary listed on an EU-regulated market; or one EU branch that generates more than EUR 40 mln

What needs to be disclosed and how? 

In practice, companies in scope of the CSRD are required to disclose sustainability information within a dedicated section of their management report called “Sustainability Statement.” These are the non-financial equivalent of Financial Statements and will be subject to limited assurance (reasonable assurance by 2028). The structure will be: 

• General information

• Environmental information

• Social information

• Governance information

Sustainability Statements follow a sort of reporting architecture with four reporting pillars (Governance; Strategy; Impact, risk, and opportunity management; Metrics & targets) and can include up to 1,200 data points – subject to the double materiality assessment. Data points across E-S-G topics are both:

• Qualitative incl. narratives, policies, actions;

• Quantitative incl. metrics, targets, financial resources.

An illustration of a Sustainability Statement structure with key challenges from experience are shown below:

What’s EFRAG’s guidance on the capabilities needed to prepare a Sustainability Statement?

The EFRAG, the European Financial Reporting Advisory Group providing guidance on how to successfully implement CSRD and ESRS reporting, clearly highlights that there are three main resources companies need – knowledge, FTEs, and technology & data. Specifically, reporting solutions are cited as critical enablers for auditable and compliant reporting.

Why let a 3rd party manage your CSRD reporting solution?

Companies have three options to build their CSRD reporting solution capabilities – build, buy, or onboard a 3rd party to manage it. We see that early reporters are foregoing building and/or buying new solutions to avoid lengthy implementations, unknown regulatory evolutions, and resource intensive maintenance. Alternatively, companies opting to let 3rd parties manage the reporting can gain three strategic advantages – especially for the first years where the ESRS standards evolve, including the phase-in provisions, sector-specific ESRS standards, and XBRL taxonomy:

What you get – hassle free compliance.

Our ‘PWC-managed CSRD reporting’ solution combines our pre-built CSRD Reporting set-up in Workiva, with our best-practice CSRD compliance advisory services, to enable year-over-year hassle-free reporting compliance. By leveraging the expertise and infrastructure of a managed service, your company can efficiently meet reporting requirements without the heavy investment in internal resources. Apart from access to best practices, your teams will be able to build a scalable and centralized solution, which streamlines assurance and audit-readiness and future-proofs your organization against ongoing regulatory changes.

PwC’s solution provides you with:

• Pre-built data collection forms, emission calculations and data aggregation built on embedded controls; 

• CSRD report templates with GenAI and audit support;

• NO implementation – our solution is always up to date and fully managed by PwC as regulations evolve.

Additionally, clients can:

• Expand into integrated reporting including financial reporting and risk & controls; 

• Request support on maintaining yearly Double Materiality Assessment, EU Taxonomy and report writing support.