Corporate Sustainability Reporting Directive (CSRD): Sustainability Disclosure in Europe

Background

The Corporate Sustainability Reporting Directive (CSRD) is an initiative by the European Union (EU) aimed at enhancing corporate transparency on environmental, social, and governance (ESG) matters, including carbon emissions. Originally adopted in December 2022 and progressively applied from 1 January 2024, the CSRD replaced and expanded upon the Non-Financial Reporting Directive (NFRD), which was first published in 2014. The NFRD required large public-interest companies with over 500 employees to report on sustainability-related risks and impacts. The NFRD was however criticized for its lack of clear guidelines resulting in inconsistent and often superficial disclosures, reducing stakeholders' ability to effectively assess corporate sustainability disclosures. Some of the NFRD's shortcomings were later addressed with the publication of further clarifications such as the guidelines on reporting climate-related information (2019). The CSRD goes further by establishing a more comprehensive reporting framework under the European Sustainability Reporting Standards (ESRS), requiring companies to provide externally audited sustainability data, including on carbon emissions and climate-related financial risks. The CSRD is a major policy tool within the European Green Deal which aims for an EU economy with no net emissions of greenhouse gases by 2050.

Reporting Requirements

Under CSRD, in-scope undertakings must report sustainability information in line with ESRS, integrated into the management report/annual reporting cycle, and subject to assurance. Core reporting elements include:

• Use ESRS as the reporting framework (cross-cutting general disclosures plus topical standards).

• Apply double materiality (impact materiality and financial materiality) to determine which ESRS disclosures are required.

• Disclose governance, strategy, and business model impacts/risks/opportunities, including how sustainability matters are overseen and managed.

• GHG emissions reporting (where material) including Scope 1, Scope 2, and Scope 3 in CO₂-equivalent, with Scope 3 covering the value chain.

• Digital tagging of sustainability information for machine readability and downstream access (aligned with broader EU digital reporting infrastructure).

• External assurance: sustainability reporting is subject to third-party assurance.

Implementation Timeline

The implementation of the CSRD will be conducted in phases, beginning with the large companies:

• For large companies previously subject to the NFRD, CSRD rules shall apply with effect from financial years starting on/after 1 January 2024, for reports published in 2025.

• For large companies not previously subject to the NFRD, CSRD rules apply for financial years starting on/after 1 January 2027, with first reports published in 2028 (covering FY 2027).

• For some non-EU based companies, CSRD rules shall apply with effect from financial years starting on/after 1 January 2028, for reports published in 2029.

Penalties for noncompliance

The CSRD does not stipulate specific penalties for non-compliance as enforcement of the directive is largely the responsibility of individual EU Member States. There is some flexibility or discretion in implementing the CSRD with each country taking into consideration existing sustainability disclosure regulations and enforcement processes, including penalties for noncompliance. In France, for instance, which took the lead in transposing the CSRD into national legislation, corporate executives may face fines of up to €75,000 and imprisonment for up to five years if they fail to provide the required information for external auditors to certify their CSRD-compliant reports or if they hinder the auditing process in any way. In general, false climate-related disclosures could expose businesses to legal liability under existing legislation in some EU Member States, especially with anti-greenwashing regulations tackling misleading corporate environmental claims.

Current Status

As of early 2026, the CSRD is in effect. The Omnibus I package (formally adopting the revised CSRD and related sustainability law amendments) was formally approved by the European Parliament in December 2025, providing greater certainty about its scope and timing.

According to Ropes & Gray's CSRD Transposition Tracker, as of January 2026, 22 EU member states have transposed the CSRD into national legislation while three countries have yet to do so, most notably Germany. Overall, the specifics of the rollout and implementation of the CSRD is subject to evolving political and legal developments across EU member states.

Resources

• European Commission - Corporate Sustainability Reporting Directive (CSRD), official text

• European Commission — Corporate sustainability reporting (CSRD overview, timeline, acts)

• Council of the EU — Omnibus political agreement press release (scope thresholds)

• EFRAG -- ESRS Q&A platform

• CEAOB — guidelines on limited assurance on sustainability reporting

• ICAEW — CSRD assurance timeline summary