The CSRD in Headlines: Navigating the Future of Sustainability Reporting

In the rapidly evolving landscape of corporate sustainability, the European Union is setting the stage for a net-zero future by 2050. At the heart of this ambition lies the Corporate Sustainability Reporting Directive (CSRD), a transformative piece of legislation that reshapes how companies disclose non-financial information. This blog post introduces the COVERE² project, a pioneering initiative aimed at bridging sustainability challenges and corporate reporting.

Why Sustainability Reporting Matters

Sustainability reporting is no longer optional. It is a critical driver of the EU’s goal for a sustainable, net-zero carbon economy. The CSRD turns the climate agenda into an economic imperative by influencing investments, innovation, and regulatory compliance. In today’s market, disclosing environmental, social, human rights, and governance factors is fundamental to building trust and fostering long-term value.

What is the CSRD?

The CSRD amends several key directives and regulations, expanding the scope of previous requirements. Notably, it builds upon Directive 2013/34/EU by introducing additional articles that lay the foundation for the European Sustainability Reporting Standards (ESRS). Under the CSRD, companies—ranging from large multinationals to medium and small holdings (excluding micro-holdings)—must now provide detailed sustainability reports. These reports must encompass three core areas: environmental factors, social and human rights considerations, and governance practices.

The directive introduces several significant changes:

Expanded Scope: Companies of various sizes are now required to produce sustainability reports, with specific criteria based on balance sheet total, net turnover, and employee count. The categories are as follows. Directive 2013/34/EU defines categories of undertakings and groups based on three criteria: balance sheet total, net turnover, and average number of employees during the financial year. To classify an undertaking or group into a specific category, it must meet at least two of these criteria. 

• Micro Undertakings: Balance sheet total: less than 350 000 €, Net turnover: less than 700 000 €, Average number of employees: less than 10. Note: Micro undertakings do not apply to groups.
• Small Undertakings: Balance sheet total: less than 4 000 000 €. Net turnover: less than 8 000 000 €, Average number of employees: less than 50. Note: Member States may suggest higher limits for small undertakings, but these cannot exceed: Balance sheet total: 6 000 000 €, Net turnover:12 000 000 €
• Medium Undertakings:Balance sheet total: less than  20 000 000 €, Net turnover: less than 40 000 000 €, Average number of employees: less than 250
• Large Undertakings: Balance sheet total: more than 20 000 000 €, Net turnover: more than 40 000 000 €, Average number of employees: 250 or more

For groups, the criteria are assessed based on the balance sheet date of the parent undertaking. Note that the recent omnibus package proposes significant changes to the size of companies subject to the CSRD.

Double Materiality: Companies must report on both the financial impact of sustainability issues (financial materiality) and the company’s broader impact on society and the environment (impact materiality). This dual perspective ensures that both internal risks and external effects are transparently disclosed (See Figure 1).

Content and Standards: The sustainability report must be included as a dedicated section in the management report, covering the business model, risk management, and progress toward short-, medium-, and long-term sustainability targets. Furthermore, corporate governance statements now need to include diversity policies across administrative, management, and supervisory bodies.

Compliance and Assurance: A “comply or explain” clause mandates that any deviations from the reporting standards be clearly justified, while the “limited assurance” clause requires verification from statutory auditors or accredited sustainability assurance providers.

European Sustainability Reporting Standards (ESRS): The ESRS, defined under the delegated regulation (EU) 2023/2772, outlines twelve standards grouped into cross-cutting, topical, and sector-specific categories, ensuring a uniform approach to sustainability reporting (see Table 1).

The Corporate Sustainability Reporting Directive was officially published on December 14th, 2022, reinforcing EU’s carbon-neutral ambitions. The Directive lays out a timeline for sustainability reporting, mandating that large enterprises will begin reporting in 2025 – covering fiscal year 2024, followed by smaller businesses over the next two years. This schedule is intended to give companies time to prepare while the European Commission refines the European Sustainability Reporting Standards (ESRS).

The European Sustainability Reporting Standards were published on December 23rd, 2023. They define three categories of reporting: cross-cutting, topical, and sector-specific. While cross-cutting and topical standards apply to all sectors, the sector-specific guidelines are still under development. Additionally, guidance on Scope 3 emissions, which refer to indirect emissions from a company’s value chain, remained pending.

In February 2024, the Commission postponed the adoption of sector-specific ESRS by two years, aiming to cut administrative burdens by 25% and provide companies with more time to comply with horizontal standards adopted in July 2023. 

Most recently, on the 26th of February 2025, the Commission announced the adoption of “Proposal for a Directive amending the Directives: Accounting, Audit, CSRD and CSDDD – Omnibus”. The proposal is framed with the objective of simplifying EU regulations, though its underlying intent may be more complex.  Around 80% of companies would be excluded from the scope of sustainability reporting and sustainability reporting obligations would be focused on the largest companies that are likely to have the greatest impacts on people and the environment. The implementation of the reporting would be postponed by two years to 2028 for companies currently in the scope of CSRD .

Although the CSRD has been in place for over two years, sustainability reporting continues to evolve with frequent updates. These ongoing changes may challenge the EU’s 2050 climate neutrality goals, emphasizing the need for companies and policymakers to remain flexible.

The CSRD is setting a new standard for sustainability reporting in Europe. With its emphasis on double materiality and comprehensive disclosure, the directive is reshaping how companies report their environmental and social impact. The COVERE² project, piloted in the agri-food sector, provides a solution to navigate the evolving regulatory landscape, ensuring compliance while driving innovation in GHG emissions reduction.