CSRD Compliance Guide: What You Need to Know

Status, September 2026: The EU's Omnibus I directive (in force March 18, 2026) narrows the CSRD to companies with more than 1,000 employees and more than €450 million in net turnover. The amendments apply from financial year 2027, with first reports in 2028, and member states must transpose them by March 2027. Source: Council of the EU.

Overview

The Corporate Sustainability Reporting Directive (CSRD) represents the most significant expansion of mandatory sustainability reporting in European history. Adopted by the European Parliament in November 2022 and entering into force in January 2023, the CSRD replaces the Non-Financial Reporting Directive (NFRD) and dramatically broadens the scope of companies required to disclose environmental, social, and governance information.

As adopted, the CSRD would have required nearly 50,000 companies operating in the EU—up from about 11,700 under the NFRD—to report against the European Sustainability Reporting Standards (ESRS) developed by EFRAG. The Omnibus I directive, in force since March 18, 2026, narrows the scope to companies with more than 1,000 employees and more than €450 million in net turnover, a cut of around 90% in the number of companies covered, according to A&O Shearman (2025). The directive introduces mandatory third-party assurance, digital tagging requirements, and the concept of double materiality, which requires companies to report on both how sustainability issues affect the business and how the business affects people and the environment.

For multinational corporations with EU operations, the CSRD's reach extends well beyond European headquarters. From financial year 2028, non-EU groups with more than €450 million in EU net turnover and an EU subsidiary or branch with more than €200 million in net turnover also fall within scope, making this a genuinely global regulation that demands attention from leadership teams worldwide.

Who Does It Apply To?

The CSRD was designed to apply in four phases. The April 2025 "stop-the-clock" directive postponed Phases 2 and 3 by two years, and the Omnibus I directive then raised the thresholds:

Phase 1 (FY 2024, reporting in 2025): Large public-interest entities already subject to the NFRD with more than 500 employees. Those that fall below the new thresholds drop out from FY 2027, and member states may exempt them for FY 2025 and FY 2026.

Phase 2 (now FY 2027, reporting in 2028): Other EU companies with more than 1,000 employees and more than €450 million in net turnover. The original test (two of three criteria: more than 250 employees, €50 million net turnover or €25 million total assets) no longer applies.

Phase 3 (removed): Listed SMEs, originally due to report for FY 2026, are no longer in scope.

Phase 4 (FY 2028, reporting in 2029): Non-EU groups with more than €450 million in EU net turnover and an EU subsidiary or branch with more than €200 million in net turnover.

Subsidiaries may be exempt if their parent company includes them in a consolidated sustainability report that meets ESRS requirements. However, exempted subsidiaries must still publish a brief statement identifying the parent company and where the consolidated report can be accessed.

Key Requirements

1. European Sustainability Reporting Standards (ESRS) Companies must report against the full set of ESRS, which currently includes two cross-cutting standards (ESRS 1 and ESRS 2), five environmental standards (E1–E5), four social standards (S1–S4), and one governance standard (G1). In July 2026 the Commission adopted a revised, shorter version that applies from financial year 2027 and cuts mandatory datapoints by more than 60%. Omnibus I dropped the planned sector-specific standards; the Commission may issue voluntary sector guidance instead.

2. Double Materiality Assessment The cornerstone of CSRD reporting is the double materiality assessment. Companies must evaluate sustainability topics from two perspectives: impact materiality (the company's effects on people and the environment) and financial materiality (how sustainability issues create risks or opportunities that affect the company's financial position). Only topics deemed material from at least one perspective require detailed disclosure.

3. Value Chain Reporting Disclosures must cover the entire value chain, including upstream suppliers and downstream customers. For the first three years, companies may use estimates where specific value chain data is unavailable, but the expectation is clear: comprehensive value chain data collection must become standard practice. Omnibus I also limits what you can ask of smaller partners: companies with up to 1,000 employees can limit what they provide to the voluntary SME standard (VSME).

4. Mandatory Assurance All CSRD reports must undergo third-party assurance at the limited assurance level. Omnibus I dropped the planned move to reasonable assurance, and the Commission must adopt a limited assurance standard by July 1, 2027. Assurance providers must be accredited and independent.

5. Digital Tagging Reports are to be prepared in XHTML format and tagged under the European Single Electronic Format (ESEF), which enables machine-readable data extraction and comparability across companies, a significant shift toward digital-first sustainability reporting. Omnibus I postponed the tagging requirement until the Commission adopts detailed tagging rules.

6. Integration in Management Report Sustainability information must be included in a dedicated section of the company's management report, not published as a separate standalone document. This elevates sustainability reporting to the same governance and oversight level as financial reporting.

7. Forward-Looking Information Companies must disclose transition plans, targets, and progress metrics. For climate, this includes alignment with the 1.5°C trajectory under the Paris Agreement. These disclosures carry significant strategic implications and require board-level engagement.

Timeline & Milestones

The European Commission adopted the first set of ESRS in July 2023 and a revised, simplified set in July 2026 that applies from financial year 2027. The reporting calendar has already moved twice, through the stop-the-clock directive and Omnibus I, so confirm your first reporting year against your member state's transposition of the new rules.

Step-by-Step Compliance Roadmap

Step 1: Scoping and Applicability Assessment

Determine which entity or entities within your corporate structure fall within CSRD scope and in which phase. Map your subsidiaries, branches, and joint ventures against the thresholds. Identify whether consolidation exemptions apply and whether your non-EU parent company triggers Phase 4 obligations. This exercise should involve legal, finance, and sustainability teams working together.

Step 2: Double Materiality and Gap Analysis

Conduct a robust double materiality assessment in line with ESRS 1 guidance. Engage internal and external stakeholders to identify material topics. Then assess your current reporting capabilities against the specific disclosure requirements for each material ESRS topic. Document gaps in data availability, process maturity, and governance structures. This gap analysis becomes your implementation blueprint.

Step 3: Data Infrastructure and Process Design

Build or enhance data collection systems to capture the quantitative and qualitative information required by ESRS. This typically involves upgrading ESG data management platforms, establishing data ownership across business functions, creating internal controls analogous to financial reporting controls, and developing processes for value chain data collection. Expect this to be the most resource-intensive phase.

Step 4: Reporting and Disclosure

Prepare your sustainability statement as a dedicated section within the management report. Apply ESRS disclosure requirements for each material topic, including policies, actions, targets, and metrics. Tag disclosures using the ESEF digital taxonomy. Ensure forward-looking statements on transition plans and targets are robust and defensible. Internal review should mirror the rigor applied to financial statements.

Step 5: Assurance and Continuous Improvement

Engage an accredited assurance provider early—ideally during the process design phase so they can advise on control frameworks. Undergo limited assurance for the initial reporting cycle. Use assurance findings to improve data quality and processes for subsequent years, and keep strengthening internal controls and documentation, since limited assurance applies every year.

Common Pitfalls

Treating double materiality as a checkbox exercise. The double materiality assessment is the foundation of your entire CSRD report. A superficial assessment leads to misidentified material topics, which means you either over-report on immaterial issues or—worse—miss disclosures that regulators and investors expect. Invest genuine analytical effort and stakeholder engagement here.

Underestimating value chain data requirements. While the three-year transition provision for value chain data offers temporary relief, companies that defer value chain engagement will face a data cliff. Start building supplier engagement programs and data collection mechanisms now, even if initial reporting relies on estimates and proxies.

Siloing sustainability reporting from finance. The CSRD explicitly integrates sustainability into the management report. Companies that keep sustainability and financial reporting in separate organizational silos will struggle with consistency, governance, and the connectivity ESRS demands between financial and sustainability disclosures.

Ignoring the digital tagging requirement. XBRL tagging of sustainability disclosures is new territory for most reporting teams. Companies that treat it as a last-minute formatting exercise will find it exposes inconsistencies in their data architecture. Plan for digital tagging from the outset of your reporting process.

How Council Fire Can Help

Council Fire brings deep expertise in the intersection of climate strategy, stakeholder engagement, and regulatory compliance—exactly the capabilities CSRD compliance demands.

Our team supports clients through every phase of the CSRD journey. We facilitate rigorous double materiality assessments that go beyond compliance to surface genuine strategic insights. For organizations with complex value chains, we design stakeholder engagement programs that build the relationships and data pipelines needed for credible value chain reporting.

Where climate-related disclosures are concerned, Council Fire's expertise in climate resilience and adaptation planning translates directly into the forward-looking transition plans and scenario analyses CSRD requires. We help clients develop targets and metrics that are both scientifically grounded and strategically coherent.

We also specialize in translating complex sustainability narratives into clear, compelling disclosure language. The CSRD demands that companies tell a credible story about their sustainability strategy—Council Fire's background in strategic communications and storytelling ensures that story resonates with investors, regulators, and stakeholders alike.

Frequently Asked Questions

Does the CSRD apply to non-EU companies?

Yes. Non-EU groups with more than €450 million in EU net turnover and an EU subsidiary or branch with more than €200 million in net turnover must report under the CSRD from FY 2028, with first reports in 2029. The European Commission is developing specific standards for these third-country undertakings. Even before Phase 4, non-EU companies may face indirect pressure through their EU subsidiaries' reporting obligations.

Can we use GRI or ISSB standards instead of ESRS?

No. CSRD mandates reporting under ESRS specifically. However, EFRAG has worked to ensure a high degree of interoperability between ESRS and other frameworks, including GRI Standards and ISSB's IFRS S1/S2. Companies already reporting under GRI will find significant overlap, which can reduce the incremental compliance burden. But ESRS includes requirements—particularly around double materiality and certain social disclosures—that go beyond what GRI or ISSB cover.

What level of assurance is required and who can provide it?

CSRD requires limited assurance over sustainability reporting. The Omnibus I directive removed the planned move to reasonable assurance, and the Commission must adopt a limited assurance standard by July 1, 2027. Assurance can be provided by statutory auditors or audit firms, as well as by independent assurance services providers accredited by EU Member States. Many companies are engaging their existing financial auditors for sustainability assurance to ensure consistency, though this is not required.

How does the CSRD interact with the EU Taxonomy Regulation?

CSRD reporting includes mandatory EU Taxonomy disclosures. Companies in scope must report the proportion of their turnover, capital expenditure, and operating expenditure associated with Taxonomy-aligned activities. The EU Taxonomy defines specific technical screening criteria for environmentally sustainable economic activities across six environmental objectives. These disclosures go in the environmental section of the sustainability statement, alongside the ESRS E1–E5 disclosures.