Sustainability Reporting

Changes of the Corporate Sustainability Reporting Directive (CSRD)

March 18, 2024

The Corporate Sustainability Reporting Directive (CSRD) aims to reform the mandatory reporting for companies in the European Union and to link sustainability information with financial reporting. A draft guideline was presented for the first time in April 2021. On June 21, 2022, the European Council and Parliament reached an agreement on points that were still in dispute. Compared to the first draft, there have been some changes in the final version.

Scope and schedule of implementation of the CSRD

Probably the most important change in what is expected to be the final CSRD draft compared to the 2021 draft is the postponement of the reporting dates for the companies that fall under the regulation.

The first Corporate Sustainability Reporting Directive draft provided for a reporting obligation for all large, capital market-oriented companies from January 1st, 2023. Large corporations with more than 500 employees are now to report from the financial year beginning on or after January 1, 2024. The Non-Financial Reporting Directive (NFRD), which is to be replaced by the CSRD, already applies to this group of companies.

All other large corporations have another year to implement the Corporate Sustainability Reporting Directive: They only have to publish a sustainability report from the financial year beginning on or after January 1st, 2025.

Small and medium-sized corporations will be required to report under the new CSRD for the first time starting from the 2026 financial year. Separate standards are planned for these corporations, with simplifications to the reporting obligation. They can also make use of an “opt-out” rule until 2028 and thus from the policy to be exempted.

The following overview shows the schedule:

Changes of the CSRD

CSRD changes – who is affected and when?

The impact of the CSRD goes beyond the EU

In addition, non-European companies with at least one subsidiary or branch office in the European Union and a net turnover of more than 150 million euros are to be included in the group of users. In order to ensure proportionality, these branches and subsidiaries must generate at least €40 million in net sales in the EU and operate as a large or publicly traded company. Further specifications are not yet known.

Effect on municipal companies in Germany

Municipal companies in Germany are usually obliged by their statutes and municipal ordinances to prepare and audit their annual financial statements like large corporations. This means that they are also impacted by sustainability reporting from financial years beginning on or after January 1, 2025, regardless of their actual size classification according to Section 267 HGB.

Increased number of reporting companies under the CSRD

It is generally assumed that the number of users of the Corporate Sustainability Reporting Directive will increase from around 500 to 15,000 companies in Germany alone. In addition, however, the approximately 18,500 public companies, approx. 16,000 of them at municipal level, could be affected by the CSRD from 2025. That depends on the implementation of the EU directive in national law and depending on the interpretation of the national regulations.

Changes in the content of sustainability reporting

The content of the mandatory sustainability reports is also taking shape. The European Financial Reporting Advisory Group (EFRAG) is currently developing uniform sustainabiity reporting standards.

Apart from cross-cutting standards that apply to all companies, there are other standards for specific topics that will be expanded to include standards for reporting in specific industries in the future.

EFRAG estimates that around 40 sector-specific reporting standards will be developed and publication is expected in November 2023. The new topic-specific reporting standards of the CSRD are divided into three areas: environmental, social and governance.

An overview of the draft standards published to date is on

The new reporting rules under the CSRD require companies to use the European Taxonomy Regulation to specify their environmental goals. As a result, reporting standards have been developed to cover all environmental goals, including one standard for the first two goals and separate standards for each of the other goals. This approach, which was requested by stakeholders and industry experts, helps ensure that sustainability reporting is consistent and comprehensive.

The social criteria have already been extensively covered in the ESRS standards, so there is currently no plan to develop a separate social taxonomy.

Report auditing gets stricter

The updated guideline now allows for accredited independent auditors to assess sustainability reports alongside regular auditors. At first, audits will have some limitations, but eventually, they will become more comprehensive, just like audits of annual financial statements. So, sustainability reporting will be audited with greater scrutiny and accuracy in the future.

Challenge for companies – which are worthwhile

The new CSRD might provide relief for some companies, while it causes delays for other due to the large amount of information that needs to be dealt with. Companies will most likely face significant challenges. Meaning, it is a good idea for these companies to start thinking about sustainability now. This includes creating a plan to develop necessary skills, allocate resources, use technology to simplify data collection and analysis, assign responsibilities, and implement changes within the company.

Focusing solely on sustainability reporting falls short, as reporting should only come at the end of a process or a sustainability strategy. Only within the framework of a strategy is it possible to set meaningful goals, define milestones and measure progress. Key figures can then also be embedded in a meaningful context and develop their control direction.

Uniform sustainability reporting as part of a company-wide sustainability strategy can make a significant contribution to overcoming the major social challenges of the 21st century and lead to cross-sector transparency.


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