What is the CSRD (Corporate Sustainability Reporting Directive)?

The Corporate Sustainability Reporting Directive (CSRD) is an EU Directive that replaces the previous Non-Financial Reporting Directive (NFRD) and expands its requirements in terms of content. It defines which companies are affected by sustainability reporting and how these reports should be structured. The aim is to provide transparent, comparable and reliable information on the impacts of corporate behaviour on environmental, social and governance factors (ESG).

The CSRD is specifically implemented via the European Sustainability Reporting Standards (ESRS). Companies that will be subject to mandatory reporting in future must publish their ESG information according to these standards.

For smaller enterprises that choose to report voluntarily, the European Financial Reporting Advisory Group (EFRAG) is in the process of developing the Voluntary Standard for SMEs (VSME). EFRAG is a working group of the EU tasked with developing the content and standards for implementing the legislation.

Mandatory CSRD reporting: Who is affected?

The CSRD is currently being revised as part of the EU Omnibus Initiative. The primary focus is on the user group – i.e. the thresholds (number of employees, net turnover, balance-sheet total) as of which sustainability reporting should be mandatory for companies.

Currently, prior to implementation of the EU Omnibus Initiative, reporting is mandatory for the following

• Large undertakings that meet at least two of the three criteria: 
  o    Balance-sheet total: ≥ €25m
  o    Net turnover: ≥ €50m 
  o    Employees: ≥ 250  
• Other groups subject to mandatory reporting: 
  o    Listed undertakings
  o    Small credit institutions
  o    Captive insurance companies
• Micro-undertakings as defined in the CSRD are excluded:
  o    Balance-sheet total: ≤ €450,000
  o    Net turnover: ≤ €900,000
  o    Employees: ≤ 10  

Note: For corporate groups, the thresholds apply at a consolidated level.

CSRD timeline – From when does mandatory reporting apply?

The CSRD came into force on 5 January 2023 and must be transferred into German law. It will be phased in in three “waves”, depending on company size and capital market-orientation.

The application dates have been postponed by the “Stop-the-clock” Directive (EU 2025/794):

• Wave 1: large capital market-oriented entities that already report in line with CSR-RUG → reporting year 2024, first report published 2025
• Waves 2 & 3: CSRD application for other large undertakings & SMEs → delayed by two years, new application:
  o    Wave 2 (large undertakings) → reporting year 2027, first report published 2028
  o    Wave 3 (listed SMEs) → reporting year 2028, first report published 2029

In a resolution from 11 July 2025, the EU Commission passed a so-called “quick-fix” delegated act, which postpones additional phased-in reporting requirements for Wave 1 companies with retroactive effect. The aim is to avoid additional overhead when introducing the ESRS – especially in areas where requirements are still under political discussion.

The act allows for the following adjustments, among others:

• Less required information for smaller companies: Companies with up to 750 employees do not need to report on financial implications, Scope 3 emissions or selected social topics for the reporting years 2025 and 2026.
• Expanded transitional arrangements, also for larger companies: Companies with more than 750 employees also benefit – for example, from the deferment of required reporting on ESRS E4 (biodiversity) and ESRS S2 (value chain).

The ESRS substantiate the content requirements of the CSRD. The first cross-sectoral standard (Set 1) was published on 31 July 2023 and applies to all companies that are subject to mandatory reporting.

The ESRS comprise two overarching standards (ESRS 1 & 2) as well as thematic standards on environmental, social and governance factors (ESG). They apply to all ESG disclosures in the management report, not as a separate sustainability report.

Please see the EU Commission’s website for the final cross-sector European Sustainability Reporting Standards (ESRS). The following Q&A from the EU Commission answers all key questions about the ESRS. 

Implementation help from EFRAG

EFRAG (European Financial Reporting Advisory Group) supports companies with practical implementation aids. On 31 May 2024, the group published the following, among others:

• Materiality assessment guidance 
• Value chain guidance
• Excel list with ESRS data points and associated explanatory note

Future adjustments (e.g. elimination of sector-specific standards) are conceivable.

EU standards for SME

EFRAG is developing the VSME Standard (Voluntary ESRS for SMEs) for small and medium-sized enterprises reporting voluntarily. This is divided into two modules:

• Basic Module: minimum requirements for micro-undertakings
• Comprehensive Module: voluntary content for more in-depth information

The following links offer further support.