European Union: CSRD and ESRS

Mandatory double materiality sustainability reporting for 27 EU member states.
Scope: 50,000+ companies (phased), sector-agnostic and sector-specific standards^[1][5][7].

Companies Covered

50,000+

Large, listed SMEs, non-EU with EU ops (2025)

Member States

EU-wide, phased national transposition^[5]

Double Materiality

Required

Financial + impact materiality^[1][5][7]

Assurance

Mandatory

Limited assurance for sustainability data^[5]

CSRD Phased Application Timeline

Wave	Companies	First Reporting Year	Report Due	Status (2025)
1	Large listed companies (NFRD scope)	2024	2025	Active
2	Other large companies (>250 staff, >€40M turnover, >€20M assets)	2025 (proposed delay: 2027)	2026 (proposed delay: 2028)	Pending
3	Listed SMEs, small credit institutions, captive insurers	2026 (proposed delay: 2028)	2027 (proposed delay: 2029)	Pending
4	Non-EU companies with >€150M EU turnover	2028	2029	Pending

Orange: Delays per "Stop-the-Clock" directive (2025)^[2][4][6][7]

European Sustainability Reporting Standards (ESRS)

Type	Scope	Examples	Notes
Sector-agnostic	All companies in scope	General disclosures, climate, biodiversity, workforce, governance	Applies to all, covers double materiality
Sector-specific	High-impact sectors	Energy, agriculture, textiles, mining, finance	Phased in, under revision as of 2025
Entity-specific	Unique company impacts	Material issues not in other standards	Optional, for unique risks/opportunities

CSRD Coverage by Company Type (2025, est.)

Estimated number of companies in each CSRD reporting wave (2025).

CSRD/ESRS Integration and Influence

Alignment: GRI, TCFD, ISSB, EU Taxonomy, SFDR
Materiality: Double (financial + impact)
Assurance: Mandatory limited assurance (reasonable assurance under review)
Topics: Climate, biodiversity, water, workforce, anti-corruption, governance
Phased simplification: ESRS revision and reporting scope reduction in 2025-2026^[7][8]

About the CSRD and ESRS

The EU’s CSRD and ESRS mandate standardized, double materiality sustainability reporting for 50,000+ companies, including large firms, listed SMEs, and non-EU companies with major EU operations^[1][5][7]. The framework requires disclosures on both financial and impact materiality, subject to mandatory assurance, and is being phased in through 2028 due to recent regulatory delays^[2][4][6][7]. ESRS standards are modular, covering general, sector-specific, and entity-specific topics, and are being revised in 2025-2026 to simplify requirements and reduce reporting burdens, especially for SMEs^[7][8].

Note: All data reflects official EU, EFRAG, and regulatory updates as of May 2025.

European Union - CSRD & ESRS (Corporate Sustainability Reporting Directive & European Sustainability Reporting Standards)

European Union - CSRD & ESRS (Corporate Sustainability Reporting Directive & European Sustainability Reporting Standards)

Countries: 27 EU member states
Function: Mandatory sustainability disclosures using double materiality; covers 50,000+ companies

Visit CSRD Website

The Corporate Sustainability Reporting Directive (CSRD) represents a landmark transformation in the European Union’s approach to corporate disclosure, mandating comprehensive sustainability reporting for a broad array of companies across the EU's twenty-seven member states. Together with the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG), the CSRD establishes one of the most detailed and ambitious sustainability disclosure frameworks globally, fundamentally redefining the scope, content, and enforcement of ESG reporting.

Adopted in 2022 and entering into phased application beginning in 2024, the CSRD applies to approximately 50,000 companies, including:

All large EU companies (whether listed or not)
All listed small- and medium-sized enterprises (with transitional exemptions)
Certain non-EU companies with significant operations in the EU market

The CSRD replaces and significantly expands the earlier Non-Financial Reporting Directive (NFRD), moving beyond broad qualitative disclosures to require standardized, verifiable, and machine-readable sustainability data. Reporting under CSRD must be embedded within the company’s annual management report and must be subject to independent assurance, elevating sustainability disclosures to the same level of scrutiny as financial statements.

Central to the CSRD and ESRS is the principle of double materiality.

Organizations are required to disclose:

Financial materiality: How environmental, social, and governance issues impact the company’s financial performance and enterprise value.
Impact materiality: How the company’s activities affect society, the environment, and broader systemic outcomes.

This dual perspective mandates a comprehensive view of risk, opportunity, and responsibility, reflecting the EU’s commitment to positioning corporate sustainability not only as a fiduciary concern but as a societal obligation.

The European Sustainability Reporting Standards (ESRS) operationalize these requirements.

The standards are modular, comprising:

Sector-agnostic standards: General disclosures applicable across industries, covering strategy, governance, materiality assessment, metrics, and targets.
Sector-specific standards: Tailored disclosure requirements for high-risk sectors such as energy, agriculture, and textiles.
Entity-specific standards: Accommodations for unique material impacts not captured within sectoral frameworks.

The ESRS integrate and align with major global initiatives, including the Global Reporting Initiative (GRI), the Task Force on Climate-related Financial Disclosures (TCFD), the International Sustainability Standards Board (ISSB), and the European Union’s broader sustainable finance agenda (such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation, SFDR). This alignment aims to promote interoperability while preserving the EU’s leadership in impact materiality disclosure.

Disclosures must address a wide range of topics, including but not limited to climate change mitigation and adaptation, biodiversity and ecosystems, water and marine resources, workforce conditions, human rights impacts, anti-corruption, and board-level sustainability governance. Companies are also expected to report on transition plans aligned with the EU’s climate neutrality objectives under the European Green Deal.

The CSRD and ESRS collectively signal a fundamental regulatory shift: sustainability reporting is no longer an ancillary or voluntary activity but a core, enforceable element of corporate accountability, risk management, and stakeholder engagement within the European market. The regulatory framework incentivizes transparency, comparability, and forward-looking strategic alignment, and it exerts extraterritorial influence by capturing non-EU firms with significant EU revenue or subsidiaries.

By embedding sustainability within the architecture of financial and corporate governance, the CSRD and ESRS position the European Union as the global frontrunner in institutionalizing systemic accountability for environmental, social, and governance outcomes, setting a normative benchmark likely to influence regulatory developments worldwide.