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The landscape of corporate accountability is undergoing a profound transformation. As global stakeholders, from investors to consumers, increasingly demand transparency on Environmental, Social, and Governance (ESG) issues, the European Union (EU) has introduced a landmark regulation: the Corporate Sustainability Reporting Directive (CSRD). This measure is aimed at reshaping how thousands of businesses, both within and outside the EU, disclose their sustainability performance, marking a significant evolution from previous frameworks.
In this blog, we dive deep into:
The CSRD is an EU directive that mandates comprehensive sustainability reporting for a wide range of companies. Effective from January 2023, the CSRD significantly expanded and replaced the earlier Non-Financial Reporting Directive (NFRD). Its primary objective is to ensure that companies provide clear, consistent, and comparable information about their environmental and social impacts, as well as how sustainability risks and opportunities affect their business.
A fundamental difference from its predecessor, the NFRD, is the CSRD’s introduction of “double materiality.” This concept requires companies to report not only on how sustainability issues impact their financial performance (financial materiality) but also how their own activities affect people and the planet (impact materiality). This holistic view ensures a more complete picture of a company’s sustainability. All disclosures made under the CSRD must be publicly available and subject to independent third-party assurance to verify their accuracy and completeness, a critical step towards enhancing credibility and combating greenwashing.
In order to effectively navigate the CSRD, businesses must understand its scope, timeline, and specific reporting requirements.
The CSRD’s reach is extensive, bringing into picture a much larger number of companies into mandatory sustainability reporting than ever before.
Large EU companies: This includes both listed and non-listed entities that meet at least two of the following three criteria for two consecutive financial years:
However, in April 2025, the European Commission proposed increasing the employee threshold from 250 to 500 or even 1000, as part of its regulatory simplification agenda. If adopted, this change could significantly reduce the number of companies initially required to comply. The final decision is expected later in 2025.
Listed Small and Medium-Sized Enterprises (SMEs): These include SMEs whose securities are listed on EU-regulated markets. They are required to report under CSRD but have an “opt-out” option available until financial year 2027. This gives them additional time to prepare and build internal ESG capacity.
Non-EU companies with significant EU operations: Companies headquartered outside the EU must comply with CSRD if they:
This ensures that global companies doing substantial business in the EU are subject to the same sustainability transparency standards.
Overall, the CSRD marks a dramatic expansion from its predecessor, the Non-Financial Reporting Directive (NFRD), increasing the number of in-scope companies from roughly 11,000 to an estimated 49,000, though this number may drop significantly depending on the final threshold changes proposed in 2025.
The implementation of the CSRD is staggered, with different categories of companies required to report in successive years. However, following recent developments in April 2025, the European Commission introduced a “stop-the-clock” amendment to ease the compliance burden for companies new to sustainability reporting. Here’s the updated timeline:
Large companies previously subjected to the NFRD must report their sustainability disclosures for FY2024 by January 2025. This wave (Wave 1) remains unaffected by the postponement and must comply as scheduled.
Originally, other large EU companies that meet the CSRD criteria but were not previously under the NFRD were expected to report for FY2025 in 2026. However, this wave has now been delayed to 2027, with the first reports due for FY2026.
Listed SMEs and select financial institutions (e.g., small and non-complex credit institutions, captive insurers), previously set to report for FY2026, can now delay their reporting to FY2027.
Non-EU companies generating over €150 million in net turnover within the EU, along with having a significant EU presence (subsidiary or branch) will still be required to report for FY2028, with submissions due in 2029. This timeline remains unchanged.
The CSRD introduced several key requirements to ensure comprehensive and standardized reporting, moving beyond previous non-financial disclosure norms. These mandates are designed to provide stakeholders with clear, consistent, and comparable sustainability information, making it an integral part of corporate transparency.
Companies are required to conduct a thorough assessment to identify which sustainability matters are material from both an impact perspective and a financial perspective. This assessment directly informs the scope of their sustainability report.
Sustainability reports must be audited by independent assurance providers, similar to financial audits. Initially, this will be “limited assurance,” focusing on whether the data appears plausible and complete. This will shift to “reasonable assurance” in the future, providing a higher level of confidence in the reported information. This external verification is a cornerstone of the CSRD’s effort to enhance credibility.
Reports must be prepared in a machine-readable format using the European Single Electronic Format (ESEF). This involves XBRL (eXtensible Business Reporting Language) tagging, which allows for easier extraction, comparison, and analysis of data by regulators, investors, and other stakeholders.
The CSRD mandates reporting in accordance with the detailed European Sustainability Reporting Standards (ESRS). The ESRS provides specific disclosure requirements across a wide range of ESG topics. This first set of ESRS (Set 1) includes two cross-cutting standards (ESRS 1 General Requirements and ESRS 2 General Disclosures) and ten topical standards covering environmental themes (e.g., climate change, pollution, water, biodiversity, resource use, and circular economy), social matters (e.g., own workforce, value chain workers, affected communities, consumers), and governance (e.g., business conduct). Companies are required to apply ESRS 1 and 2 and then report on relevant topical standards based on their double materiality assessment.
The CSRD represents a significant shift from previous reporting regimes, bringing with it both increased burdens and strategic opportunities for businesses. Here are the key implications for businesses:
The directive dramatically expands the scope of mandatory sustainability reporting, affecting nearly 50,000 companies, a substantial increase from the 11,000 under NFRD. This requires collecting, analyzing, and reporting more granular data across a wide range of ESG topics, including complex value chain impacts like Scope 3 emissions. Furthermore, the mandatory third-party assurance demands robust internal controls and data management systems, akin to those used for financial reporting, to ensure accuracy and auditability.
Compliance with the CSRD necessitates significant investment in new systems, dedicated personnel, and revised internal processes for data collection, analysis, and reporting. This often requires substantial cross-functional collaboration and a strategic reallocation of financial and human resources to build the necessary ESG reporting infrastructure.
Banks and insurers are responding to the Central Bank of Oman’s 2024 circular on sustainable finance, with board-level ESG implementation plans due by June 2025. Most banks are now embedding ESG into credit risk assessments, stress testing portfolios for climate exposure, and piloting green lending instruments. Sustainable sukuks and SDG-linked bonds are emerging as preferred financing tools, aligned with Oman’s efforts to position itself as a regional green finance hub.
The CSRD’s emphasis on value chain reporting means companies will need to engage closely with their suppliers, customers, and other partners. This involves gathering necessary ESG data and ensuring their sustainability practices aligned with CSRD requirements, driving increased transparency and responsibility throughout global supply chains.
Enhanced transparency and credible, assured sustainability disclosures can significantly boost investor confidence, improve corporate reputation, and potentially facilitate better access to sustainable finance and ESG-focused investment funds. Companies demonstrating strong ESG performance are increasingly favored by investors and lenders seeking to align their portfolios with sustainability goals, making ESG a strategic differentiator.
The CSRD is a pivotal piece of legislation driven by several critical objectives:
By standardizing reporting methodologies, enforcing detailed disclosures, and mandating third-party assurance, the CSRD aims to eradicate greenwashing that presents misleading claims about environmental or social performance. This ensures that sustainability disclosures are credible and verifiable.
The directive is an integral component of the EU’s ambitious Green Deal, which aims to make Europe the first climate-neutral continent by 2050. It provides the necessary data infrastructure to monitor progress towards climate and environmental targets and to channel private capital towards sustainable investments.
Investors, consumers, policymakers, and other stakeholders gain access to reliable, comparable, and standardized ESG data, which in turn empowers them to make more informed business, investment, and purchasing decisions, fostering a more sustainable economy.
The comprehensive and robust nature of the CSRD, particularly its double materiality principle and assurance requirements, is setting a significant benchmark that is influencing and shaping sustainability reporting practices and regulations worldwide.
While the CSRD’s objectives are clear, achieving compliance presents several key challenges for businesses.
Gathering accurate and auditable data across a wide range of ESG topics, especially indirect impacts like Scope 3 emissions across the value chain, is complex. Existing systems often lack the necessary integration. For external assurance, companies must maintain data quality and internal controls with the same precision and reliability seen in financial reporting.
Many firms lack sufficient in-house expertise in sustainability reporting, ESRS application, and ESG data analysis. Effective compliance demands strong collaboration and clear responsibilities across different departments to manage diverse ESG data. This cross-departmental involvement and limitation in expertise makes reporting a tedious task.
Significant capital is needed for new IT systems, specialized software, staff training, and engaging independent assurance providers, which in a short time period will be challenging for many organizations.
Interpreting and applying the detailed European Sustainability Reporting Standards (ESRS) based on the double materiality assessment can be challenging due to their extensive scope and the sheer volume of detailed disclosure requirements, often exceeding existing company data collection capabilities.
For many companies, the phased reporting deadlines for FY2024 (due 2025) and FY2025 (due 2026) are pressing, as the time needed to implement new data collection systems, conduct thorough materiality assessments, and ensure audit-readiness is substantial and cannot be achieved last minute.
Obtaining reliable ESG data, particularly Scope 3 emissions, from global suppliers is a major hurdle, as many suppliers may not yet be equipped for such disclosures.
As a new directive, CSRD guidance and interpretations may evolve, requiring companies to continuously monitor regulatory developments and remain adaptable.
The CSRD presents significant hurdles, but digital tools are emerging as crucial enablers for compliance. SAMESG ®, is designed to help businesses navigate these complexities by streamlining data management, ensuring alignment with reporting standards, and fostering organizational readiness. Here’s detailed overview of how SAMESG ® simplifies the processes
SAMESG ® centralizes data collection from various departments and subsidiaries, eliminating fragmented data. It supports diverse data integration options, from manual uploads to API connections, and employs automated quality checks to ensure data accuracy and auditability.
SAMESG ® comes with built-in disclosure templates aligned to GRI and the ISSB’s IFRS S1 & S2, removing the guesswork from ESG reporting. These pre-aligned templates help you meet reporting requirements accurately and on time.
The platform includes an embedded double materiality assessment tool, guiding organizations to identify relevant ESG impacts. It effectively manages organizational hierarchies and provides robust user role and access management, streamlining cross-functional collaboration and data governance.
SAMESG ® offers an automated report builder that instantly generates ESRS-compliant reports, significantly reducing manual effort. KPI dashboards provide real-time performance tracking, enabling strategic resource allocation and helping companies move from mere compliance to strategic ESG leadership. This automation ultimately aims to drive cost and time efficiency.
The software comes with pre-aligned disclosure templates for ESRS, GRI and ISSB standards, simplifying compliance. Its robust data management and audit trails prepare reports for mandatory third-party assurance, ensuring accuracy and credibility.
SAMESG ® helps address value chain challenges by supporting data collection from vendors and partners. This is crucial for calculating emissions and conducting broader ESG risk assessments within the supply chain, helping identify high-risk areas.
SAMESG ® provides real-time regulatory alerts and automatically updates disclosure reports for any changes in ESG frameworks or jurisdictional requirements, ensuring continuous compliance with the latest CSRD developments.
The CSRD represents a transformative shift in corporate sustainability reporting, which is the starting point of a new era of transparency, accountability, and comparability for businesses. While compliance undeniably poses significant challenges, the directive also presents substantial opportunities. Companies that proactively embrace CSRD requirements can enhance their credibility, build trust with stakeholders, attract sustainable investment, and ultimately future-proof their operations in an increasingly sustainability-driven global economy. Early and strategic engagement with the CSRD will be paramount for long-term success in this evolving landscape. With the right tools to equip and ease the reporting process, businesses can achieve their sustainability goals in efficient and transparent ways!
Want to know how SAMESG® works?
SAMESG® streamlines ESG reporting—automating data collection, ensuring compliance, and delivering audit-ready reports in one powerful platform.
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