The new CSRD directive on corporate sustainability reporting

At a time when corporate social responsibility (CSR) has become a central concern, the European Union has strengthened its sustainability reporting requirements. The European NFRD directive, in force until now, has given way to the new "CSRD" (Corporate Sustainability Reporting Directive). The CSRD aims to redefine the standards for transparency and non-financial performance of European companies. Since January 1, 2024, the CSRD has been gradually rolled out, but its scope was significantly revised in 2025-2026 by the Omnibus package (see below). One of the major benefits of this directive is its potential to create a financial advantage for companies by redirecting capital toward more sustainable projects, driven by greater transparency and more reliable reported sustainability information. In this article, we explore the ins and outs of this directive, its foundations and guiding principles, the companies it covers, and the benefits and challenges that come with it. Finally, we share some practical tips to ease the transition into this new era of sustainability reporting.

The CSRD: definition, foundations and guiding principles

What is the CSRD?

This new regulation, officially named (EU) 2022/2464, aims to harmonize corporate sustainability reporting and to improve the availability and quality of published ESG (environmental, social and governance) data.

This directive, signed on June 21, 2022 and voted by the European Parliament in November 2022, is a key element of the European Green Deal and is tied to corporate social responsibility (CSR). It seeks to give the sustainability dimension of business activities as much weight as their economic dimension. 

Companies within its scope will now have to publish an ESG statement in addition to their financial statements, in a dedicated section of their management report.

What is new compared with the NFRD

The main changes introduced by the CSRD compared with the 2014 Non-Financial Reporting Directive (NFRD) it replaces are:

• A broader scope: the CSRD applies to companies (except micro-enterprises) listed on European regulated markets;
• Stronger, standardized reporting obligations: companies will have to publish detailed information on their material risks, opportunities and impacts related to social, environmental and governance issues, based on harmonized European standards, the ESRS;
• A mandatory digital format  (European single electronic format, xHTML);
• Mandatory verification of the information by a statutory auditor or an independent third-party body.

The topics covered

Companies are required to report qualitative and quantitative information on:

• their sustainability strategies, objectives and performance;
• their greenhouse gas emissions;
• their CSR policy, including how employees are treated;
• their anti-corruption policy;
• how they manage human rights issues;
• their ESG targets and progress toward their objectives.

The ESRS

The ESRS, European Sustainability Reporting Standards, are one of the main pillars of the CSRD. They set out the reporting method for all companies, harmonizing disclosures so that they are more transparent and easier to compare. There are 12 ESRS, covering the 3 ESG themes: environmental, social and governance. 

Of the twelve reporting standards, five focus on environmental issues, including a standard dedicated to climate change (ESRS E1). The purpose of this standard is, in particular, to examine the impact, whether positive or negative, of the company's activities on climate change. It also seeks to assess the actions the company has taken, is taking and will take to mitigate climate change, in line with the Paris Agreement and its goal of keeping global warming below 1.5 degrees. In addition, this standard aims to identify the short-, medium- and long-term financial consequences of climate change impacts on the company and of its dependence on the climate.

The DRs

The climate change standard includes nine Disclosure Requirements (DRs), among them the requirement to report on the company's greenhouse gas emissions across scopes 1, 2 and 3. It also requires the company to disclose its transition plan for reducing its climate impact, as well as the mitigation and adaptation measures it has taken and the resources dedicated to these actions.

The concept of double materiality

The CSRD also introduces the concept of double materiality, which takes into account both the positive and negative impacts of sustainability issues on the company's financial performance (financial materiality) and the positive and negative impacts of the company on its economic, social and natural environment (impact materiality). This double materiality assessment should enable the company to identify the main topics on which the external environment or its own activities create sustainability-related (ESG) impacts, risks or opportunities, and which must be included in the company's non-financial reporting.

Governance at the heart of compliance

The CSRD is not just a technical reporting exercise: it requires an in-depth analysis of material issues so that the company's governance bodies can fully play their role in setting strategic direction. The board of directors is now responsible for putting consistent CSR policies in place, which means CSR is no longer an option or a nice-to-have, but a strategic lever in its own right for the company's overall performance.

Who is affected? The scope narrowed by the Omnibus package

The timeline and thresholds described above were those set in 2022. In response to concerns about the compliance burden, the European Union substantially revised the scope of the CSRD through the Omnibus package: first the "Stop the Clock" directive (April 2025), which postponed by two years the entry into application for large unlisted companies in wave 2 and for listed SMEs, then the Omnibus I directive, adopted in 2026, which significantly raises the application thresholds.

The CSRD is now mandatory only for companies that exceed both of two criteria, whereas previously meeting two out of three was enough: more than 1,000 employees and more than €450 million in revenue. Raising the thresholds cuts the number of companies covered by around 80% compared with the initial 2022 scope, a far cry from the "more than 50,000 European companies" originally announced.

The reporting timeline has also been pushed back: large unlisted companies that meet the new thresholds (wave 2) and non-EU companies generating more than €450 million in revenue in the EU through a subsidiary or branch generating at least €200 million (wave 3) will publish their first report in 2028, covering the 2027 financial year. In practice, the new thresholds will only apply once transposed into French law, which is expected by March 2027 at the latest.

In practical terms, even if your company no longer meets the CSRD thresholds after Omnibus, investors, major clients and financial markets still expect ESG transparency comparable to what the directive requires: the ESRS remain a de facto benchmark, even for companies that are no longer legally subject to them.

Benefits and challenges of the CSRD

Good news for the climate

The CSRD is a significant step forward in the fight against climate change. By requiring a large number of companies to produce detailed reports on their environmental impacts, the directive encourages them to adopt a sustainable development approach. It also enables all stakeholders to identify the best-performing companies in this area, beyond the purely financial dimension, and to better prepare for future climate risks.

The transparency, accuracy and accessibility of corporate sustainability information also help build a relationship of trust with consumers. Indeed, one of the goals of the CSRD is to combat greenwashing and to guarantee that the progress companies report on sustainability is genuine.

In short, the CSRD is an important lever for encouraging companies to adopt more environmentally friendly practices and for strengthening stakeholder confidence in their commitment to sustainable development.

Benefits for transparency, trust and CSR

Companies committed to CSR are more competitive and better at retaining talent, and they also save money on non-renewable resources. Even for organizations that are not required to comply with the CSRD, adopting stronger sustainability practices brings countless benefits. Sustainable practices are good not only for protecting our planet but also as a sound business strategy.

• Greater transparency: the CSRD requires more detailed sustainability reports, which provides greater transparency on companies' ESG performance and helps stakeholders assess their real impact on society and the environment;
• Stronger trust: companies that provide reliable, verified sustainability data can build trust with investors, consumers and the public. This can also help win the support of consumers who want to back companies that follow sustainable practices;
• Better-informed investment decisions: detailed, reliable sustainability information can help investors identify companies that are not only profitable but also socially and environmentally responsible. The directive aims to standardize sustainability reporting, making the information provided by different companies more comparable and easier for investors and analysts to assess;
• An incentive to improve: having to report publicly on ESG performance can motivate companies to improve their environmental and social impact;
• Lower costs: by improving your energy efficiency and reducing water consumption, you can cut your organization's operating costs. This will also make you less exposed to energy price fluctuations;
• Employee retention: more and more employees want to work for sustainable, socially responsible companies. By committing to more sustainable business practices, you will increase employee satisfaction and productivity and improve retention.

Penalties

Financial penalties for non-compliance with the CSRD can range from a few thousand euros to several million euros, depending on the seriousness of the breach. Administrative sanctions may include orders to remedy, warnings and bans on carrying out certain activities. Legal proceedings may also be brought, leading to criminal convictions such as prison sentences or fines. It should be noted that the CSRD is a directive, which means that Member States have some leeway in setting the penalties applicable to companies that fail to comply. However, they must ensure that these penalties are effective and dissuasive enough to guarantee genuine compliance.

Penalties for breaches are set by each Member State. In France, for example, the following penalties apply:

• A fine of €3,750 for failing to publish the report or for publishing incomplete or inaccurate information;
• A fine of €30,000 and up to 2 years in prison for failing to have the non-financial report audited;
• A fine of €75,000 and up to 5 years in prison for obstructing the auditors' checks or inspections.

Tips for a successful transition to the CSRD

To prepare for the implementation of the CSRD, companies can follow these steps:

1. Anticipate changes in ESG reporting standards: the French Impact platform can give a first overview of the work needed to comply with the CSRD;
2. Carry out a carbon footprint assessment of your company;
3. Draw up a roadmap for your CSR strategy;
4. Open a dialogue with stakeholders, such as suppliers and subcontractors, by seeking out partners committed to a low-carbon approach;
5. Work in "project" mode, involving every function of the company;
6. Adapt your data collection and processing tools;
7. Put in place robust internal control over sustainability reporting.

By following these steps, companies can prepare effectively for the implementation of the CSRD and improve their sustainability performance, whether they are still within the legal scope after Omnibus or are anticipating the ESG expectations of their partners and markets.

Need help? The Colibris experts can support you

You now know what the CSRD involves and how the Omnibus package has redrawn its scope. Whether your company remains within the scope of the directive or has fallen outside it after the thresholds were raised, anticipating the ESG expectations of your partners and markets remains a competitive lever. 

To make sure you meet your obligations, we recommend turning to our partner Colibris. Their team of experts is ready to support you in adopting these new regulatory requirements.

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