01 Background
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is EU legislation that requires companies to report detailed information about their environmental, social, and governance (ESG) impacts. It replaces the older Non-Financial Reporting Directive (NFRD) and dramatically expands the scope of mandatory sustainability disclosure.
Adopted in January 2023, CSRD introduces standardised reporting requirements through the European Sustainability Reporting Standards (ESRS) — a set of 12 modules covering everything from climate change and biodiversity to workforce conditions and business ethics.
Key fact
CSRD expands mandatory ESG reporting from ~11,000 companies under NFRD to over 50,000 companies across the EU — a 4.5× increase in scope.
Unlike previous voluntary frameworks, CSRD reports must be independently verified by a third-party auditor and published in a machine-readable format using XBRL digital tagging — making data directly comparable across companies and sectors.
02 Scope
Who is affected?
CSRD applies in phases based on company size. A company is in scope if it meets at least two of three criteria: employee count, annual turnover, or total assets.
Employees
250+
Full-time equivalent
Turnover
€40M+
Annual net turnover
Total assets
€20M+
Balance sheet total
Rule of two
You only need to meet 2 of the 3 criteria above to fall within CSRD scope. A company with 300 employees and €15M turnover qualifies. A company with €50M turnover and €25M assets qualifies — even with fewer than 250 employees.
Non-EU companies with €150M+ annual turnover in the EU and at least one EU subsidiary or branch also fall within scope from 2028, making CSRD a global concern for multinationals.
03 Deadlines
Timeline & deadlines
Large PIEs
500+ employees, already reporting NFRD. First CSRD reports due Jan 2025.
Large companiesYOUR DEADLINE
250+ employees OR €40M+ turnover OR €20M+ assets. Reports due Jan 2026.
Listed SMEs
SMEs listed on EU regulated markets. Reports due Jan 2027.
Non-EU companies
Non-EU companies with €150M+ EU turnover. Reports due Jan 2029.
04 Standards
ESRS modules explained
CSRD reporting is structured around 12 European Sustainability Reporting Standards. The bars below show average EU SME compliance levels — most companies have significant gaps to close.
E1
E1 — Environmental
Climate change
45%
Critical
E2
E2 — Environmental
Pollution
20%
E3
E3 — Environmental
Water & marine
15%
E4
E4 — Environmental
Biodiversity
10%
E5
E5 — Environmental
Circular economy
18%
S1
S1 — Social
Own workforce
35%
Critical
S2
S2 — Social
Value chain workers
22%
S3
S3 — Social
Affected communities
12%
S4
S4 — Social
Consumers & end-users
14%
G1
G1 — Governance
Business conduct
40%
Critical
% = Average EU SME compliance rate · Source: ESGMaster analysis Q1 2026
05 Emissions
Scope 1, 2 & 3 emissions
CSRD requires disclosure of greenhouse gas emissions across all three scopes under the GHG Protocol framework. Most companies find Scope 3 the hardest to measure — it typically represents 70–90% of total emissions but requires data from your entire supply chain.
Scope 1
5%
Direct emissions
Emissions from sources owned or controlled by your company. Boilers, company vehicles, on-site manufacturing processes.
Easy
Scope 2
15%
Purchased energy
Emissions from purchased electricity, heat, steam, or cooling. Calculated using grid emission factors.
Medium
Scope 3
80%
Value chain
All other indirect emissions across your value chain — supplier goods, business travel, waste, sold products.
Hard
06 Assessment
How to do a CSRD gap analysis
A gap analysis compares your current ESG data and processes against the full requirements of each ESRS module. It identifies what you have, what you are missing, and how long it will take to close each gap.
01
Inventory your data
List all ESG data you currently collect — emissions records, HR data, governance policies, supplier information.
02
Map to ESRS modules
Match each data point to the relevant ESRS module. Identify which disclosure requirements you can already satisfy.
03
Score each module
Rate each ESRS module from 0–100% based on your current data coverage. Modules below 60% are priority gaps.
04
Prioritise by deadline
Focus on mandatory disclosures first (E1 climate, S1 workforce, G1 governance). Phase optional disclosures.
05
Build a remediation plan
For each gap, define the data needed, the owner, the process change required, and the estimated completion date.
07 Enforcement
Penalties & enforcement
CSRD enforcement is handled at member state level, meaning penalties vary significantly by country. All member states must implement effective, proportionate, and dissuasive sanctions.
Country
Max fine
% basis
Level
Germany
€10M
2% turnover
high
Netherlands
€4M
4% turnover
medium
Poland
€1M
Fixed fine
medium
Sweden
€2M
3% turnover
medium
Ukraine
TBD
EU alignment
low
08 Action plan
How to comply with CSRD
Most companies need 6–18 months to achieve full CSRD compliance from scratch. The key is starting with a materiality assessment and gap analysis, then building your data collection processes systematically.
01
Run a materiality assessment
Identify which ESRS topics are material to your business. Not all 12 modules may apply.
02
Conduct a gap analysis
Compare current ESG data against ESRS requirements. Identify priority gaps to close.
03
Build data collection systems
Set up processes to collect emissions data, HR metrics, governance documentation.
04
Engage third-party auditors
CSRD requires limited assurance from an independent auditor. Engage early — good auditors book out fast.
05
Write your CSRD report
Draft each ESRS disclosure. AI tools like ESGMaster can draft sections automatically.
06
Apply XBRL digital tagging
Required for machine-readable submission. ESGMaster handles this automatically from 2026.
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