CSRD and Integrated Reporting
CSRD requires the sustainability report to be included in the management report — effectively mandating integrated reporting for all in-scope companies. Understanding how to structure the combined financial and sustainability report, manage connectivity between the two, and satisfy both financial and sustainability audiences is a key practical challenge.
CSRD requires the sustainability report to be included in the management report — effectively mandating integrated reporting for all in-scope companies. CSRD requires the sustainability report to be included as a distinct, clearly identified section of the management report — the primary annual financial reporting document.
What CSRD requires on report structure
CSRD requires the sustainability report to be included as a distinct, clearly identified section of the management report — the primary annual financial reporting document. This effectively mandates some form of integrated reporting for all CSRD companies.
The management report structure under CSRD: The management report contains both the traditional financial and business commentary AND the ESRS-compliant sustainability report as a distinct section. Both sections are included in the same document, subject to the same filing requirements, and covered by the same XBRL tagging obligation (financial XBRL for financial statements, ESRS XBRL for sustainability disclosures).
Alternative compliance: Some jurisdictions allow the sustainability report to be published separately from the management report if it is explicitly referenced in the management report and filed simultaneously. Check national implementing legislation for the specific requirements in your jurisdiction.
Why this matters: Placing the sustainability report in the management report creates direct accountability — auditors and financial regulators review it alongside the financial statements. Sustainability claims that are inconsistent with financial disclosures — for example, a transition plan that is not reflected in asset valuations or CapEx plans — become immediately visible when the two reports share a document.
Managing connectivity between financial and sustainability disclosures
The most significant practical challenge of integrated CSRD reporting is ensuring consistency between financial and sustainability disclosures — particularly where the same underlying facts are relevant to both.
Climate risk and financial statements: Physical climate risks identified in ESRS E1 physical risk assessment must be consistent with the going concern assessment, asset impairment testing, and provisions in the financial statements. If ESRS E1-9 discloses material physical climate risk, the financial statements should reflect this through: increased asset impairment provisions for climate-exposed assets; disclosure of climate-related going concern risks; or explicit confirmation that climate risks have been assessed and are not material to the financial position.
Transition plan and CapEx: ESRS E1-3 discloses the CapEx allocated to climate transition actions. This CapEx should be traceable to the capital expenditure disclosures in the financial statements. Inconsistency — claiming substantial transition investment in ESRS E1-3 while the financial statements show limited actual CapEx — is a red flag for assurers and investors.
EU Taxonomy KPIs and revenue: ESRS Taxonomy revenue KPI (proportion of revenue from taxonomy-aligned activities) must be consistent with the revenue analysis in the financial statements. If the financial statements report revenue by segment, the Taxonomy KPI calculation should be traceable to these segment figures.
Liabilities and E2-6: ESRS E2-6 discloses anticipated financial effects from pollution-related risks — including remediation liabilities. These must be consistent with the environmental provisions recognised in the financial statements under IAS 37.
The Integrated Reporting Framework — a useful structure
The International Integrated Reporting Council (IIRC, now part of the IFRS Foundation) developed the Integrated Reporting Framework — a voluntary framework for producing reports that connect financial and non-financial value creation.
IIRC six capitals: The integrated reporting framework organises value creation around six capitals — financial, manufactured, intellectual, human, social and relationship, and natural. This framework provides a useful structure for demonstrating how sustainability performance connects to financial value — complementary to but not replacing ESRS requirements.
Connectivity principle: The IIRC framework emphasises connectivity between the six capitals — showing how natural capital depletion (E3 water, E4 biodiversity) affects manufactured capital (asset values) and financial capital (returns). This connectivity thinking is directly applicable to the CSRD integration challenge.
For CSRD reporters considering IIRC: IIRC alignment is voluntary and adds structure to the integrated narrative — particularly useful for companies seeking to communicate the link between sustainability performance and long-term value creation to institutional investors. IIRC does not substitute for ESRS requirements but provides a complementary framework for the management commentary surrounding them.
Practical integration: Present the ESRS sustainability report as a distinct section within the management report, preceded by an integrated narrative section that draws connections between sustainability topics and financial performance — using IIRC thinking without formal IIRC alignment.
Frequently asked questions
Can we publish the sustainability report separately from the management report?
In most EU jurisdictions, CSRD requires the sustainability report to be part of the management report. Some flexibility exists on presentation — a clearly identified and cross-referenced separate section within the management report is typical. Check your national implementing legislation for specific formatting requirements. In all cases, the sustainability report must be filed via ESAP alongside the financial statements.
Do the financial auditor and sustainability assurance provider need to coordinate?
Yes — particularly on areas of overlap. The financial auditor assesses going concern, asset impairment, and provisions that may be affected by climate risks identified in ESRS E1-9. The sustainability assurer verifies ESRS E1-9 disclosures. Inconsistencies between the financial statements and ESRS disclosures will be flagged by one or both providers. Early coordination between the two assurance teams prevents late-stage rework.
How does CSRD integrated reporting affect the annual report timeline?
Significantly — the sustainability report must be completed, assured, and XBRL-tagged alongside the financial statements. For December year-end companies with an April filing deadline, all financial and sustainability content must be finalised by late March. This requires parallel workstreams — financial close and sustainability reporting must run simultaneously rather than sequentially.