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In the woke culture of increasing environmental consciousness and the pressing need for transparent corporate governance, the European Union (EU) has introduced the Corporate Sustainability Reporting Directive (CSRD).
On February 24, 2026, the EU Council approved changes to simplify reporting requirements and narrow the directive’s scope.
Besides the Mandatory Company Carbon Reporting, this directive represents a significant shift in how companies are expected to report their sustainability practices and performance.
As businesses navigate this new regulatory landscape, it is crucial to understand what CSRD entails and the consequences it brings for companies.
AT A GLANCE
Understanding Corporate Sustainability Reporting Directive (CSRD)
CSRD stands for Corporate Sustainability Reporting Directive and requires companies within its scope to provide standardised and detailed information on their environmental, social and governance (ESG) impacts, risks and opportunities.
The CSRD updates and expands the Non-Financial Reporting Directive (NFRD), which applied from the 2017 financial year, with the first reports published in 2018. The CSRD is part of the EU’s broader agenda to promote sustainable finance and integrate sustainability considerations into business practices.
Who needs to comply with CSRD
Phase 1: 2025 (financial year 2024)
Starting 2024, the EU framework required large public-interest entities with more than 500 employees, including listed companies, banks and insurance undertakings, to report under CSRD. These companies were required to report against the European Sustainability Reporting Standards in 2025 for the 2024 financial year.
Dutch implementation has been delayed. The government is introducing transitional arrangements for companies that reported voluntarily using European Sustainability Reporting Standard before the Dutch legislation took effect.
Phase 2: 2026 (financial year 2025)
Large undertakings, including non-listed companies, were originally expected to publish their first CSRD report in 2026, covering the 2025 financial year, following three criteria:
- more than 250 employees;
- a balance sheet total exceeding EUR 25 million;
- net turnover exceeding EUR 50 million.
On February 24, 2026, the EU Council approved a narrower scope. From the 2027 financial year, reporting principally applies to companies that meet both of the following criteria:
- more than 1,000 employees;
- net annual turnover exceeding EUR 450 million.
Companies in this reporting wave that remain within scope will publish their first CSRD report in 2028, covering the 2027 financial year
Dutch Transitional Exemption: The Netherlands intends to exempt companies that were covered from the 2024 financial year but fall outside the revised scope from reporting for the 2025 and 2026 financial years. Dutch legislation implementing the CSRD and the amended EU framework is still being finalised.
Key Elements of CSRD
1. Scope
The CSRD originally expanded reporting obligations beyond the companies covered by the NFRD. However, the amendments approved in February 2026 substantially reduce its scope. Listed status alone does not determine whether a company must report, and SMEs are generally outside the revised mandatory scope
2. Reporting Requirements
Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS).
Companies must report on a wide range of sustainability metrics, including climate-related risks, biodiversity impacts, human rights, and diversity. The CSRD introduces the concept of double materiality, meaning companies must consider both the impact of the environment on the business and the business’s impact on the environment.
Reports must be prepared in a digital readable format to facilitate data analysis and comparison across companies.
There is a guidance supporting companies and is called the guidance on the interoperability between the European and international sustainability reporting standards.
3. Third-Party Assurance
Sustainability reporting is subject to independent limited assurance. This supports the reliability of the disclosed information but does not guarantee that every statement is accurate or complete.
4. Alignment Global Standards
The European Sustainability Reporting Standards support interoperability with international sustainability reporting standards. The Sustainable Finance Disclosure Regulation (SFDR) is a separate EU regulation governing sustainability disclosures by financial market participants and financial advisers.
CSRD is a comprehensive directive for sustainability reporting, whereas TCFD specifically addresses climate-related financial disclosures. CSRD will not replace SFDR; instead, they function as complementary regulations.
While GRI offers a global framework for sustainability reporting, CSRD is a specific EU directive with mandatory reporting requirements.
Consequences for Companies
The introduction of CSRD brings significant implications for companies, both positive and challenging.
- Transparency and Accountability: Companies will need to provide comprehensive and detailed sustainability information, leading to greater transparency and accountability.
- Operational Changes and Strategic Reassessment: To meet CSRD requirements, companies may need to reassess and adapt their operational strategies. This includes investing in sustainable technologies, adopting greener practices, and ensuring supply chain sustainability. Such changes can drive long-term business resilience and competitiveness.
- Compliance, Costs and Administration: Preparing detailed sustainability reports and obtaining third-party assurance will entail significant costs and administrative efforts. Smaller companies, in particular, might face challenges in meeting these requirements due to limited resources and expertise.
- Risk Management: The CSRD’s emphasis on reporting climate-related risks and other ESG factors will compel companies to integrate these considerations into their risk management frameworks. This can lead to better identification, assessment, and mitigation of risks, ultimately safeguarding business continuity.
- Company Reputation: Companies that excel in sustainability reporting and performance can differentiate themselves in the market. A strong sustainability profile can enhance a company’s reputation, attract environmentally conscious consumers, and provide a competitive edge.
- Investor Relations: With growing investor interest in ESG factors, compliance with the CSRD can improve a company’s attractiveness to investors. Transparent and reliable sustainability reporting can facilitate access to capital and potentially lower the cost of capital.
- Legal and Regulatory Risks: Non-compliance with the CSRD can result in legal and regulatory repercussions, including fines and reputational damage. Companies must ensure robust governance and reporting mechanisms to avoid such risks.
Preparation CSRD
To effectively navigate the CSRD landscape, companies should take proactive steps:
Step 1: Conduct a Gap Analysis
Confirm whether the company falls within the revised CSRD scope and identify its applicable reporting date. Then assess current reporting practices against the relevant requirements to identify gaps and areas for improvement.
Step 2: Invest in Data Collection and Management
Implement robust systems for collecting, managing, and reporting sustainability data.
Step 3: Engage Stakeholders
Collaborate with stakeholders, including investors, customers, and employees, to align sustainability goals and reporting practices.
Step 4: Seek Expert Guidance
Engage with sustainability experts, auditors, and legal advisors to ensure compliance and leverage best practices.
The directive also offers opportunities for companies to enhance their sustainability performance, building trust with stakeholders, and driving long-term value.
More Information
- Mandatory Company Carbon Reporting: Employee Work Related Mobility Netherlands.
- Navigating the Dynamics of Employment Law in the Netherlands.
- GDPR General Data Protection EU: Guidelines for Entrepreneurs & HR.
- Articles on European Union Law.
