CSRD was adopted - New sustainability reporting obligations in the EU start


In brief

The Corporate Sustainability Reporting Directive (CSRD) final text was finally adopted by the European Parliament and the European Council. This was the result of a long period of political negotiations with the Member States and the European Parliament after the first proposal was published by the European Commission in April 2021. The Directive is expected to be published in the Official Journal of the European Union in the first quarter of 2023.

In details

Redefined approach of sustainability reporting - more standardised reporting requirements

With the CSRD, the existing sustainability matters of ESG (environmental, social and governance) reporting will be expanded and standardised. 

A major contributing factor is the clarification of the principle of double materiality. This requires that the companies report information necessary to understand: 

  • the impact the company has on sustainability matters (an “inside-out” perspective)
  • how sustainability matters affect a company’s business development, performance, and position (an “outside-in” perspective)

Through the CSRD, mandatory European Sustainability Reporting Standards (ESRS) are introduced, based on the European Financial Reporting Advisory Group’s (EFRAG) recommendations. EFRAG agreed on 15 November, 2022, on the first set of 12 draft ESRS submitted to the European Commission and to be adopted by Delegated Acts (planned to be in June 2023). The submitted drafts provide a comprehensive coverage of ESG matters and a solid basis for the sustainability reporting and the double materiality notion. For their future applicability, their interoperability with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) is essential.

The revised standards further contribute to:

  • Alignment with existing sustainability frameworks, standards, and regulations in the EU (including final version of CSRD, International Sustainability Standards Board (ISSB) and Global Reporting Initiative (GRI));
  • Harmonisation of the terminology used and structure of the sustainability reporting;
  • Reduction of the disclosure requirements and data points from the original drafts by 40%;
  • Clarification of the concept of double materiality and the approach to materiality including those items that must be reported irrespective of materiality.

Extension of scope

Compared with the existing Non-Financial Reporting Directive (NFRD), CSRD will significantly expand the scope of sustainability reporting at both the individual entity and group level. 

The scope of application also includes companies outside the EU. For example, a multinational company would be required to provide reporting for the global consolidated entity if the parent company has debt or equity securities listed on an EU-regulated market.






Current Regulation NFRD

CSRD Scope

Listed and large public interest companies with more than 500 employees.
  • All listed companies in EU (including listed SMEs*, but excluding the micro-undertakings)
  • All large undertakings, as well as all parent undertakings of a large group, which exceed two of the three criteria during the financial year in two consecutive financial years:
    • € 20 million balance sheet total, 
    • € 40 million net turnover, 
    • average number of 250 employees
  • Companies outside the EU if they generate a net turnover in the EU of more than € 150 million (in the last two consecutive years) and have at least one large or EU-listed subsidiary or a branch that generates minimum revenue of €40 million in the EU. 

*Listed SMEs have the possibility to postpone the first-time application by two years.

There is a possibility that there could be changes to the exemption options for subsidiaries by inclusion in the consolidated sustainability report of a parent undertaking. Listed subsidiaries may no longer benefit from this exemption option. In addition, certain disclosures and metrics have to be broken down at the subsidiary level in the parent undertaking’s report, possibly under the condition that the subsidiary has a different risk profile than the group as a whole.

CSRD Timeline including ESRS adoption

The CSRD will be applicable at 4 different dates depending on the undertaking status:

  • FY 2024: Large EU PIE entities (already under NFRD).
  • FY 2025:  All large undertakings, as well as all parent undertakings of a large group, as described above.
  • FY 2026: Listed SMEs (with an opt out option until FY 2028).
  • FY 2028 : All non EU undertakings as described above.
CSRD Timeline and Scope

Where and how to report?

CSRD requires that the only permissible reporting format for the sustainability information will be within the  management report, in a separated section.

Additionally, the companies must prepare their management report in XHTML format and digitally tag certain of the sustainability information.

Assurance obligation

The CSRD includes a mandatory external assurance obligation for the reported sustainability information and the requirements begin with limited assurance and expand to reasonable assurance at a later date.The statutory auditor of the financial statements will be allowed to perform these assurance engagements.

Next steps after the EU adoption

The final formal approval by the European Parliament and European Council should be followed by the transposition of the directive into the national law of the Member States in a period of maximum 18 months.


Contact us

Julien Melotte

Audit Partner, Industry & Public Sector, Sustainability, PwC Luxembourg

Tel: +352 49 48 48 5287

Claire Cherpion

Audit Director, Sustainability, PwC Luxembourg

Tel: +352 62133 27 63

Frédéric Vonner

Advisory Partner, Sustainable Finance & Sustainability Leader, PwC Luxembourg

Tel: +352 49 48 48 4173