August 2025
The European Union’s CSRD will require EU-listed companies to include detailed ESG transition plans in annual reporting from 1 January 2026, introducing more prescriptive reporting standards than its predecessor, the Non-Financial Reporting Directive (NFRD).
Why CSRD is necessary
The NFRD applied to a relatively narrow set of companies and did not mandate standardised disclosure. In the face of heightened investor scrutiny and increasing global focus on climate risks and social concerns, patchy ESG reporting is no longer acceptable. CSRD requires standardised and far more detailed reporting, and aligns with the Paris Agreement. In our view, it should bridge the gaps left by the NFRD.
Phased implementation has started and will include all EU companies by 2029
Implementation of CSRD started with public-interest companies in 2024. It will be introduced over a number of years, with defined deadlines/targets and full compliance by all EU companies required by 2029.
CSRD introduces double materiality disclosure – a key differentiator
Dual-lens reporting is a paradigm shift in ESG reporting, embedding sustainability into strategic business considerations. CSRD requires organisations to report on how they (and their value chains) impact sustainability, and how they in turn are impacted. This requires a better understanding of the underlying business.
Practical aspects of adopting the CSRD
CSRD’s stricter, standardised and double-materiality reporting requirements imply – in our interpretation – the need for structured and active board oversight of sustainability and integration into corporate strategy. Addressing sustainability issues must become part of everyday business. For some companies, this may require a substantial investment in the specialist skills and technology needed to track key metrics, from emissions to social impact.
Conclusion
CSRD is more than a directive. It reflects a shift in the way society expects businesses to operate. Profit, while still the main tenet of any investment decision, is no longer the only measure of success. Companies are now being assessed on their ability to create long-term value for all stakeholders. By mandating transparency and accountability, CSRD encourages companies to embed sustainability into their ethos.