CSRD Explained: What Every European Business Needs to Know

The Corporate Sustainability Reporting Directive (CSRD) is the EU's most significant update to sustainability reporting rules in a generation. If your business operates in Europe, it will almost certainly affect you — either directly or through your customers and supply chain partners.

What is CSRD?

CSRD replaces the older Non-Financial Reporting Directive (NFRD) and dramatically expands who must report, what they must report, and how rigorously they must do it.

The directive requires companies to report on:

• Environmental impact — greenhouse gas emissions (Scopes 1, 2, and 3), energy use, water, biodiversity
• Social impact — workforce conditions, supply chain labour standards, community effects
• Governance — anti-corruption, board diversity, executive pay ratios

Reports must follow the European Sustainability Reporting Standards (ESRS), a detailed set of topic-specific standards developed by EFRAG.

Who Does It Apply To?

Reporting is being phased in by company size:

Wave	Who	Reporting starts
Wave 1	Large listed companies (already under NFRD)	2025 (for FY 2024)
Wave 2	All other large EU companies (500+ employees, or €50M+ revenue)	2026 (for FY 2025)
Wave 3	Listed SMEs (with opt-out to 2028)	2027 (for FY 2026)
Wave 4	Non-EU companies with significant EU turnover (€150M+)	2029 (for FY 2028)

Even if you fall outside the mandatory scope, your large customers almost certainly do — and they will ask you for your emissions data to complete their own Scope 3 reporting.

Double Materiality: The Key Concept

CSRD introduces double materiality, which means companies must assess sustainability topics from two angles:

1. Impact materiality — how does your business affect people and the planet?
2. Financial materiality — how do sustainability risks and opportunities affect your business financially?

Both perspectives must be documented and disclosed. This is more demanding than traditional financial materiality analysis.

What the Omnibus Simplification Changes

In 2025, the EU Commission proposed the "Omnibus" package to simplify CSRD for smaller companies. The key proposed changes are:

• Raise the threshold to companies with 1,000+ employees (removing most Wave 2 companies)
• Reduce the number of mandatory ESRS data points
• Simplify the value-chain data collection requirements

However, the Omnibus is still being debated in the European Parliament. Until it passes into law, current CSRD timelines remain in force. Do not plan around a simplification that has not yet been confirmed.

Getting Started

The most common mistake companies make is waiting too long. A complete CSRD report requires:

• A double materiality assessment (typically 2–4 months the first time)
• Setting up data collection processes for energy, travel, waste, and supply chain emissions
• Third-party assurance (limited assurance from year one, reasonable assurance later)

Transparabl automates the data collection and calculation layer, so you can focus on the strategic decisions — not spreadsheets.

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Have questions about CSRD and your specific situation? Book a free 30-minute call with our team.