Framework Criteria

The CSRD more than quadruples the number of companies required to report on sustainability, from the 11,000 covered by the NFRD to the nearly 50,000 that will be covered by the CSRD.

Large companies – even ones based outside of the EU

Companies meeting two of the following three conditions will have to comply with the CSRD:

1. €50+ million in net turnover
2. €25+ million in assets
3. 250+ employees

In addition, non-EU companies that have a turnover of above €150 million in the EU will also have to comply.

Small and medium enterprises (SMEs)

The CSRD will apply to small and medium-sized enterprises (SMEs) that are listed on European markets and meet at least two of the following three conditions

• €8+ million in net turnover
• €4+ million assets
• 50+ employees

The first reports for SMEs will be due in 2027, though they can be opted out of until 2028.

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Non-EU vs EU companies: what’s the difference?

When it comes to CSRD requirements, the rules are largely the same for EU and non-EU companies – the main difference is in how they qualify for reporting.

EU companies need to comply if they meet any two of these three criteria:

• €50+ million in net turnover
• €25+ million in assets
• 250+ employees

Non-EU companies (including those in the UK, US, and other countries) must comply if they:

• Have a net turnover of €150 million or more in the EU, and have at least one of the following:
  • A large EU subsidiary (meeting the EU company criteria above)
  • A branch in the EU with net turnover exceeding €40 million
  • Securities listed on EU regulated markets

This means that major international companies doing business in Europe will likely need to report their sustainability impact, even if they’re headquartered outside the EU. For example, a US tech company with significant European revenue and an office in Germany would need to comply with CSRD.

This approach ensures that both European and international companies are held to the same standards of sustainability reporting when operating in EU markets.

What should be reported under the CSRD?

Companies will need to disclose the sustainability information in their management reports, which means that financial and sustainability information will be published at the same time.

This sustainability data will have to be submitted in a standardized digital format, to allow for easier checking and comparison in the European single access point database.

The submitted data will then be subject to “limited third-party assurance,” meaning that an auditor will need to evaluate the data.

Starting in 2025, CSRD will mandate that businesses have a Paris Agreement-aligned emissions reduction plan to reach net zero by 2050.

What we know about the CSRD’s requirements

EFRAG, a private association financed by the EU, was tasked with developing reporting standards for the CSRD. On July 31, 2023, the European Commission officially adopted the European Sustainability Reporting Standards (ESRS). These standards detail the rules and requirements for companies to report on sustainability impacts, opportunities, and risks, and will form a key part of the CSRD. Their adoption marks a significant step towards its implementation.

Under the proposed value chain sustainability reporting, companies would be required to report scope 3 emissions. These indirect emissions result from the company’s upstream and downstream activities. They are notoriously tricky to measure, and it’s not an overnight process – so companies should begin the process as soon as possible, to get ahead of the CSRD mandates and ensure they will be compliant.

When do I need to comply with CSRD by?

Depending on the size of your business, your first CSRD disclosure may be due between 2025 and 2029.