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Feb. 21, 2024 • Reading time: 13 Min

Sustainability reporting (CSRD): What you should know

Learn how the Corporate Sustainability Reporting Directive (CSRD) marks a significant milestone in European sustainability reporting and encourages companies to be more transparent about their environmental, social and governance aspects. In a world where sustainability is increasingly becoming a decisive factor for companies, uniform standards and extended reporting requirements are essential to increase stakeholder confidence and create long-term value. Our comprehensive guide provides you with a clear path to successfully lead your company into a sustainable future by effectively implementing CSRD and making your sustainability reporting a success. Find out everything you need to know here.

In brief: Sustainability reporting (CSRD)

Sustainability reporting is an essential measure to promote transparency and accountability in companies regarding their environmental and social activities. The Corporate Sustainability Reporting Directive (CSRD), building on the Non-Financial Reporting Directive (NFRD) of 2014, marks a significant advancement in Europe. It requires certain companies to prepare detailed reports on their sustainability performance and have them externally verified. The directive, which came into effect in January 2023, aims to ensure clear and comparable reporting, providing investors and stakeholders with informed insights into the sustainable engagement of companies. The CSRD directive defines specific requirements and standards developed by the European Financial Reporting Advisory Group (EFRAG) to enable uniform reporting. These standards cover both financial and non-financial aspects, such as environmental, social issues, and corporate governance. A central principle of the directive is double materiality, which obligates companies to report on their impacts on society and the environment, as well as the importance of these issues for the company itself. Another key element of the CSRD is the requirement for external auditing of sustainability reports to ensure their accuracy and credibility. The reports must be integrated into the company's management report and published in the European Single Electronic Format (ESEF) to enhance accessibility and comparability.

The phased introduction ofreporting obligations begins in 2024 and initially covers large public-interest companies. By 2026, capital market-oriented small and medium-sized enterprises (SMEs) will also be included. These measures aim to promote a more sustainable and responsible business world. While sustainability reporting offers many benefits, such as improved transparency, risk management, and competitive advantages, it also presents challenges, especially for smaller companies. High costs and complex requirements can lead to significant administrative burdens.

Overall, the CSRD highlights the growing importance of sustainability in business. Companies are encouraged to rethink and improve their practices to foster a responsible and sustainable business environment. Ongoing adaptation and enhancement of reporting are crucial to meeting the requirements and ensuring long-term success.

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What is sustainability reporting?

The Corporate Sustainability Reporting Directive (CSRD) is a real step forward in the history of sustainability reporting in Europe. It builds on the Non-Financial Reporting Directive (NFRD) of 2014, which required public interest entities in the EU to disclose their sustainability performance. The aim is to provide stakeholders with a solid basis for assessing the sustainability commitment of these companies. 

In April 2021, the European Commission presented its proposal for the Corporate Sustainability Reporting Directive for companies. Following negotiations, a compromise was reached between representatives of the Commission, the Council and the European Parliament on June 21, 2022. This compromise was formally approved by the European Parliament and the Council and published in the Official Journal of the European Union on December 16, 2022. The directive entered into force on January 5, 2023. The member states now have 18 months to transpose the new regulations into national law.

The guidance for corporate sustainability reports is based on the NFRD. It sets out clear rules for the publication of sustainability information in company reports in accordance with the CSR Directive. From January 5, 2023, certain companies must submit a detailed sustainability report and have it externally verified. This report covers many areas, including financial and non-financial aspects such as the environment, social affairs and corporate governance. 

The new CSRD rules emphasize the importance of sustainability in business. As a result, companies are given precise instructions on how they should report. The European Sustainability Reporting Standards (ESRS) set out the specific requirements and rules according to the EU taxonomy. The regulations on sustainability reporting help companies to report on their sustainability efforts in a clear and consistent way that is easy to compare. Comparability is important for investors who are interested in companies.

Transparency and commitment to sustainable reporting

There are discussions that some companies only engage in CSR activities to improve their reputation or to gain an advantage over their competitors. This is often referred to as "greenwashing". To counteract this and to ensure clarity, the European Parliament has introduced the CSRD Directive. This obliges. This obliges companies to report on their non-financial performance. 

The EU directive on reporting on non-financial performance is therefore mandatory for companies with more than 500 employees, a turnover of more than 40 million euros or a balance sheet total of more than 20 million euros. These companies must report on their sustainability work. The new laws are aimed at requiring companies to disclose what they are doing for sustainability. In doing so, they must prevent corruption or deception.

New version of the CSR Directive

Until now, the European CSR Directive 2014/95/EU(the Directive), also known as the "Non-financial Reporting Directive", and its national implementation through the CSR Directive Implementation Act (CSR-RUG) applied to sustainability reporting. However, studies have revealed significant shortcomings in the reporting obligations to date. 

Inspired by the "European Green Deal" and the European Commission's strategy for sustainable finance, the CSR Directive was thoroughly revised between 2021 and 2022. The result: it now has a new name and also includes the Delegated Act. It is now referred to as the "Corporate Sustainability Reporting Directive", Directive (EU) 2022/2464(on the Directive). In German, this means the Directive on Corporate Sustainability Reporting. The updated and revised directive and the delegated acts have been in force since the beginning of 2023. The directive must now be transposed into national law by the EU member states by mid-2024. 

Information relating to sustainability should now be taken just as seriously as financial information, financial reports or a company's financial reporting. The regulation is to start with the 2024 financial year. This means that reports on sustainability performance will have to be submitted from 2025. Initially, however, this will only affect companies that already had to report before then. 

Companies that are already dealing with CSR today can gain a competitive advantage as they are prepared for future legal requirements. It is therefore worth getting to grips with the topic of CSR now.

Reporting obligation: When is there an obligation to report?

The introduction of the directive for the sustainability strategy of companies, Directive (EU) 2022/2464(on the directive), is taking place gradually. This gives companies enough time to adapt to the new reporting standards and prepare accordingly. Initially, only a certain group of companies will be affected by the CSR Directive. However, it will gradually be extended to more and more companies. 

  • From January 2024, the directive will initially affect companies that are of public interest and employ more than 500 people. This group consists of many organizations that are leaders in sustainability reporting due to their size and importance. In Germany, this affects around 15,000 companies that are subject to the CSRD.
  • From the 2025 financial year, the scope of application will be extended to all other large companies that meet the accounting criteria. This extension aims to promote comprehensive clarity about sustainable business practices not only among large companies, but also beyond.
  • From the 2026 financial year, capital market-oriented small and medium-sized enterprises (SMEs) will also be included in the scope. However, this group can postpone the introduction until 2028. This takes into account that smaller companies may need more time and resources to meet the requirements.

Companies should also familiarize themselves with the European Sustainability Reporting Standards (ESRS) in good time in order to meet the requirements. It is possible that reports on non-financial performance will have to be audited. This is the only way to ensure that they comply with all standards. If companies deal with the reporting rules at an early stage, they can ensure that they comply with the requirements. They can also pass on information about their environmental, social and governance work to investors and stakeholders.

This gradual introduction of reporting obligations demonstrates the EU's commitment to more transparent and sustainable development. Companies of all sizes are encouraged to rethink and improve their sustainability practices. This ultimately contributes to a more responsible and sustainable business world.

Reporting made easy

Navigate safely through the requirements of the CSRD: Our tool supports you in complying with reporting obligations and achieving sustainability targets.


Core innovations of the directive

The new directive also introduced important changes to reporting on companies' non-financial performance. The aim is to improve the transparency, consistency and reliability of the information:

  • Extended and standardized reporting obligations: Companies are encouraged to adapt their reports and follow standardized rules. This can improve measurability and comparability through figures and data. The rules are being developed by the European Financial Reporting Advisory Group (EFRAG). They also take into account the opinions of interest groups and experts as well as existing standards.
  • Redefinition of materiality: The requirements for sustainability reporting introduce double materiality. Companies must now report on how their work affects society and the environment and how important sustainability is to them. Previously, they only had to report if both aspects were important.
  • Mandatory external audit: As with financial reports, sustainability reports must now also be audited by a third party in accordance with certain standards. The EU Commission determines the exact audit rules. Initially, an audit is planned that only provides "limited assurance". Later, however, this audit is to be extended to "reasonable assurance", similar to the audit of financial reports.
  • Integration into the management report: In order for sustainability information to be easily found, it must now be included in the management report. This shows that sustainability reports are becoming extremely important, similar to financial reports. 
  • Application of the European Single Electronic Format (ESEF): Since 2020, some companies that are active on capital markets have had to publish their financial reports in the European Single Electronic Format (ESEF). This format is easy to read for both humans and machines. Sustainability reports should also follow this format in future. The European Commission wants to introduce a special XBRL taxonomy for sustainability reports.

These changes show that the European Union is striving to be a leader in sustainable finance. It wants to improve the requirements for reporting on non-financial performance through reporting.

Effective measurement and reporting

Definition of sustainability indicators

Under the CSRD, companies must set clear sustainability targets that encompass their economic, environmental and social activities. These targets should be precise, measurable, achievable, important and time-bound (SMART). The special thing about SMART targets is that their success can be easily monitored. It is important that companies choose these goals carefully to show how their activities have a positive impact on sustainability. One example that is often used by companies is the CO₂ footprint. It is considered a typical standard for sustainability reporting.

Regular monitoring and evaluation

The CSRD requires companies to review and evaluate their sustainability. To do this, they must have proper processes in place for data collection and analysis. It is necessary for companies to use the right systems and technologies to collect and process data correctly. Regular checks are important for this. This allows companies to see where they currently stand and where they still need to improve. They can then align their plans and strategies accordingly. 

Clarity and consistency in reporting

Sustainability reports must be clear and standardized. Companies are required to produce comprehensive reports on their environmental activities that comply with European rules and standards. These reports should not only include financial data, but also cover other important areas to give a complete picture of the company's performance. If all companies present their reports in the same way, it will be easier to compare them. In addition, standardized reporting promotes understanding, which increases the credibility and reliability of the information provided. 

Participation of interest groups

The Corporate Sustainability Reporting Directive emphasizes the importance of companies communicating with their stakeholders and interested parties when it comes to environmental and social issues. Companies should talk to them to find out what they expect and what they are concerned about. This information should then be incorporated into the company's plans for greater sustainability and into their reports. By actively involving their stakeholders, companies will make their reports more trustworthy. This also helps the public to have more confidence in the way the company is run.

Continuous improvement

Under the obligation to report on non-financial performance, it is important for companies to constantly review and improve how they report on their environmental and social work. It is not enough to submit a CSR report just once. Companies must regularly evaluate whether they are still up to date and whether they are using the best methods. This means that companies must be committed to environmental protection and social responsibility at all levels.

Relevance of the report

Nowadays, it is very important for companies to produce standardized sustainability reports. This is especially true since the introduction of the Corporate Sustainability Reporting Directive, which is part of the drive for sustainable finance. This directive emphasizes the importance of sustainability in the financial sector.

But why exactly is this report so important? Not only does it provide crucial information about how sustainably a company operates, it also fulfills legal requirements in the area of sustainable finance. When companies provide accurate information about their impact on the environment and society, they show exactly what they are doing to achieve this. This helps investors, customers and stakeholders to assess the company's financial security and future plans, especially in the context of its sustainability efforts.

The report also encourages companies to continuously improve their sustainability practices. This encourages them to critically examine their actions and introduce environmentally friendly solutions. In short, the sustainability report is an important tool for companies to show how serious they are about protecting the environment and society and to ensure their long-term success.

Requirements for a sustainability report

The introduction of the directive by the European Union is an important milestone in the reporting of companies on their sustainability performance. This regulation is intended to improve the openness, comparability and reliability of sustainability reports. It requires companies to report very precisely on their impact on the environment and society. With the CSRD, many more companies now have to report, including all large companies and those of public interest in the EU. This also applies to listed small and medium-sized enterprises (SMEs), but micro-enterprises are exempt.

An important principle of CSRD is that of dual materiality. This means that, on the one hand, companies must report on how their work affects the environment and society. On the other hand, they must also report on how environmental and social issues affect the company itself. This gives a complete picture of the risks and opportunities in terms of sustainability.

In order to achieve regular and comparable reporting, the directive stipulates that companies must prepare their reports in accordance with the European sustainability reporting standards. These were developed by the European Financial Reporting Advisory Group (EFRAG). The standards cover a wide range of topics, including environmental aspects such as climate change and biodiversity, social aspects such as employee rights and community impact, and governance topics such as business ethics and anti-corruption.

In addition to reporting on current performance, the CSRD also requires companies to share forward-looking information. This includes their sustainability goals, strategies for achieving these goals and the assessment of associated risks and opportunities. This requirement supports the development of more sustainable business models and adaptation to future challenges.

Another important part is that the sustainability reports must be reviewed by external experts. These reviews are intended to ensure that the information in the report is accurate and trustworthy. This is intended to strengthen the trust of people who are interested in the company in its sustainability efforts.

Companies must make their sustainability reports digitally accessible. This makes the data easy to find and compare. This not only increases the transparency of sustainability efforts, but also helps investors, customers and the public to make informed decisions.

In short, the CSRD requires companies to have a precise roadmap of what they should do in terms of sustainability. In order to prepare the reports, they must follow fixed rules and standards and clearly formulate their goals. When companies take this into account, they not only comply with the law, but also show that a sustainable future is important to them. 

Advantages and disadvantages of reporting for companies

The new EU regulation on corporate sustainability is an important step towards better reporting on environmental and social issues. It obliges companies to disclose their work on environmental, social and governance(ESG) issues. This should ensure that information on sustainability is easier to understand and compare. Although this rule brings many benefits, such as greater clarity for companies, investors and the general public, it also presents some challenges.

Advantages of sustainability reporting

Companies benefit from the Corporate Sustainability Reporting Directive in many ways. It improves the transparency and credibility of a company. It also brings advantages in terms of risk management and competition. It also facilitates access to capital.

More clarity and trustworthiness

The CSRD helps companies to become more transparent and credible. When companies report openly on their performance in environmental and social issues, they improve their image. They show that they act responsibly. This openness builds trust - with investors, customers and the public. Trust is important for maintaining long-term relationships.

Risk management

Another advantage of sustainability reporting is that it improves risk management. By taking a closer look and reporting on environmental risks and social problems, companies can recognize where dangers lurk at an earlier stage. This allows them to act in good time. This not only minimizes damage to the company, but also makes it easier to adapt to new market situations and society's expectations.

Competitive advantages

Sustainability reports give companies great competitive advantages. Sustainability reports allow companies to set themselves apart from others and strengthen their image. They also make the company more attractive as an employer, as it attracts people who attach great importance to ethical behavior and environmental protection. This is crucial for finding employees who really want to get involved and remain loyal to the company in the long term.

Access to capital

Sustainability reports make it easier for companies to access capital. Investors and lenders are paying more and more attention to how companies perform in terms of sustainability. They prefer companies that report openly on their performance on environmental and social issues. This can make them more willing to invest and offer better credit terms. In addition, companies can use their sustainability reports to access special sources of funding, such as green bonds, which often have better terms.

Disadvantages of sustainability reporting

Although sustainability reports have many advantages for companies, there are also challenges and disadvantages. These can be particularly important for smaller companies and need to be carefully considered.

High costs and a lot of work

For companies preparing sustainability reports for the first time, this can be expensive and time-consuming. They may need to invest in new technology or systems and change the way they work in order to collect, analyze and report on environmental data. Training employees may also require extra resources. For smaller companies in particular, these initial and ongoing costs can be difficult to manage and present some hurdles. 

Complicated rules

It can be very difficult for smaller companies to meet all the requirements of sustainability reporting. There are many regulations that need to be observed and the information required is very detailed. This requires a good understanding of the subject. Often these companies have to hire outside experts, which can be expensive. The big task is to understand exactly what the law requires without using too many of the company's resources.

Too much information can be confusing

Detailed reports should show how serious a company is about environmental and social issues and provide clarity. However, such a report can also reveal too much information. If stakeholders receive too much data, it can be difficult for them to recognize what is most important.

Risk to reputation

Sharing information about environmental performance can be risky for a company. If companies show their weaknesses, this could lead to criticism. Especially if not all targets have been met or there is still a lot to improve. Being honest and open can build trust in the long term, but in the short term there is a risk of negative reactions that can damage the company's public image.

The reports show how companies can protect the environment, manage risks and present themselves in a good light. Although it can be challenging and expensive, it is worth developing a smart strategy for these reports. This is because it not only gives companies credibility, but also the trust of their stakeholders. It is an opportunity for companies to actively promote the environment and strengthen their position in the market.

Open and honest reporting strengthens the trust of stakeholders and contributes to the positive development of society. By complying with CSR rules, companies not only demonstrate their environmental efforts, but can also further improve them. A focus on sustainability can also lead to new innovations and business opportunities.

Criticism of sustainability reporting

The regulation obliges companies to report better and more uniformly on their environmental and social performance. However, the many advantages that the law brings with it are also offset by some points of criticism. 

High costs and administrative burden: One of the main criticisms of the CSRD is that it is expensive and involves a high administrative burden, especially for small and medium-sized enterprises. Many internal resources are used to implement the precise requirements of the reports. Companies often have to commission external experts. This is a major burden, especially for smaller companies, and can lead to a loss of competitiveness.

Complexity and comprehensibility: The law also leads to an increase in the complexity of sustainability reporting. The variety of information required and the need to structure it in accordance with the standards can make reports difficult for readers to understand. There is concern that the abundance of technical details and data will obscure the actual sustainability performance and goals of companies.

Standardization vs. individual relevance: The directive provides for the creation of standardized sustainability reports. This is the only way to clearly compare the performance of different companies. However, critics are of the opinion that the specific sustainability efforts of individual companies could be lost. The requirements could make it more difficult to clarify a company's own path and successes in sustainability.

Risk of "greenwashing ": Another problem is the risk of "greenwashing". Although the CSRD wants companies to clearly demonstrate their commitment to the environment, this could lead to an increase in greenwashing. The regulation could lead to some companies presenting their environmental performance as better than it really is. The complexity of reporting and the difficulty of scrutinizing the information could lead to false or misleading information not being detected.

These points of criticism show how difficult and controversial the introduction of the CSRD is. Although the objectives of this regulation - better sustainability reports and more transparency and responsibility in companies - are widely supported, the actual implementation is complicated. A great deal of discussion and adaptation will still be required to achieve these goals, particularly in the area of sustainability information.

Opportunities and challenges

The introduction of the CSRD is a big step for European companies. Although it offers both opportunities and difficulties, it creates fundamental conditions for the further development of sustainable business practices.


  1. Promoting transparency and trust: CSRD gives companies the opportunity to improve stakeholder trust by being more open. When companies report in detail on their sustainability efforts, they can develop a better relationship with customers, investors and the general public.
  2. Improving sustainability performance: More accurate reporting motivates companies to re-evaluate their sustainability goals while making a better commitment to the environment and society. This can lead to finding new and more sustainable ways of working.
  3. Easier access to capital: More and more investors are paying attention to environmentally friendly investments. Companies that are open about their environmental credentials often receive investment more easily, as they are seen as a safer and more forward-looking choice.
  4. Strengthening competitiveness: Companies that are leaders in sustainability reporting can position themselves as market leaders and build a stronger brand. This can lead to a competitive advantage in global markets.


  1. Implementation costs and complexity: For many companies, especially SMEs, implementing the regulations poses a significant challenge. The cost and complexity of data collection and reporting can be considerable.
  2. Lack of standardization and comparability: The CSRD is intended to standardize sustainability reporting and make it comparable. However, different interpretations could make comparisons between companies difficult.
  3. Risk of information overload: The demand for comprehensive reporting could lead to an excess of information that is difficult for stakeholders to navigate. This could reduce the effectiveness of communicating sustainability performance.
  4. Tension between transparency and competitiveness: Companies may be reluctant to disclose sensitive information for fear of weakening their competitive position. The challenge is to find a balance between the need for transparency and the protection of business-critical information.

In summary, CSRD brings both opportunities and difficulties for companies. It paves the way for better environmental practices, but to implement them successfully requires careful planning and flexibility. Companies must overcome the challenges while seizing the opportunities to achieve their sustainability goals and ensure long-term success.

Examples of sustainability reporting

A sustainability report shows what a company is doing for the environment, society and good corporate governance (ESG). A clear report not only shows that the company complies with the rules, but also how seriously it takes sustainability. Using the example of an invented company, "GreenTech Innovations", we show what such a report could look like.

Phase 1: Preparation and planning

Set goals and rules: First, GreenTech Innovations considers goals and rules for the sustainability report. The company wants to show how well they are reducing CO₂ emissions, implementing a circular economy and ensuring diversity and cohesion in the workplace.

Talk to stakeholders: To find out the important points, GreenTech talks to various stakeholders, such as employees, customers, suppliers and people from the surrounding area.

Phase 2: Data collection and analysis

Materiality analysis: GreenTech uses a materiality analysis to find out which sustainability issues are really important, both for the company and for interested parties.

Data collection: In the next step, GreenTech collects figures and information on energy consumption, waste management and employee satisfaction.

Phase 3: Reporting and communication

Structure of the report: GreenTech's sustainability report is divided into various important sections:

  • Start and overview: What the company understands by sustainability and how it intends to tackle it.
  • Environmental protection: How the company reduces emissions, saves energy and reduces waste.
  • Social commitment: information on working conditions, diversity in the team and projects for the community.
  • Governance: How the company is managed and adheres to fair business rules.
  • Future plans: What the company wants to achieve in the next few years.

Creation and design: The report should be written in such a way that the core message is easy to understand. It also includes infographics, diagrams and case studies to better illustrate the information. GreenTech focuses on openness and honesty by showing both the successes and the difficulties.

External review: Before GreenTech publishes the report, another company reviews the information. This ensures that everything is correct and trustworthy.

Phase 4: Publication and follow-up

Publication: The final sustainability report is published on the company's website. To ensure that it receives sufficient coverage and attention, it is shared on social networks and through press releases.

Feedback and discussions: In order to obtain different opinions on the report, GreenTech engages in an exchange with various interest groups.

Continuous improvement: Following an internal review, GreenTech attempts to apply the feedback and suggestions for improvement to the report. On this basis, plans are developed for further steps to increase sustainability.

The example illustrates how a company can compile a detailed report on its environmental performance. The report not only provides information on what the company has achieved so far, but also what it would like to implement in the future in order to continue to act in an environmentally friendly manner.

The future of sustainability reporting: trends and developments

A conclusion

The way in which sustainability is reported on is constantly changing. This is due to new expectations from society, stricter regulations and better technology. The latest trends and outlooks show how important sustainability has become for business and how to continue trying to make clear what companies are doing for the environment. Below we look at trends and innovations that could soon become important for sustainability reporting.

Merging of reports

An important trend is the move towards a report that shows both financial and non-financial topics in a single, coherent document. The aim is to clarify how a company's sustainability plans relate to its finances. This allows interested parties to get a complete and comprehensive picture of the company.

Digital reporting and use of data

Digitalization is also becoming increasingly important for sustainability reports. Digital platforms and tools, such as artificial intelligence, will make it possible to collect and analyze data even faster in the future. This could also allow sustainability data to be recorded more quickly and accurately, which could have a positive impact on reporting.

Focus on climate reporting

With climate change as a major global challenge, reporting on the climate is also becoming increasingly important. In their sustainability reports, companies should explain exactly what measures they intend to introduce in relation to the climate and what impact their work has on it. The Task Force on Climate-related Financial Disclosures (TCFD) has already drawn up important rules for this, which more and more companies are now using.

Sustainability as a dialog

It is also increasingly important to talk about the sustainability report, be it with employees or stakeholders. This enables them to better understand what stakeholders expect from the report and to implement suggestions for improvement in the next report. Conversations about the report can take place in various situations, for example in workshops, through surveys or via social networks.

Global standards and harmonization

In large parts of the world, the aim is to ensure that sustainability reports follow the same rules. Until now, there have been many different ways of reporting on sustainability aspects. This is to be changed. The aim of standardization is to make it easier to compare reports and companies with one another. The International Sustainability Standards Board (ISSB) wants to adopt basic rules so that reports are standardized in the future.

These developments indicate that there is more and more collaboration in sustainability reports. Digital means are being used, exchanges are being sought and standardized methods are being applied.

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