Question 1

Who is subject to the CSRD?

Accepted Answer

As the CSRD significantly broadens the scope of NFRD, it is expected to roughly quadruple the number of covered organisations to over 50,000 companies—many of which will be required to report their full carbon emissions for the first time. The new regulations also cover an estimated 10,000 non-EU companies with significant operations in Europe.

The CSRD will apply to EU-based public companies (only excluding micro-enterprises), alongside all EU-based private organisations considered to be “large”— i.e., that have two or more of (1) 250+ employees, (2) €40m+ annual revenues, (3) €20m+ balance sheet.

For many non-EU parent companies, their EU subsidiaries will qualify for CSRD reporting if they meet the criteria above. That will require reporting by their EU subsidiaries, with some reporters opting to consolidate reporting and report at the global level.

However, the CSRD will eventually layer on separate requirements for non-EU companies, extending the scope of firms included, and requiring CSRD reporting to cover the whole entity – including the parent company – not just their EU activity.

This second wave of requirements will specifically apply if a non-EU parent has €150m+ in annual EU revenues, with at least one branch or subsidiary where: (1) the branch has €40m+ in annual EU revenues, (2) the subsidiary is either EU-listed or meets the large criteria above.

Question 2

What does “double materiality” refer to in the CSRD?

Accepted Answer

Filers must start with a “double materiality” assessment that identifies both how its operations impact people and the environment, and how sustainability-related developments impact the organisation. A topic is considered material if the impact is material from either (or both) perspectives.

The assessments ask a broad range of stakeholders to evaluate risks and opportunities across the topics covered by CSRD, and include some metrics-based measurements to supplement the understanding of potential impact. With qualitative and quantitative input from stakeholders like scientific experts, customers, employees, and investors, companies will uncover which topics are material. The outcomes of these materiality assessments determine which components of the CSRD a company must include in their reporting, ensuring companies focus on the topics that matter both to the organisation and society at large.

Question 3

What climate change reporting is mandatory?

Accepted Answer

No matter what a company’s materiality assessment says, the CSRD establishes a baseline of reporting for all companies. That includes the full climate requirements, which go further than the TCFD framework, which they are based on.  They include measurement and disclosure of a company’s  full scope 1-3 emissions footprint, an assessment of climate risks, and policies related to climate change mitigation and adoption.

Question 4

Will companies be required to get assurance?

Accepted Answer

To prevent greenwashing and bring sustainability reporting up to the level of rigour required for financial reporting, the CSRD introduces an audit assurance requirement for its reporting – beginning with limited assurance in 2026, followed by reasonable assurance two years later. The assurance requirement will be a new motion for many companies who will need high levels of data accuracy, completeness, and controls.

Question 5

How do the CSRD and EU Taxonomy connect?

Accepted Answer

On the policy front, the CSRD is closely linked to the EU Taxonomy, a classification system that establishes a list of environmentally sustainable economic activities.Companies within scope of the CSRD will also have to comply with the EU Taxonomy. Reporting on both regulations will be in companies’ annual sustainability reports.

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