Policy Briefing — EU Council Adopts CSRD
Council adoption of the CSRD triggers phased ESRS reporting from 2024, forcing companies to operationalize double materiality, data governance, and assurance-ready sustainability statements.
Executive briefing: On the Council of the European Union gave final approval to the Corporate Sustainability Reporting Directive (CSRD), amending the Accounting Directive (2013/34/EU) and expanding mandatory sustainability reporting to roughly 50,000 companies. The law introduces European Sustainability Reporting Standards (ESRS), phased application dates beginning with financial years starting , and mandatory limited assurance over sustainability information. Boards, audit committees, CFOs, and sustainability leaders must orchestrate cross-functional programs that integrate data governance, control testing, and stakeholder engagement to deliver investor-grade sustainability statements.
The CSRD applies to EU large undertakings (meeting two of: >250 employees, €40 million net turnover, €20 million total assets), EU-listed SMEs (with a transition option until 2028), and non-EU companies with significant EU revenues (€150 million) accompanied by an EU subsidiary or branch. Public-interest entities (PIEs) already subject to the Non-Financial Reporting Directive (NFRD) will report using CSRD rules for FY2024, other large EU companies for FY2025, listed SMEs for FY2026 (opt-out until FY2028), and non-EU companies for FY2028. Companies must publish sustainability statements in their management reports, digitally tag disclosures, and follow double materiality assessments covering both impacts and financial risks.
Materiality assessment and strategy integration
Organizations should refresh double materiality assessments to align with ESRS requirements. This involves engaging stakeholders—employees, investors, suppliers, communities—and evaluating sustainability matters from both impact and financial perspectives. Document methodologies, scoring models, thresholds, and approval processes. Link material topics to governance structures, strategy objectives, and risk management frameworks. Boards should oversee the materiality process, ensure alignment with enterprise risk management (ERM), and integrate outputs into capital allocation, product development, and supply chain decisions.
CSRD demands disclosure of transition plans for climate change, adaptation strategies, and resilience analyses. Companies must align climate targets with the Paris Agreement, describe decarbonization levers, and explain progress toward science-based targets. Integrate climate scenarios into strategic planning and stress testing, leveraging existing frameworks (TCFD, ISSB S2) to drive consistency. Document dependencies on nature, human rights considerations, and social factors across value chains.
Data architecture and control environment
Delivering CSRD-compliant reporting requires robust data governance. Map data sources for greenhouse gas emissions, energy consumption, water usage, workforce metrics, and supply chain impacts. Establish data owners, data quality rules, and data lineage documentation. Implement automated data pipelines and workflow tools that capture supporting evidence, approvals, and audit trails. Align controls with COSO Internal Control–Integrated Framework, tailoring control activities to sustainability metrics (e.g., automated validation of emission factors, reconciliations of supplier data, user access reviews for ESG platforms).
Finance and sustainability teams must collaborate to integrate non-financial data into consolidation systems. Evaluate ESG software solutions capable of supporting ESRS data models, XBRL tagging, and scenario analysis. Where spreadsheets remain, implement version control, change management, and segregation of duties. Consider adopting master data management (MDM) practices to standardize entity identifiers, facility codes, and supplier references used across financial and sustainability reporting.
Assurance readiness and audit coordination
CSRD requires limited assurance from statutory auditors or accredited assurance providers starting with initial reporting cohorts. Companies should engage audit firms early to agree on scope, evidence expectations, and control testing. Conduct readiness assessments evaluating documentation, sample trails, and control design. Pilot assurance procedures on high-risk metrics (Scope 1 and Scope 2 emissions, employee diversity, health and safety). Internal audit can perform pre-assurance reviews, benchmarking controls against assurance standards such as ISAE 3000 and upcoming EFRAG assurance guidance.
Audit committees should update charters to include oversight of sustainability reporting, risk management, and assurance. Establish standing agendas covering CSRD program status, data quality indicators, and remediation of identified deficiencies. Ensure independence considerations are addressed when engaging the statutory auditor for sustainability assurance in addition to financial audits.
Value chain engagement and supplier data controls
ESRS require disclosure of upstream and downstream impacts, including Scope 3 greenhouse gas emissions, social matters, and human rights due diligence. Companies must map value chains, identify priority suppliers, and implement data collection processes. Develop supplier engagement programs that communicate data requirements, provide training, and integrate contractual clauses covering sustainability data accuracy. Leverage digital supplier portals to collect quantitative metrics, questionnaires, and supporting documentation. Establish validation routines to detect anomalies and require attestation from suppliers’ senior management.
Coordinate CSRD efforts with the Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy reporting to streamline data collection. Align supplier assessments with human rights frameworks, conflict minerals requirements, and ESG ratings to avoid duplicate requests. Track response rates and data quality; escalate persistent gaps to procurement leadership and risk committees.
Digital reporting and taxonomy alignment
CSRD mandates digital tagging of sustainability statements using the European Single Electronic Format (ESEF) and the forthcoming ESRS XBRL taxonomy. Technology teams must ensure consolidation and reporting systems support taxonomy mapping, validation, and inline XBRL generation. Update disclosure controls to include XBRL tagging reviews, validation of dimensional tagging, and reconciliation between human-readable and tagged data. Coordinate with investor relations to ensure digital reports meet usability expectations and integrate with ESG data aggregators.
Monitor developments from EFRAG regarding sector-specific ESRS and data points. Establish regulatory watch processes to capture updates, Q&As, and guidance on proportionality for SMEs. Participation in industry forums can provide benchmarking on disclosure practices and emerging metrics.
Outcome testing, metrics, and program management
Program management offices should implement detailed roadmaps covering policy updates, system enhancements, data collection cycles, and assurance milestones. Track key performance indicators such as percentage of ESRS data points with defined owners, number of controls tested without exceptions, and status of supplier data coverage. Use maturity assessments to evaluate progress across governance, data, technology, and culture.
Conduct dry runs or parallel reporting exercises ahead of statutory deadlines. These rehearsals should include end-to-end data collection, consolidation, tagging, and review. Capture lessons learned, remediate deficiencies, and update training materials. Internal audit should review the CSRD program annually, focusing on risk management, control design, and compliance with implementation timelines.
Stakeholder communications and culture
Transparent communication is vital. Provide regular updates to boards, investors, employees, and regulators on CSRD progress. Align messaging with broader sustainability commitments, demonstrating how CSRD data supports strategic initiatives, capital allocation, and stakeholder value. Develop training for finance, sustainability, procurement, and IT teams covering ESRS requirements, data responsibilities, and assurance expectations. Foster a culture of accountability where data owners understand their roles and escalation pathways.
By embedding CSRD requirements into governance, data management, and assurance processes, companies can deliver credible sustainability disclosures, meet regulatory deadlines, and strengthen stakeholder trust.
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