CSRD (Corporate Sustainability Reporting Directive)
Definition
The Corporate Sustainability Reporting Directive (CSRD) is EU legislation that significantly expands mandatory sustainability reporting requirements for companies operating in Europe. It introduces the European Sustainability Reporting Standards (ESRS) and requires double materiality assessments, third-party assurance, and digital tagging of reports. The CSRD applies to approximately 50,000 companies, including non-EU companies with significant EU operations.
Why It Matters
CSRD represents the most comprehensive mandatory sustainability reporting regime in the world and is setting the benchmark for other jurisdictions. Companies must prepare robust data collection systems and governance processes to meet its detailed requirements.
Related Terms
Double Materiality
Double materiality is the principle that companies should report on sustainability matters from two perspectives: how ESG issues affect the company's financial performance (financial materiality) and how the company's activities impact people and the environment (impact materiality). This concept is central to the EU's CSRD and European Sustainability Reporting Standards. It represents a broader view than the single financial materiality approach used by ISSB.
EU Taxonomy
The EU Taxonomy is a classification system establishing a list of environmentally sustainable economic activities based on science-based technical screening criteria. It provides a common language for investors, companies, and policymakers to determine which activities can be considered genuinely sustainable. Activities must substantially contribute to at least one of six environmental objectives without significantly harming the others.
GRI (Global Reporting Initiative)
The Global Reporting Initiative (GRI) is an independent international organisation that provides the world's most widely used standards for sustainability reporting. GRI Standards help organisations report on their economic, environmental, and social impacts in a structured, comparable way. The framework emphasises stakeholder inclusiveness and materiality.
ISSB (International Sustainability Standards Board)
The International Sustainability Standards Board (ISSB) was established by the IFRS Foundation to develop a global baseline of sustainability disclosure standards for the capital markets. Its inaugural standards, IFRS S1 (General Requirements) and IFRS S2 (Climate-related Disclosures), consolidate and build upon TCFD, SASB, and other frameworks. The ISSB aims to create consistency and comparability in sustainability reporting worldwide.