CSRD: who is concerned?

Entered into force in January 2023, The European CSRD directive, or Corporate Sustainability Reporting Directive, is a directive that provides a methodology on how businesses should report their extra-financial performance. The aim of this directive is to create a standardized and common language in terms of extra-financial reporting to allow better understanding and better comparability of the non-financial performances of organizations.

What is the context behind the creation of the CSRD?

An update to the Non-Financial Reporting Directive (NFRD) of 2014, it aims to prevent greenwashing, by harmonizing sustainability reporting, while also broadening its scope. In fact, more than 50,000 European companies are expected to be affected by this directive, according to audit and consulting firm Ernst & Young, compared with 11,000 European companies under the NFRD, according to Entreprises Engagées.

This directive is part of the European Green Deal (2019), a roadmap issued by the European Union with the goal of making Europe carbon-neutral by 2050, with an intermediate target of cutting greenhouse gas emissions by 55%, compared with 1990 levels, by 2030.

Since the investments linked to this Green Deal cannot be fully financed by public authorities, private investment will be essential to reaching these goals.

To that end, two other regulations play a key role:

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CSRD: who is concerned?

The CSRD (Corporate Sustainability Reporting Directive) requires certain companies to publish detailed information on their environmental, social and governance (ESG) impact. It replaces and expands the obligations of the previous directive, the NFRD (Non-Financial Reporting Directive).

While the NFRD only applied to large companies with more than 500 employees, the CSRD, since the Omnibus package, applies to companies that exceed the following two cumulative thresholds:

To put it simply, companies concerned by the CSRD are:

1. Large companies and parent undertakings: those with more than 1,000 employees and generating more than €450 million in net turnover (both cumulative thresholds).
2. Non-EU companies with significant activity in the EU: concerned once they generate more than €450 million in net turnover within the Union, via a subsidiary or branch whose net turnover exceeds €200 million (first application for fiscal year 2028).
3. Certain subsidiaries of international groups: If a parent company is subject to the CSRD, its European subsidiaries may also have to comply with the reporting obligations.

Companies excluded from the CSRD

Certain companies are excluded from the CSRD, including:

1. Companies below the thresholds: those that do not reach 1,000 employees and €450 million in net turnover are not subject to the obligation.
2. Micro-enterprises: Very small companies with fewer than 10 employees, annual turnover below €2 million, or a balance sheet total below €2 million.
3. Companies not listed on a stock exchange that do not meet the criteria mentioned (size, turnover, balance sheet) are also exempt.
4. Non-profit organizations.
5. Public entities.

Listed SMEs, briefly targeted, were removed from the mandatory scope by the Omnibus package; they can use the voluntary VSME standard.

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The CSRD timeline

The CSRD (Corporate Sustainability Reporting Directive) timeline provides for a phased rollout, depending on company size and type.

The largest companies must comply first, while listed SMEs have more time to prepare.

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The main steps of a CSRD project:

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The cost of the CSRD

Today, it is difficult to know the exact cost of a CSRD project; what we do know is that it should include:

• Reporting system updates: Companies will need to adapt their internal systems to collect and process ESG (environmental, social and governance) data. This may require investment in new software or management tools.
• Advisory and expertise: Many companies will need to call on external consultants or compliance experts to help them understand and meet CSRD requirements, which comes at a cost.
• Audit and verification: The CSRD requires external verification of sustainability reports. Using auditors to validate the data can lead to additional fees.
• Internal training: Teams will need to be trained to understand and apply the new standards, which can involve costs in terms of time and human resources.
• Human resources: Some companies will need to recruit or train teams dedicated to sustainability reporting to ensure long-term compliance.

The cost of complying with the CSRD varies depending on the size and structure of each organization. According to the French Cour des Comptes, preparation costs for the directive could range between €40,000 and €320,000, while annual audit costs could range between €67,000 and €540,000.

A study by the C3D found that, in terms of human resources, 40% of companies surveyed estimate that the additional workload generated by the CSRD is equivalent to 1 full-time equivalent (FTE), while 26% consider it would represent 2 FTEs.

Finally, 75% of companies estimate their CSRD implementation budget at between €1 and €200,000, but 11% report a budget above €600,000, highlighting the disparities depending on the complexity of the organization and its needs.

Penalties for non-compliance

In the event of non-compliance with the CSRD, companies face several types of penalties, which vary from one EU country to another, as each member state applies its own rules and sanctions. Here are the main possible penalties:

• Financial penalties: Companies can be fined. The amount of these fines depends on the severity of the breach and may be proportional to the size of the company.
• Administrative penalties: This can include official warnings or orders for immediate compliance.
• Reputational damage: Failing to comply with the CSRD can harm a company's image. Stakeholders (investors, customers, partners) could lose trust, especially as sustainability becomes a major decision-making criterion.
• Restrictions on access to financial markets: An increasing number of investors require transparent and reliable sustainability information before making investment decisions.

In France, the transposition law (Law No. 2025-391 of 30 April 2025) removed the criminal penalties initially envisaged. Penalties now fall under the national regime, based on the principle of penalties that are "effective, proportionate and dissuasive" (administrative penalties, injunctions, publication of the decision).

The sustainability report must be verified by:

• A statutory auditor,
• Or an independent third-party body (ITPB), accredited by COFRAC (the French Accreditation Committee).

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What content must be disclosed for the CSRD?

‍Full reporting

Full reporting must contain all of the information below.

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1. A brief description of the business model and strategy of the company, including in particular:

• The level of resilience of both with regard to risks linked to sustainability matters
• The opportunities related to sustainability matters for the company
• The plans to ensure that the business model and strategy are compatible with the transition to a sustainable economy, in line with the Paris Agreement (implying the goal of climate neutrality by 2050)
• How the business model and company strategy account for the interests of stakeholders and the company's impacts on sustainability matters
• How the company has implemented its strategy with regard to sustainability matters

2. A description of the role of the administrative, management and supervisory bodies with regard to sustainability matters, as well as a description of their expertise and skills in fulfilling this role, or the opportunities available to them to acquire this expertise or these skills.

3. A description of the company's policies with regard to sustainability matters.

‍4. Information on the existence of incentive schemes linked to sustainability matters offered to members of the administrative, management and supervisory bodies.

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5. A description of the due diligence process implemented by the company regarding sustainability matters and, where applicable, in accordance with EU requirements for companies to carry out such a process.

6. A description of the main actual or potential adverse impacts connected with the company's own operations and its value chain, including its products and services, its business relationships and its supply chain, of the measures taken to identify and monitor these impacts, and of any other adverse impacts the company is required to identify under other EU requirements mandating a due diligence process.

7. A description of any measures taken to prevent, mitigate, remediate or eliminate the adverse impacts, whether actual or potential, and the outcome achieved in this regard.

8. A description of the main risks related to sustainability matters, including a description of the main dependencies involved and a description of how the company manages these risks.

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9. Indicators relating to the previous points.

• These plans also include the actions implemented and the investment and financial plans

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Simplified reporting

Simplified reporting must contain:

• A brief description of the business model and company strategy.
• A description of the policies with regard to sustainability matters.
• The main actual or potential adverse impacts on sustainability matters, and any measures taken to identify, monitor, prevent, mitigate or remediate them.
• The main risks related to sustainability matters and how the company manages these risks.
• The key indicators needed for the information to be disclosed referred to in the above points.

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Who is concerned by the CSRD — Key Takeaways