Sustainability reporting is evolving. Here’s what consultants need to know.
Companies operating in the European Union (EU) or doing business with EU entities are facing a major shift in sustainability reporting. The Corporate Sustainability Reporting Directive (CSRD) is now in force, setting new legal requirements for corporate disclosures on environmental, social, and governance (ESG) topics. But complying with CSRD isn’t as simple as following a single directive—companies must also align with the European Sustainability Reporting Standards (ESRS), which define exactly what needs to be reported and how.
For consultants helping clients navigate this complex landscape, it’s essential to understand how CSRD and ESRS work together. While often treated as separate entities, they are in fact two parts of the same regulatory system: CSRD establishes the legal obligation to report, and ESRS provides the framework and technical standards for doing so.
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is a European Union directive that mandates corporate sustainability disclosures. It significantly expands the scope of ESG reporting compared to its predecessor, the Non-Financial Reporting Directive (NFRD), by increasing the number of companies required to report and broadening the scope of information they must disclose.
Key objectives of CSRD:
- Standardize corporate sustainability reporting across the EU
- Increase transparency for investors, regulators, and other stakeholders
- Align financial and sustainability reporting on equal footing
- Ensure disclosures support the EU Green Deal’s climate goals
CSRD applies to a broad range of entities, including large EU-based companies, publicly listed SMEs, and non-EU companies with significant business activities in the EU. Companies covered by CSRD must follow ESRS guidelines to structure their sustainability reports.
What is ESRS?
The European Sustainability Reporting Standards (ESRS) are the detailed reporting standards that make the CSRD’s legal requirements operational. Developed by the European Financial Reporting Advisory Group (EFRAG), these standards ensure that sustainability disclosures are comparable, consistent, and aligned with international ESG frameworks like the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB).
Key functions of ESRS:
- Define specific disclosure requirements for sustainability topics
- Provide technical guidance on how to report ESG data
- Ensure consistency across industries and sectors
- Align with global ESG frameworks to facilitate cross-border compliance
While CSRD mandates reporting, ESRS tells companies exactly what they need to disclose. Without ESRS, CSRD compliance would lack standardization, making it difficult to compare ESG performance across organizations.
How CSRD and ESRS work together
Rather than thinking of CSRD and ESRS as separate or competing standards, it’s better to see them as two complementary elements of the EU’s sustainability reporting framework. CSRD sets the overarching legal requirements, while ESRS provides the structured methodology to meet those requirements.
Regulatory authority
CSRD is legally binding under EU law and determines which companies must report, when they must do so, and at a high level, what kind of sustainability information they must disclose. ESRS, on the other hand, functions as a technical standard, ensuring uniformity and comparability in reporting.
Scope of application
CSRD applies to companies that meet specific size and operational thresholds (e.g., EU-based companies with more than 250 employees or non-EU companies with an annual EU turnover exceeding €150 million). ESRS applies to all companies covered by CSRD, outlining sector-agnostic, sector-specific, and entity-specific reporting requirements.
Reporting requirements
CSRD requires companies to disclose their sustainability performance, governance structures, risk management processes, and environmental and social impacts. ESRS translates these requirements into actionable reporting obligations, detailing how companies must present their ESG data.
Level of detail
CSRD provides high-level principles, but ESRS gets into the details. For example, CSRD requires companies to disclose climate-related risks, but ESRS specifies how to measure, assess, and present these risks, ensuring consistency across different reports.
Implementation timeline and deadlines
CSRD is being phased in over several years, with the first set of disclosures required in 2025 for large companies reporting on the 2024 financial year. ESRS compliance follows the same timeline, ensuring that companies have a standardized framework to meet CSRD obligations.
Alignment with global ESG standards
The ESRS has been designed to align with international sustainability frameworks, including:
- ISSB (International Sustainability Standards Board) – Ensuring consistency with IFRS S1 and S2
- GRI (Global Reporting Initiative) – Supporting double materiality assessments
- TCFD (Task Force on Climate-related Financial Disclosures) – Integrating climate-related risk reporting
This alignment helps companies streamline compliance across multiple jurisdictions and investor requirements.
Challenges and best practices for CSRD/ESRS implementation
While CSRD and ESRS establish a clear framework for sustainability reporting, companies often struggle with implementation. The CSRD is the most rigorous sustainability reporting requirement to date, and many companies are unused to the level of detail and rigor required. In particular, companies tend to struggle with:
- Data collection and management: Companies must gather ESG data from multiple departments and external sources, which can be time-consuming and inconsistent.
- Double materiality assessments: CSRD requires companies to assess both financial materiality (how sustainability issues impact the business) and impact materiality (how the business impacts the environment and society), a complex process that requires in-depth analysis.
- Alignment with existing ESG frameworks: Many companies already report using GRI, TCFD, or ISSB standards and need to ensure CSRD/ESRS compliance without duplicating efforts.
For consultants working with their clients on CSRD compliance, here are a few best practices to keep in mind:
- Establish clear data governance processes: It sounds boring, but heling clients set up structured systems for collecting and verifying sustainability data will save a lot of headaches in the long run.
- Use AI and automation tools like Manifest Climate: Leverage digital solutions to streamline compliance, identify gaps, and reduce manual workload.
- Provide training and stakeholder engagement: Educate internal teams on CSRD/ESRS requirements to ensure company-wide adoption and accurate reporting.
Key reporting dates to know for CSRD/ESRS
Implementation timeline
| Date | Milestone |
| January 2025 | First reports due for large public-interest entities (reporting on FY 2024 data) |
| January 2026 | First reports due for large non-listed companies (based on FY 2025 data) |
| January 2027 | First reports due for listed SMEs begin reporting (with opt-out until 2029) |
| January 2029 | First reports due for non-EU companies meeting EU revenue thresholds (based on FY 2028 data) |
Consultants should make sure that their clients stay ahead of these deadlines and have streamlined data collection, compliance assessments, and reporting systems in place well in advance.
Supercharge your CSRD reporting processes with Manifest Climate
Navigating CSRD and ESRS compliance can be overwhelming, but the right tools can make the process faster, easier, and more accurate. Manifest Climate helps ESG consultants and compliance teams streamline sustainability reporting by leveraging AI-driven insights, automated disclosure gap assessments, and expert-backed recommendations.
With Manifest Climate, consultants can:
- Quickly assess compliance with CSRD and ESRS
- Automate ESG data analysis and reporting
- Ensure consistency and accuracy across sustainability disclosures
Don’t let manual reporting slow down your clients. Book a demo to see how Manifest Climate can simplify sustainability compliance for your firm.
