The Corporate Sustainability Reporting Directive (CSRD) is reshaping sustainability disclosure requirements across the European Union. For consultants advising clients on regulatory compliance, understanding CSRD’s thresholds is critical. These thresholds determine which businesses must comply, the timelines for reporting, and the steps consultants should take to help their clients navigate compliance.
It’s critical that companies operating in the EU — even those that aren’t headquartered in the EU — clearly understand the thresholds for CSRD compliance. Non-compliance carries a number of risks, from reputational to financial. The best thing consultants can do for their clients is spend the time to determine whether or not the company is subject to any CSRD reporting requirements, when they’ll have to comply, and what they’ll need to report on. If you can guide your clients through the early days of CSRD compliance in this way, you can position your firm as a trusted advisor and build a solid foundation for the client relationship.
Have CSRD reporting thresholds changed?
In 2023, the EU updated CSRD thresholds, easing the reporting burden (by about 25%) on smaller enterprises while maintaining strict requirements for larger organizations.
The initial CSRD reporting criteria applied to companies with:
- A balance sheet of €20 million
- A net turnover of over €40 million
- More than 250 employees
The updated thresholds (laid out below) ensure a proportionate approach to compliance. Recent news coming out of the EU suggests the CSRD reporting requirements may change again — this time as part of a merger with other existing EU sustainability reporting initiatives. The new proposal, named the Omnibus Initiative, would see the CSRD potentially simplified and combined with the CSDDD (Corporate Sustainability Due Diligence Directive) and the EU Taxonomy.
CSRD thresholds for large undertakings
A company qualifies as a large undertaking under CSRD if it meets at least two of the following criteria for two consecutive financial years:
Balance sheet
→ Total assets exceeding €25 million.
Turnover
→ Annual net turnover exceeding €50 million.
Employees
→ An average workforce of more than 250 employees during the financial year.
Taken together, these thresholds ensure that companies with significant economic impact are subject to comprehensive ESG reporting standards.
CSRD thresholds for small and medium-sized enterprises (SMEs)
While SMEs are generally subject to fewer reporting requirements, those listed on EU-regulated markets must comply with CSRD. The criteria for SMEs are as follows:
Balance sheet
→ Total assets exceeding €4 million.
Turnover
→ Annual net turnover exceeding €8 million.
Employees
→ An average of 50 or more employees.
EU-listed companies
→ All listed SMEs must comply with CSRD, although reporting requirements will be phased in. Micro-listed SMEs (those with no more than €450,000 on their balance sheet, no more than €900,000 in net turnover, and no more than 10 employees) won’t have to comply.
Non-EU companies exceeding net turnover and location thresholds
Non-EU companies must comply if they generate more than €150 million in net turnover within the EU and meet at least one of the following conditions:
- They serve as the ultimate parent of EU subsidiaries classified as large undertakings or listed SMEs.
- They have an EU branch with a net turnover exceeding €40 million in the previous financial year.
Parent companies of subsidiaries
Parent companies must comply with CSRD if their subsidiaries collectively meet the thresholds, even if the parent itself does not qualify independently.
When do these thresholds apply?
The CSRD reporting obligations are being phased in over several years:
- 2024: Large undertakings already subject to the Non-Financial Reporting Directive (NFRD) begin reporting.
- 2025: All other large undertakings not previously covered by NFRD must start reporting.
- 2026: Listed SMEs and small credit institutions must report.
- 2029: Non-EU companies meeting the thresholds must begin reporting.
Understanding these timelines helps consultants prepare their clients for upcoming compliance requirements.
Steps to determine if a client meets CSRD thresholds
We recommend following this sequence when determining whether your client will be subject to CSRD reporting regulations.
1. Evaluate financial and operational metrics
Start by collecting your client’s financial statements, payroll records, and corporate structure details. Assess whether the client meets two of the three key thresholds: balance sheet total, net turnover, or employee count. For non-EU clients, evaluate their EU-based revenue and presence to determine whether they fall under CSRD requirements. Depending on the client, it may take time to obtain the right data to get a clear picture of their compliance requirements.
2. Map out CSRD compliance timelines
If you know your client will be subject to CSRD reporting, use the phase-in schedule to determine when they will need to start reporting. Some companies will have immediate obligations, while others will have more time to prepare.
Some SMEs may also be able to opt out of reporting for two years, delaying reporting obligations until 2029 if necessary.
Even if your client is not required to report for another few years, we recommend encouraging them to get data collection and reporting systems in place and even publish voluntary CSRD reports (these don’t require external assurance) as a ‘practice run’ for the real thing.
3. Conduct a materiality assessment
Evaluate whether sustainability factors are material to your client’s business. Unlike other sustainability reporting requirements, such as the SEC’s climate disclosure rules, the CSRD requires a focus on “double materiality,” which means organizations must consider the financial implications of their environmental, social, and governance (ESG) risk factors while also considering how the company’s activities affect the environment and relevant communities.
A robust double materiality assessment that includes input from multiple stakeholders and is informed by peer companies will be foundational for setting reporting priorities and compliance strategies.
Your client’s materiality assessment is a critical step in their CSRD compliance journey, as the risk factors identified in the assessment will determine which of the 10 topical CSRD standards the company will be required to report against.
| Disclosure requirements for materiality assessments under CSRD | |
| What’s considered material | Double materiality (financial and impact) (i.e. impact on the environment and business). |
| Processes | Description of how materiality was determined including if any materiality thresholds. Specifically, how the organization implemented materiality assessments and how this is necessary to identify material risks and opportunities reported. |
| Prioritization | Overview of processes to identify, assess, and prioritize, and monitor potential and actual impacts, informed by the undertaking’s due diligence process. |
| Likelihood and magnitude of risk | Disclose how the organization assesses the likelihood, magnitude, and nature of effects of the identified risk and opportunities. |
4. Bring in legal and policy expertise as needed
You may need to involve specialized legal or policy experts to ensure accurate compliance. If your firm doesn’t have in-house legal professionals with deep CSRD knowledge, engaging external experts can help clarify technical reporting requirements and jurisdictional nuances. If you find that a number of your clients are subject to CSRD, it may be worth hiring in-house CSRD experts to lead CSRD compliance for relevant clients.
Manifest Climate helps your clients get CSRD-compliant faster
Helping clients comply with the EU’s new CSRD reporting requirements isn’t easy, and it’s not meant to be. But there are parts of the process—like combing through existing reports and reading through competitor disclosures—that don’t need to be done manually.
That’s where Manifest Climate comes in. We’re an AI-powered ESG compliance tool that helps consultants assess their clients’ compliance with regulations and standards like the CSRD, ISSB, and more.
With Manifest Climate, you can assess your clients’ compliance in less than a tenth of the time a traditional review would take, allowing you to spend more time ensuring the accuracy of a client’s report and guiding them toward more strategic initiatives.
Book a demo to find out how you can accelerate your clients’ CSRD compliance.
