Vlad Kalashnikov is Head of Products at CFOUR Comply, an inline XBRL (iXBRL) conversion software. Through direct involvement in customer onboarding, he works closely with teams navigating these requirements, giving him firsthand insight into the operational realities firms face with tagging and the challenges corporate service providers encounter delivering these services at scale.
The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose environmental, social, and governance (ESG) information aligned with the European Sustainability Reporting Standards (ESRS). Following Omnibus I (Directive EU 2026/470, published 26 February 2026, in force 18 March 2026), CSRD scope was substantially narrowed to companies with over 1,000 employees AND over €450m turnover. Wave 1 companies (previously under NFRD) reporting on 2024 data were granted a transition exemption. CSRD requires application of double materiality, disclosing both how sustainability issues affect the business financially and how business activities affect the environment and society. Reports must be submitted with digital tagging in iXBRL format. The EU Taxonomy alignment is also required for covered entities.
Background and Purpose of CSRD
The CSRD evolves from the previous Non-Financial Reporting Directive (NFRD), addressing significant gaps in non-financial reporting. It was introduced to ensure that companies disclose not only their financial performance but also how their operations impact society and the environment. This directive supports the EU Green Deal’s ambition of creating a sustainable economy, driving businesses to reflect sustainability as a core part of their strategy.
Double Materiality Under CSRD
Double materiality is the reporting principle at the centre of CSRD. It requires a company to assess its sustainability topics from two directions. Financial materiality covers how sustainability risks and opportunities affect the company’s own financial position, performance, and cash flows. Impact materiality covers how the company’s operations and value chain affect people and the environment, independent of any financial consequence. A topic is material if it meets either test, so a company must report on it even where only one of the two directions applies.
Under Omnibus I, the assurance standard for these disclosures moved from reasonable assurance to limited assurance, which reduces the scope of audit procedures required but does not remove the assurance obligation. Companies still need to run a formal double materiality assessment and be able to show the reasoning behind which topics they included or excluded.
Is Sustainability Reporting Mandatory?
Yes, sustainability reporting is mandatory for companies meeting certain criteria under the CSRD. The directive applies to large EU companies and certain non-EU companies with significant operations in the EU. This mandatory reporting is aimed at improving transparency and ensuring companies disclose their environmental, social, and governance (ESG) impacts to meet the EU’s sustainability objectives.
EU Sustainability Reporting Standards
The CSRD requires companies to align their reporting with the European Sustainability Reporting Standards (ESRS). These standards provide clear guidelines on what information businesses must disclose, ensuring consistency and comparability across industries. The ESRS covers a wide range of topics, including climate-related risks, governance practices, and social impact, helping businesses align their reporting with the EU Taxonomy and other global sustainability frameworks.
Who Does CSRD Apply To?
CSRD applies to large EU companies and certain non-EU companies with significant EU operations. Initially, the directive was expected to cover around 50,000 companies. Following Omnibus I (Directive (EU) 2026/470, published 26 February 2026, in force 18 March 2026), the scope was narrowed to companies with more than 1,000 employees and more than €450 million in turnover, reducing the in-scope population to around 6,000 entities.
Wave 1 companies, those already reporting under the NFRD from 2024 data, are permitted a transition exemption and may skip CSRD filings for 2025 and 2026.
For the full reporting schedule by company type, see our CSRD Timeline: Who, When, and What Companies Should Report?
What Are the CSRD Reporting Requirements?
The CSRD brings robust reporting requirements for businesses to follow. A key aspect is the concept of double materiality.
- Financial materiality. Disclosing how sustainability issues impact the business financially.
- Impact materiality. Explaining how a company’s activities affect the environment and society.
These disclosures must align with the European Sustainability Reporting Standards (ESRS) and undergo external assurance to verify their accuracy. Under Omnibus I, the assurance standard has moved from reasonable assurance to limited assurance. Companies are also required to use digital tagging, such as iXBRL, to make the data more accessible and easier to track. CFOUR Comply supports iXBRL software for CSRD reporting, so digital tagging fits directly into your existing reporting workflow.
Recent Revision of CSRD Requirements: Omnibus I
The European Commission’s Omnibus I package introduced significant changes:
- Reduced scope. The number of companies required to comply with CSRD has been cut by approximately 80%, focused on larger entities with more than 1,000 employees and more than €450 million in turnover. This reduces the compliance burden for SMEs and mid-sized companies.
- Simplified reporting. The overhaul of sector-specific ESG standards and the restructuring of reporting templates eases the reporting process for companies that remain in scope.
- Extended timelines. Reporting deadlines for Wave 2 and Wave 3 companies have been pushed back, giving businesses more time to refine their data collection and tagging processes.
- Supply chain simplification. Supply chain reporting now focuses on direct partners only, unless significant risks are identified further down the chain.
- Simplified assurance rules. The assurance level has shifted from reasonable to limited assurance, reducing the scrutiny and cost associated with sustainability disclosures while maintaining accountability.
- Technical criteria adjustments. The “do no significant harm” criteria, particularly for chemical assessments, have been relaxed.
Challenges Companies Face in CSRD Compliance
Meeting CSRD requirements presents several challenges:
- Complex data collection. Gathering and managing ESG data across an entire supply chain is resource intensive.
- Double materiality. Fully understanding and applying this concept can be difficult for many businesses.
- Alignment with other frameworks. Many companies must align their reporting with other EU frameworks, such as the EU Taxonomy or Task Force on Climate-Related Financial Disclosures (TCFD).
- Building internal expertise. Embedding sustainability expertise within organisations is necessary for effective implementation.
How CSRD Connects to the EU Taxonomy
The EU Taxonomy is a classification system that sets out which economic activities count as environmentally sustainable, based on technical screening criteria across six environmental objectives, including climate change mitigation and the transition to a circular economy. Companies in scope of CSRD are required to report the proportion of their turnover, capital expenditure, and operating expenditure that is Taxonomy-eligible and Taxonomy-aligned.
This is a separate disclosure obligation from the ESRS-based sustainability statement, but the two sit inside the same annual report and the same digital tagging submission. For a full breakdown of how the classification system works, see our guide to what the EU Taxonomy covers.
Steps to Prepare for CSRD Compliance
To tackle these challenges, businesses should consider the following steps:
- Conduct a gap analysis. Identify areas where current reporting falls short of CSRD requirements.
- Set up ESG data collection systems. Establish robust processes for ESG data gathering across your organisation and supply chain.
- Integrate CSRD into business strategy. Ensure that sustainability goals are embedded in management reporting and overall business strategy.
The Role of Technology in CSRD Reporting
Technology plays a pivotal role in easing the CSRD compliance journey. Digital solutions can help automate data collection and reporting. CFOUR Comply handles digital tagging through iXBRL, covering CSRD submission requirements end to end. Pairing this with a dedicated ESG data software solutions like Biagio can further support businesses in tracking and reporting their sustainability efforts.
CSRD Implementation Timeline
CSRD implementation occurs in three waves, with Omnibus I (in force 18 March 2026) substantially revising the original scope and deadlines.
It is important to note that earlier guidance suggested large EU companies would begin reporting in 2026. Following Omnibus I, this requirement has been postponed to 2028, based on 2027 fiscal year data. Listed SMEs, previously expected to comply from 2027 (2026 fiscal year), have been removed from CSRD scope entirely, though they may report voluntarily under the VSME standard.
Prepare for the Corporate Sustainability Reporting Directive
The CSRD marks a significant shift in sustainability reporting and requires businesses to be proactive in aligning their strategies with EU standards. Early preparation can help companies stay ahead of the curve and ensure long-term success.
Start your CSRD compliance process with CFOUR Comply to automate digital reporting and ensure the accuracy of your reports.
FAQ - What is CSRD (Corporate Sustainability Reporting Directive) Reporting?
- What is CSRD?
CSRD (Corporate Sustainability Reporting Directive) is an EU directive requiring companies to disclose environmental, social, and governance (ESG) information aligned with the European Sustainability Reporting Standards (ESRS). It builds on the previous Non-Financial Reporting Directive (NFRD) and requires reports to include digital tagging in iXBRL format.
- Who must comply with CSRD after Omnibus I?
Companies with more than 1,000 employees and more than €450 million in turnover fall under CSRD following Omnibus I. This narrowed the original scope of around 50,000 companies to roughly 6,000 entities.
- What is double materiality under CSRD?
Double materiality means assessing sustainability topics from two angles, how they affect the company financially, and how the company’s activities affect people and the environment. A topic must be reported if it is material under either test.
- What changed under Omnibus I?
Omnibus I reduced the number of companies in scope by around 80%, simplified sector-specific ESG standards, extended reporting deadlines for Wave 2 and Wave 3 companies, narrowed supply chain reporting to direct partners in most cases, and lowered the assurance standard from reasonable to limited.
- What does CSRD stand for?
CSRD stands for the Corporate Sustainability Reporting Directive, the EU law requiring in-scope companies to disclose ESG information aligned with the European Sustainability Reporting Standards.
- Does CSRD require EU Taxonomy reporting?
presentYes. Companies in scope of CSRD must also report the proportion of turnover, capital expenditure, and operating expenditure aligned with the EU Taxonomy, alongside their ESRS-based sustainability statement.
