Navigating CSRD – The Implementation Timeline

When are you obligated to start reporting under the CSRD? We explain everything you need to know about the phased implementation of this new directive.

The Corporate Sustainability Reporting Directive (CSRD) has heralded a new era in corporate sustainability reporting in the European Union. Officially in effect since January 2023, this landmark directive aims to enhance transparency, encourage sustainability, and bolster corporate responsibility. 

Here’s an overview of the CSRD implementation timeline, with the key dates and details for each phase. 

Phase 1: Large companies subject to NFDR (Reporting fiscal year from January 2024)

Phase one covers organizations already subject to the NFRD, including public interest entities, which are typically large listed EU entities, banks and insurance companies that exceed the following criteria: 250 employees and €50M in revenue or €25M on the balance sheet. 

These companies are obligated to start reporting according to CSRD requirements for the 2024 fiscal year, with the reports to be published in 2025.

Phase 2: Other large companies (Reporting fiscal year from January 2025)

Phase two, the CSRD extends its reach to the next group – large companies, which were not previously subject to the NFDR and meet at least two out of the following three requirements:

• More than 250 employees.
• More than €50 million EUR in turnover.
• More than €25 million EUR in total assets.

Companies in this phase are required to start reporting according to CSRD requirements in 2025, with the reports to be published in 2026.

Phase 3: Wider inclusivity (Reporting fiscal year from January 2026)

Phase three will cover small and medium-sized enterprises (SMEs) listed on EU-regulated markets if they exceeded at least two of these thresholds: 

• More than 10 employees.
• More than €900,000 in net turnover. 
• More than €450,000 in total assets.

It's important to note that companies with less than 10 employees or below 2 million EUR were will not be covered by the CSRD. SMEs and other small and non-complex institutions will be given until the 1st of January 2028 to opt into the reporting rules, providing a buffer for adjustment.

Phase 4: Expanding Beyond EU Borders (Reporting fiscal year from January 2028)

Phase four of CSRD implementation, which will begin  on January 1, 2028, will mark a significant expansion of the directive's coverage. From this point onwards, CSRD will be applied to companies headquartered outside the EU that met two key requirements:

• A net turnover exceeding €40 million in the EU.
• At least one subsidiary or branch in the EU.
• This phase aims to ensure that global firms operating in the European Union are held to the same CSRD standards as EU-based companies.

The Future of Reporting Standards

The EU Sustainability Reporting Standards (ESRS) are a crucial component of the CSRD and are mandatory for companies which fall within its scope. Developed by the European Financial Reporting Advisory Group (EFRAG), these standards, presented in 12 proposed ESRSs, encompass general principles, cross-cutting disclosure requirements, and specific disclosure requirements for 10 critical Environmental, Social, and Governance (ESG) topics.

One significant development to watch for is the EFRAG's Sustainability Reporting Work Programme for 2024. It includes an ESRS implementation Q&A process to clarify reporting intricacies. Implementation Guidelines (IG), such as those addressing materiality assessment and value chain issues, will be drafted and published based on ongoing Q&A discussions. 

Simplified ESRS for SMEs

In January 2024, the EFRAG is set to release an exposure draft of simplified ESRS for listed SMEs, small banks, and insurance entities, offering a streamlined approach for these entities to meet their sustainability reporting obligations. These initiatives cater to the diversity of businesses and further empower the evolution of sustainability reporting in the EU.