CSRD: What It Means for ESG Reporting

The Corporate Sustainability Reporting Directive (CSRD) is reshaping the landscape of ESG reporting in the European Union (EU). Here’s a practical breakdown of what this means for companies, the challenges they face, and the strategies to achieve compliance.

What is CSRD and Why it Matters

The CSRD replaces the old Non-Financial Reporting Directive (NFRD) by expanding the number of companies required to report on their ESG performance.

Starting in 2025, a much larger group of companies will need to prepare detailed ESG reports.

Why it is important:

This isn’t just another compliance checkbox, but a move toward greater transparency and accountability in business practices. Companies must now invest in robust ESG data collection, analysis, and reporting systems to meet higher standards, strengthening both sustainability practices and stakeholder trust.

Who will be affected:

Under the old NFRD, about 11,000 companies were covered. With the CSRD, nearly 50,000 companies in the EU will need to comply, with around 13,000 of those in Germany alone.

Companies are selected based on employee count, turnover, and balance sheet totals.

This means that not only large multinationals but also many mid-sized companies will need to integrate ESG reporting into their annual processes.

Key Challenges in ESG Reporting

1. Data collection and management - companies must track everything from carbon emissions and energy usage to diversity statistics and social impact. Many still use spreadsheets, leading to data silos and inaccuracies that complicate the reporting process.
2. Resource allocation - for mid-sized companies, preparing a CSRD-compliant report can require a dedicated full-time employee or even a team. External auditors, who are now required for ESG data assurance, may lack sufficient experience with these new metrics.
3. Regulatory ambiguities - with the European Sustainability Reporting Standards (ESRS) subject to updates, companies face uncertainty about the final requirements. This uncertainty can slow down investments in new ESG systems and strategies.

Strategies and Solutions

Companies have several paths to navigate these challenges.

1. Build internal capabilities - create a dedicated ESG team that understands both regulatory requirements and key sustainability issues. However, this approach can be resource-intensive and may require a steep learning curve for companies new to sustainability reporting.
2. Hire external ESG reporting consultants - consultants can guide the data collection process, implement best practices, and ensure the final report meets all regulatory standards. The benefits of getting an external consultant are the following - access to specialized expertise, faster time-to-compliance, and reduced internal burden.
3. Use modern technology and tools - specialized ESG reporting software can integrate data from multiple sources, automate calculations, and offer real-time dashboards. They also help to reduce manual errors and ensure that data is consistent and audit-ready.

Many companies find that combining external consultants with software provides the most comprehensive and efficient reporting process.

Recommendations and Future Outlook

1. Start early - assess your current ESG data management processes and identify any gaps. Consider partnerships with external experts for immediate support during this transition.
2. Use modern technologies - look into integrating AI and data analytics to automate data collection, flag inconsistencies, and gain deeper insights into ESG performance. Investing in scalable, flexible ESG systems today can prepare your company for future regulatory changes and give you a competitive edge in sustainability.
3. Form partnerships - collaborate with ESG software providers or consulting firms to build a resilient reporting framework that can adapt to ongoing changes in the regulatory landscape.

Final Thoughts

The CSRD marks a turning point for ESG reporting in the EU. With a dramatic expansion in the number of companies required to report and a heightened focus on detailed, verified ESG data, the new regulation presents both challenges and opportunities.

Whether you build internal expertise, hire external consultants, or use advanced technology, the time to act is now.

For companies looking for expert guidance, Centida offers specialized ESG reporting services designed to help organizations navigate the complexities of the CSRD. Centida’s comprehensive solutions cover everything from data collection and analysis to assurance and compliance.

Embracing this regulatory change not only ensures compliance, but also paves the way for stronger, more transparent ESG practices that drive long-term corporate success.