CSRD (Corporate Sustainability Reporting Directive)
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's mandatory sustainability reporting law. It requires companies operating in the EU above certain thresholds to disclose environmental, social, and governance (ESG) information according to the European Sustainability Reporting Standards (ESRS), with third-party assurance.
CSRD dramatically expands the scope of mandatory sustainability reporting in Europe compared to its predecessor, the Non-Financial Reporting Directive (NFRD). Starting with large EU public-interest entities in 2025 (for FY 2024 data), it phases in to cover large companies, listed SMEs, and non-EU companies with significant EU operations by 2028/2029.
The ESRS standards — developed by EFRAG — require detailed disclosures across ten ESG topics including climate change (E1), pollution (E2), water (E3), biodiversity (E4), circular economy (E5), workforce (S1–S4), and governance (G1). Climate disclosures under ESRS E1 require Scope 1, 2, and 3 emissions, transition plans, targets, and climate risk assessments.
CSRD introduces the "double materiality" concept: companies must report both how sustainability issues affect the business (financial materiality) and how the business affects society and the environment (impact materiality). This dual lens is a departure from US frameworks that focus primarily on financial materiality.
Key compliance requirements include machine-readable XBRL tagging, limited assurance (moving to reasonable assurance), and integration with the financial report. Companies that have not historically tracked detailed emissions data face significant data collection challenges, making robust carbon accounting platforms essential for CSRD readiness.
Frequently asked questions
What is the CSRD? +
The CSRD (Corporate Sustainability Reporting Directive) is the EU's mandatory sustainability reporting law requiring covered companies to disclose ESG information under the European Sustainability Reporting Standards (ESRS), with third-party assurance. It applies to large EU companies, listed SMEs, and non-EU companies with significant EU presence.
When does CSRD reporting start? +
CSRD reporting phases in starting with large EU public-interest entities reporting FY 2024 data in 2025. Large EU companies follow in 2026 (FY 2025 data), listed SMEs in 2027 (FY 2026 data), and non-EU companies with significant EU operations in 2028/2029.
What is double materiality under CSRD? +
Double materiality requires companies to report both how sustainability issues affect the business financially (financial materiality) and how the business impacts society and the environment (impact materiality). This dual perspective is a defining feature of CSRD compared to US frameworks.
How does Gravity help with CSRD compliance? +
Gravity provides GHG Protocol-aligned emissions accounting across all three scopes, evidence-linked audit trails, automated data collection from utilities and suppliers, and structured reporting outputs that map to ESRS E1 climate disclosure requirements.
Related terms
ESRS (European Sustainability Reporting Standards)
ESRS are the detailed reporting standards developed by EFRAG that specify what companies must disclose under the EU's CSRD. They cover ten sustainability topics across environmental, social, and governance dimensions, with ESRS E1 (Climate Change) requiring detailed emissions data, transition plans, and climate risk assessments.
Double Materiality
Double materiality is the assessment framework required by the EU's CSRD that evaluates sustainability topics from two perspectives: impact materiality (how the company affects society and the environment) and financial materiality (how sustainability issues affect the company's financial performance, position, and cash flows).
Carbon Accounting
Carbon accounting is the systematic process of measuring, recording, and reporting the greenhouse gas (GHG) emissions produced by an organization, product, or activity. It follows standardized methodologies — most commonly the GHG Protocol — to quantify emissions across Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (value chain) categories, producing an auditable inventory that underpins disclosure, reduction planning, and regulatory compliance.
Scope 3 Emissions
Scope 3 emissions are all indirect greenhouse gas emissions that occur in an organization's value chain — both upstream (suppliers, purchased goods, business travel, employee commuting) and downstream (product use, end-of-life treatment, investments). Scope 3 typically represents 70–90% of a company's total carbon footprint.
CDP (formerly Carbon Disclosure Project)
CDP is a global non-profit organization that operates the world's largest environmental disclosure system. It collects self-reported climate, water, and forest data from thousands of companies, cities, and subnational governments on behalf of investors and purchasers, scoring disclosures from A (leadership) to D– (minimal).
SBTi (Science Based Targets initiative)
The Science Based Targets initiative (SBTi) is a partnership between CDP, WRI, the UN Global Compact, and WWF that defines and validates corporate greenhouse gas reduction targets consistent with the Paris Agreement goal of limiting warming to 1.5°C above pre-industrial levels.