EU Corporate Sustainability Reporting Directive (CSRD)

Prepare for CSRD. Build an ESG data foundation that accelerates sustainable business outcomes with SAP Sustainability solutions.
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What is CSRD?

CSRD, the Corporate Sustainability Reporting Directive, modernizes and strengthens the rules concerning the social and environmental information that companies operating in the European Union have to report.

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Using Technology to Illuminate the Path to Sustainability

Trellis and SAP explore how the right technologies can help organizations create a sustainable operating system that supports their business strategies.

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Assessing impacts on people and the environment

CSRD disclosures will ensure that stakeholders have the information they need to assess a company’s impacts on people and the environment, and for investors to assess the financial risks and opportunities arising from those impacts.

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Are you ready for the Corporate Sustainability Reporting Directive (CSRD)?

CSRD, the EU Corporate Sustainability Reporting Directive, is here. For companies with business operations in the EU, learn how SAP can help you understand CSRD compliance and the ESG data needed for disclosures.

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CSRD compliance: AI-powered solutions

Learn how to simplify and go beyond CSRD compliance with AI, September 12.

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Understanding EU CSRD compliance and the ESG data needed for disclosures

The EU Corporate Sustainability Reporting Directive is here. Is your ESG data foundation ready to support the required disclosures and drive sustainability improvements?

CSRD is here

Large public-interest companies in the EU must prepare now to report in 2025 on their ESG performance. Requirements cascade to other business entities in subsequent years.

Prepare your ESG data

To ensure compliant disclosures and process-embedded sustainability, you need to improve ESG data quality and aggregation across operations and supply chains.

Act now

SAP has helped companies master complexity for over 50 years. Today we’re helping companies meet the challenge of complex ESG regulatory landscapes, including CSRD.

Master the challenges of ESG data management for CSRD reporting

Enable trusted CSRD disclosures with SAP Sustainability Control Tower.

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Record. Report. Act.

Record: Actuals instead of averages

Record ESG factors with actual data – not averages – that’s automatically aggregated across systems.

 

Report: Audit-ready sustainability metrics

Report company-specific targets with a solution that supports the largest sustainability ecosystem.

 

Act: Sustainability embedded in business processes

Act on unmet sustainability goals with actionable insights, accurate forecasts, and robust planning.

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Manage EU Taxonomy and ESRS disclosures required under CSRD

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An ESG data foundation built for EU Taxonomy disclosures under CSRD

The EU Taxonomy classifies sustainability disclosures for investors. SAP Sustainability Control Tower lets you track activities in line with the EU Taxonomy, reporting on KPIs for eligibility and alignment.

 

  • Get a holistic view of EU Taxonomy reporting through shared data and KPIs

  •  Kick-start data management and reporting with pre-built, adaptable templates   

  • Simplify compliance by integrating with SAP S/4HANA Cloud

  • Integrate your in-house or partner extensions with APIs 

 

See how SAP Sustainability Control Tower enables reporting in line with EU Taxonomy requirements. 

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Accurate, auditable ESG data to comply with ESRS disclosures for CSRD

SAP Sustainability Control Tower streamlines the preparation of European Sustainability Reporting Standards (ESRS) disclosures required by CSRD.

Retrieve and calculate accurate ESG data

  • Establish a data foundation for CSRD  with integration of SAP solutions like SAP S/4 HANA

  • Directly calculate your GHG emissions and automatically incorporate climate impact into your ESG report

Meet evolving disclosure requirements

  • Digitalize CSRD compliance to meet evolving ESG and financial reporting needs

  • Use a pre-built ESG data model and extend with SAP ecosystem and partner content

Set, track, and achieve sustainability targets

  • Steer ESG performance with granular, trusted data embedded in business processes

  • Achieve ESRS requirements for material KPIs and sustainability

Obtain a limited external assurance

  • Run coherence checks, review and approve data, and track tasks for auditability

  • Prepare for reasonable external assurance

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Test drive SAP Sustainability Control Tower

Explore select capabilities of SAP Sustainability Control Tower with guided tours including EU Taxonomy.

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Test drive SAP Sustainability Footprint Management

Assess your carbon footprint from cradle to gate on a product and corporate level with carbon accounting software from SAP.

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Hear from our customers

SAP customers are using SAP Sustainability Control Tower to master their ESG data management and reporting challenges.

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msg global: Advancing sustainable business operations

Find out how msg global is using SAP Sustainability Control Tower to set targets, monitor progress, and establish robust and auditable sustainability and ESG reporting.

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Frequently asked questions

FAQ

CSRD is the Corporate Sustainability Reporting Directive. Adopted in April 2021 by the European Commission,

 

CSRD modernizes and strengthens the rules concerning the social and environmental information that companies operating in the European Union have to report.

 

CSRD disclosures will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues.  

 

CSRD requirements will first impact large public-interest companies with over 500 employees which need to report in 2025 on 2024 ESG performance. Requirements cascade to small and mid-size enterprises in coming years. Overall, nearly 50,000 companies will need to comply with CSRD, an increase from the 11,000 companies that are subject to the existing sustainability reporting requirements under the Non-Financial Reporting Directive (NFRD).

 

CSRD builds on the foundations of the Global Reporting Initiative (GRI), the Task Force for Climate Related Disclosures (TCFD), and the International Sustainability Standards Board (ISSB) among others.  

The EU Corporate Sustainability Reporting Directive (CSRD) aims to revise and strengthen the existing rules introduced by the Non-Financial Reporting Directive (NFRD), and to bring – over time – sustainability reporting on par with financial reporting. Companies will have to report on how sustainability issues affect their business and the impact of their activities on people and the environment.

Under EU Corporate Sustainability Reporting Directive (CSRD), companies will have to report on how sustainability issues affect their business and the impact of their activities on people and the environment. CSRD disclosure requirements are detailed in the European Sustainability Reporting Standards (ESRS).

The EU Taxonomy is a classification scheme to standardize sustainability/environmental-related disclosures for investor information purposes. The aim of this system is to provide transparency to the EU market on what should be considered sustainable (according to the Taxonomy) so that capital can be reallocated accordingly.

 

The EU Taxonomy is mandatory under CSRD for businesses headquartered in the EU as well as businesses headquartered outside of the EU with significant business in the EU. Implementation began phasing in during 2021 and currently requires holistic assessment and disclosure of risks covering environmental topics but also impact of the company on the environment, so called “double materiality” (social and governance aspects are currently represented only at a high level).

 

The EU Taxonomy defines a general framework for what economic activities qualify as “environmentally sustainable,” based on six objectives: (1) mitigating climate change, (2) adapting to climate change; (3) promoting sustainable use and production of water and marine resources; (4) transitioning to a circular economy; (5) preventing and controlling pollution; and (6) protecting and restoring biodiversity and ecosystems.

 

To qualify as “environmentally sustainable,” organizations need to assess the degree to which their economic activities provide a substantial contribution to at least one of the six environmental objectives, cause “no significant harm” to any of the environmental objectives, comply with robust and science-based technical screening criteria, and comply with minimum social and governance safeguards.

 

The EU Taxonomy specifies industry-specific criteria and key performance indicators (KPIs) related to turnover, capital expenditure (CapEx), and operational expenditure (OpEx) that non-financial undertakings must disclose related to their economic activities. By analyzing these KPIs, companies can determine the percentage of each KPI that aligns with the EU Taxonomy, allowing them to communicate their level of compliance with the taxonomy's criteria.

CSRD disclosure requirements are detailed in the European Sustainability Reporting Standards (ESRS) which cover four areas: (1) overarching standards for general requirements and disclosures; (2) environmental standards covering climate change, pollution, water and marine resources, biodiversity, and resource use and circular economy; (3) social standards covering a company’s own workforce, the workforce in the value chain, affected communities, and consumers and end-users; and (4) governance standards covering business conduct e.g. anti-corruption. These standards are set by the European Financial Reporting Advisory Group (EFRAG) and provide a framework for companies to report reliable and comparable sustainability information.

 

Since CSRD was built on the foundations of the Global Reporting Initiative (GRI), the Task Force for Climate Related Disclosures (TCFD), and the International Sustainability Standards Board (ISSB) among others, ESRS covers the majority of the disclosure requirements under GRI as well as the climate focused regulations ISSB (IFRS S2), SEC, and TCFD. With the broad overlap of ESRS with these other ESG reporting frameworks, companies can leverage a common ESG data management foundation for compliant disclosures to ESRS and other ESG regulations as needed to meet their specific disclosure needs.

The European Sustainability Reporting Standards (ESRS) take a “double materiality” perspective – that is they oblige companies to report both on their impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the company.

The EU Corporate Sustainability Reporting Directive (CSRD) aims to bring – over time – sustainability reporting on a par with financial reporting. The Sustainable Finance Disclosure Regulation (SFDR) aims to prevent greenwashing and to ensure greater transparency to investors on the extent to which financial products account for ESG aspects, invest in sustainable investments, or pursue sustainable objectives. SFDR reporting relies on data from CSRD disclosures (both the European Sustainability Reporting Standards and EU Taxonomy), further driving the need for companies to build a solid foundation of ESG data and sustainability KPIs.

The Task Force on Climate-related Financial Disclosures (TCFD) was created by The Financial Stability Board (FSB) in 2015 to improve and increase reporting of climate-related financial information. Following the release of TCFD’s 2023 Status Report, upon request of the FSB, the TCFD has been disbanded and the FSB asked the IFRS Foundation to take over the monitoring of the progress of companies’ climate-related disclosures. The IFRS Foundation establishes globally accepted accounting and sustainability disclosure standards. Under the IFRS, the International Sustainability Standards Board (ISSB) has developed standards for sustainability disclosures focused on the needs of investors and the financial markets: IFRS S1 covers General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2 covers Climate-related Disclosures which meet the former TCFD recommendations as they are fully incorporated into the ISSB's Standards.

The disclosure requirements of the former TCFD (now covered in ISSB IFRS S2) coincide with the requirements under the EU Corporate Sustainability Reporting Directive (CSRD) detailed in the European Sustainability Reporting Standards (ESRS).

The CSRD impacts various sectors, but industries with significant ESG impacts are particularly affected. These include energy, mining and metals, transportation, industrial manufacturing, retail (food and beverage), mill products (textiles and apparel), utilities, real estate, high tech, and healthcare.

CSRD will start applying between 2024 and 2028, as follows:

  • From January 2024 for companies previously subject to the Non-Financial Reporting Directive (large, listed companies, large banks, and large insurance undertakings – all if they have more than 500 employees), as well as large non-EU listed companies with more than 500 employees; with reports first due in 2025.​

  • From January 2025 for other large companies with more than 250 employees and/or €50 million in turnover and/or €25 million in total assets not presently subject to the NFRD; with reports first due in 2026.

  • From January 2026 for listed SMEs, including non-EU listed SMEs; with reports first due in 2027. (SMEs may opt out until 2028).

  • From January 2028 for non-EU companies that generate more than €150 million per year in the EU and that have in the EU either a branch with a turnover of more than €40 million or a subsidiary that is a large company or a listed SME; with reports first due in 2029.

 

[Note: On 7-February-2024, the European Council and the European Parliament reached a provisional deal on a directive on the time limits for the adoption of sustainability reporting standards for certain sectors and for certain third-country undertakings, amending CSRD. This will give more time for companies to prepare for the sectorial European Sustainability Reporting Standards and for specific standards for large non-EU companies, which will be adopted in June 2026, two years later than the originally scheduled date. The provisional agreement needs to be endorsed and formally adopted by both institutions]

Penalties for noncompliance with CSRD will be established by each EU member country through their legislative frameworks. As one example, the French government introduced penalties for noncompliance with CSRD including fines for various infringements up to €75,000 with the additional threat of five years imprisonment.

Complying with CSRD not only ensures regulatory adherence but also brings business benefits including:

  • Efficiency gains — ESG data provides insights for more efficient and sustainable operations, leading to cost savings from, for instance, energy reduction.

  • Competitive advantage — improved consumer perception from ESG reporting can boost market share, attract talent, and lead to preferential standing in B2B relationships.

  • Financial access — through improved eligibility for sustainable finance sources.

Becoming compliant with CSRD, encompassing ESRS and EU Taxonomy disclosures, involves interrelated actions at the crossroads of corporate data management, strategy, and governance. This poses multiple questions for businesses.

  • ESG data aggregation and validation: how can we improve the quality of data, both from internal operations and across supply chains, to foster trust and auditability.

  • Materiality assessment: which KPIs are material to our operations?

  • Aligning material KPIs with the EU Taxonomy and ESRS: which EU Taxonomy and ESRS criteria are in scope now and what will be future considerations?

  • Target setting: Can leadership align on sustainability goals that go beyond basic regulatory requirements to create competitive advantage, and over what timeframe can they be achieved?

  • Action plan: how will we cascade our targets into our business processes and decision making, and how will we monitor, measure, and report our progress?

  • Monitoring and managing risks: what controls are needed?

  • Timely and public disclosures: how do we demonstrate compliance with the EU Taxonomy and ESRS?

  • Sustainable transformation at scale: ESRS is expecting companies to adopt internal carbon pricing practices and disclose the associated internal policy. How do we deploy such transformation at scale?

ESG data aggregation and validation is a common and daunting challenge. Most companies have not fully integrated their ESG data recording and control functionality into their core financial, procurement, supply chain management, and human resources systems. This financial and non-financial data is often disconnected, stored in spreadsheets, not updated from real-time systems, and not easily shared within the company or with partners such as upstream suppliers or downstream logistics providers. Worse, ESG data is often derived from industry averages which can vary by 30-40% or more from actual values.

 

With climate-related disclosures at the top of the list of environmental factors under CSRD, companies need to tackle both compliance with Scope 1 and 2 emissions (internal), which are generally better understood, as well as Scope 3 emissions (supply chain). Considering that on average 90% of a business’s carbon footprint lies within its supply chain, the inability to track, manage, and gain insights from live data and embed it into core business processes can cripple even the best-intentioned ESG efforts. Worse, it can mislead investors, create compliance issues, and misguide transformation efforts. Unifying ESG data provides significant gains in capabilities and competitive performance.

To record, report and act on their sustainability ambitions and comply with mandatory regulatory disclosures including CSRD, companies need an ESG data management and reporting foundation. The foundation needs to future-proof their ability to keep up with evolving ESG regulations and continually drive sustainable business innovation to meet the expectations of consumers, investors, and regulators for positive environmental and social outcomes. This requires digital tools that go beyond simple dashboards.

 

To achieve long term value from investments in ESG data management and reporting, businesses need cloud solutions that automate the aggregation of accurate, auditable data from both internal operations as well as across supply chains and embed that data back into core business processes. Only through the convergence of sustainability data, cloud ERP, and business AI can enterprises drive continual process optimization and long-term agility to lead in their industries.

At SAP, we believe collaboration is essential for sustainable business success, which is why we have built an ecosystem of strategic consulting partners and advisory firms to provide their expertise, methodologies, and reporting frameworks to help our customers achieve holistic sustainability transformation.

 

Our strategic partners offer sustainability consulting, and their analytics and data management teams have the expertise and experience to assist companies with their materiality assessments, connect and integrate data sources, and report custom KPIs tailored to their specific needs. These services enable organizations to transition from strategy to action in setting and managing sustainability initiatives, including internal data management and external disclosures to CSRD and other ESG reporting frameworks and regulations.

Learn how our partners work with SAP to deliver positive sustainability impact for our mutual customers.

Featured partners

To support your sustainability journey from ESG data management to compliant sustainability disclosures including CSRD, SAP partners offer services that build on SAP Sustainability Control Tower.

See how PwC partners with SAP to enhance CSRD reporting

PwC's "ESG Reporting Manager - CSRD" leverages SAP Sustainability Control Tower to extend ESG reporting and data-driven decision support for client specific needs.

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