CSRD and ESRS Compliance

The CSRD amended the Accounting Directive so that sustainability reporting applies beyond the earlier non-financial reporting population. The in-scope analysis should identify the legal entity or group, whether it is a large undertaking, listed SME that is not a micro-undertaking, public-interest entity, parent undertaking, subsidiary, branch, issuer, credit institution, insurance undertaking, or third-country group case, and whether any group-level reporting exemption is available.

The reporting perimeter cannot be copied from a policy template. ESRS 1 says the sustainability statement is for the same reporting undertaking as the financial statements, and then extends the information to material impacts, risks, and opportunities connected through direct and indirect business relationships in the upstream and downstream value chain.

ESRS compliance begins with double materiality, not with a fixed list of sustainability topics. The undertaking must identify impacts, risks, and opportunities, assess impact materiality and financial materiality, and then disclose the ESRS information that is material or otherwise required irrespective of the materiality outcome.

A defensible assessment should preserve the criteria used, the stakeholder and source inputs considered, the thresholds applied, and the link from each material impact, risk, or opportunity to the relevant ESRS disclosure requirements. Climate change needs particular care because ESRS requires a detailed explanation if the undertaking concludes that climate change is not material and omits all ESRS E1 disclosures.

ESRS value-chain reporting is not a request to document every supplier or customer. The sustainability statement must include material upstream and downstream value-chain information where needed to understand material impacts, risks, and opportunities. Different matters can be material in different parts of the value chain.

Where value-chain data is incomplete, the CSRD text requires the undertaking, during the first three years of application of the national measures, to explain the efforts made to obtain the information, why it could not be obtained, and the plans to obtain it in the future. That explanation should be tied to a real data-collection log rather than a boilerplate disclaimer.

CSRD compliance includes assurance over sustainability reporting. The amended audit rules require an assurance opinion, initially on a limited-assurance basis, covering compliance with the Directive, the ESRS standards, the process used to identify reported information, the electronic markup requirement, and Article 8 Taxonomy reporting where applicable.

The evidence pack should be designed for review before the sustainability statement is drafted. Assurance will be difficult if materiality judgments, value-chain estimates, source systems, controls, and management approvals are kept in separate tools with no stable version history.

CSRD amended the Accounting Directive so in-scope undertakings prepare the management report in the electronic reporting format specified by the ESEF rules and mark up sustainability reporting, including Article 8 Taxonomy disclosures, in accordance with that format. Digital tagging is therefore part of the compliance design, not a final publishing task.

EFRAG's ESRS Set 1 XBRL taxonomy material explains that ESMA defines the tagging rules for digital reporting under ESRS Set 1, with the final rules to be adopted through an amendment to the ESEF Regulation. Until final tagging rules apply, preparers can still make the human-readable sustainability statement easier to digitalise by structuring disclosures around separable ESRS datapoints and avoiding vague narrative blocks.

A CSRD compliance file should remain usable after the annual report is published. It should explain what changed since the prior report, which materiality judgments or value-chain estimates are likely to be challenged, which data controls failed or required manual adjustment, and which ESRS disclosures need earlier collection in the next cycle.

Do not include EU-wide penalty amounts or enforcement guarantees unless the source material for the relevant Member State supports them. CSRD compliance is implemented through national law and assurance, publication, and filing controls; unsupported penalty figures or generic statements can make the page less accurate.