Getting ready for the future – CSRD framework explained

The European Union’s Corporate Sustainability Reporting Directive (CSRD) is driving Environmental, Social and Governance (ESG) reporting across every industry. However, there’s another compelling reason to closely examine CSRD: it introduces a completely innovative ESG reporting framework.

  1. What is the Corporate Sustainability Reporting Directive (CSRD)?
  2. What is the scope of SCRD?
  3. Who is impacted and when?
  4. Why a new framework?
  5. What is in it for me?

What is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive (CSRD) serves as the European Commission’s directive for reporting on corporate sustainability matters. Essentially, the EU is urging companies to disclose sustainability risks, opportunities, and management in financial terms. A CSRD report encompasses your company’s approach to various sustainability issues, the financial commitment to mitigate or capitalize on risks and opportunities, and the anticipated outcomes.

What is the scope of CSRD?

CSRD reporting encompasses sustainability comprehensively, addressing all facets of E (environment), S (social), and G (governance). Unlike many other national or market mandates that narrow the scope to disclosures related to climate change and emissions management, CSRD has a broader focus.

In essence, a CSRD report outlines the company’s impact on sustainability throughout the fiscal year, detailing the budget and initiatives for the reporting year and the near future. At the forefront of every CSRD report is the double materiality assessment, analysing how your company influences and is influenced by different sustainability risks.

The various sustainability areas are outlined below, each with its own standard developed by the European Financial Reporting Advisory Group (EFRAG). In total, 12 standards were developed:

  • 2 general ones, also called Cross-Cutting Standards, whose application is the same for every industry. They define the general reporting principles and the CSRD fundamental concepts. These standards are mandatory.
  • 10 topical ones, whose application varies based on the output of the materiality assessment.

Who should report under CSRD and when?

Why a new framework?

CSRD distinguishes itself from other national-level mandates but shares similarities with other prominent ESG reporting frameworks.


CSRD takes inspiration from the TCFD framework.It encompasses your company’s oversight of sustainability issues and risk identification, but the core of the report is notably more action-oriented, emphasizing risk management, mitigation, and opportunity initiatives.

The CSRD Climate Change (E1) section covers all the disclosures recommended in the TCFD guidelines and introduces additional metrics. Notably, ESRS 1, the CSRD standard on General Requirementsmirrors the TCFD architecture. This implies that your CSRD report should go beyond conformity to TCFD and the other national climate disclosures that adhere to the TCFD recommendations.

EU Taxonomy (SFRD) & CSRD

The Sustainable Finance Disclosure Regulation (SFDR) or the EU Taxonomy, pertains to financial sustainable reporting aimed at financial market participants. In essence, SFRD concentrates on any sustainable investments undertaken by your company, and these activities, classified according to the EU Taxonomy, serve as a supplementary report to CSRD.

Under SFRD, your company is required to provide details on every activity contributing to an environmentally or socially sustainable objective. If you’re wondering about these objectives, the Commission has comprehensive guidelines.

The EU Taxonomy delineates all sustainable objectives, specifically the six environmental objectives:

  1. Climate change mitigation
  2. Climate change adaptation
  3. Sustainable use and protection of water
  4. Transition to a circular economy
  5. Pollution management
  6. Protection of biodiversity

Each reported activity must meet the following criteria:

  1. Substantial contribution to one or more objectives.
  2. Avoidance of significant harm to other criteria.
  3. Adherence to the European Union’s minimum safeguards.
  4. Compliance with the technical screening criteria for each objective.

Here’s the curveball: Every reported activity must pass the technical screening criteria, detailed in a 300-page regulation document with a 600-page Annex dedicated to climate change adaptation and mitigation alone. These criteria are based on ISO 14067, the standard for product lifecycle.

GHG Protocol & CSRD

CSRD aligns its scope definitions and calculation guidelines for Green House Gases (GHG) emissions under the E1 – Climate Change standard with several key standards from the GHG Protocol, including:

The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance for companies and other organizations preparing a corporate-level GHG emissions inventory.

The Scope 2 Guidance standardizes how corporations measure emissions from purchased or acquired electricity, steam, heat and cooling (called “scope 2 emissions”).

The Product Life Cycle Accounting and Reporting Standard can be used to understand the full life cycle emissions of a product and focus efforts on the greatest GHG reduction opportunities.)

The Corporate Value Chain (Scope 3) Accounting and Reporting Standard allows companies to assess their entire value chain emissions impact and identify where to focus reduction activities.)

A notable distinction between CSRD and the GHG Protocol pertains to boundary definitions. While the GHG Protocol considers boundaries outside a company’s financial control as encompassing equity share, financial control, and operational control, CSRD solely defines boundaries based on operational control.


The CSRD reporting standards have been crafted, drawing upon the GRI standard, and as per EFRAG’s assertion, they are completely synchronized. Nevertheless, there are two primary enhancements within CSRD:

While GRI focuses solely on impact materiality, double materiality.

While GRI permits the omission of value chain information if unavailable, CSRD mandates value chain reporting and establishes a qualitative standard for data.

What is in it for me?

In summary, CSRD represents more than just another ESG standard; it signifies a transformation that your company must navigate. However, equipped with the appropriate tools and a resilient strategy, your CSRD report can seamlessly integrate into your regular business operations.

🙌 – 4SupplyChain is committed to assisting with ESG reporting!

If you require assistance in navigating your CSRD report and data collection, don’t hesitate to reach out to our team of experts!

The Financial Stability Board (FSB) created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to improve and increase reporting of climate-related financial information.

The EU has put in place a transparency framework, the Sustainable Finance Disclosure Regulation (SFDR). By setting out how financial market participants
have to disclose sustainability information.

The Global Reporting Initiative (known as GRI) is an international independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption.

The European Financial Reporting Advisory Group is a private association established in 2001 with the encouragement of the European Commission to serve the public interest. EFRAG’s mission is to develop and promote European views in a thought leadership role and to ensure that they are properly taken into account in the IASB (International Accounting Standard Board) standard setting process.

reporting company’s impact on the economy, environment and people for the benefit of multiple stakeholders, such as investors, employees, customers, suppliers and local communities.) , CSRD introduces the concept of double materiality.

impact materiality + financial materiality. Financial imateriality =Information on economic value creation at the level of the reporting company for the benefit of investors (shareholders).