What is the CSRD

Definition

The CSRD (Corporate Sustainability Reporting Directive) is the European Union directive that requires companies to disclose detailed sustainability information following the European Sustainability Reporting Standards (ESRS), developed by EFRAG. It replaced the earlier Non-Financial Reporting Directive (NFRD), expanding both the number of companies in scope and the depth of disclosure required. The reported data must be independently assured, placing sustainability reporting on a footing closer to financial reporting.

How the CSRD works in practice

The directive introduces the concept of double materiality. A company must report not only how sustainability issues (climate change, labor practices, biodiversity loss) affect its financial performance, but also how its own operations affect people and the environment. This is a departure from frameworks that look at only one direction of impact.

The ESRS are organised into topical standards covering environmental, social and governance subjects. Each standard specifies the datapoints a company must disclose, unless a materiality assessment concludes that a particular topic is not material to the business. That assessment itself must be documented and disclosed.

Consider a mid-size European chemical manufacturer with 1,200 employees and turnover above the applicable threshold. Under the CSRD, the company would need to conduct a double materiality assessment across all ESRS topics, identify which ones are material (likely climate, pollution, water, workers in the value chain), collect quantitative and qualitative data for each material topic, and publish the disclosures as part of its management report. An independent assurer would then verify the information, initially to a limited assurance standard, with the expectation that the level of assurance will move toward reasonable assurance over time.

Scope after Omnibus I

The original CSRD phased companies in over several years, starting with large public-interest entities already subject to the NFRD. After the Omnibus I simplification package (in force since March 2026), the scope was narrowed significantly. The revised thresholds require more than 1,000 employees and net turnover exceeding 450 million euros. The first reporting deadline for the second wave was also pushed back: those companies now file their first CSRD-aligned report in 2028, covering financial year 2027 (the largest companies already subject to the NFRD reported for financial year 2024).

The Omnibus I changes reduced the estimated number of companies in scope from roughly 50,000 to a much smaller set concentrated among large corporates. However, the directive still captures non-EU companies that generate significant revenue within the EU, meaning the jurisdictional reach extends well beyond Europe.

How the CSRD applies in Brazil

Brazil does not transpose EU directives, but Brazilian companies are affected in two ways. First, any Brazilian group with subsidiaries or significant operations in the EU may fall within the CSRD’s scope for non-EU companies, depending on the revenue thresholds. Those groups would need to prepare consolidated sustainability reports following the ESRS, even if headquartered in São Paulo or Rio de Janeiro.

Second, Brazil is developing its own sustainability reporting requirements along a parallel but distinct track. The Comissão de Valores Mobiliários (CVM), the Brazilian securities regulator, issued CVM Resolution 193 in 2023, which adopted the ISSB standards (IFRS S1 and IFRS S2) on a voluntary basis; the planned mandatory application was revoked by CVM Resolution 244 of May 2026, and from 2027 listed companies that do not file must explain why. The ISSB standards differ from the ESRS in important ways: they focus on enterprise value (how sustainability issues affect the company financially) rather than on double materiality. A Brazilian company subject to both regimes would therefore need to satisfy two different reporting logics, one for CVM using ISSB-aligned standards and another for the EU using ESRS.

For international professionals managing Brazilian operations, the practical implication is that compliance with CVM requirements does not automatically satisfy CSRD obligations, and vice versa. The datapoints, materiality approach, and assurance expectations are different enough that parallel workstreams are usually necessary.

The most common mistake

The most frequent confusion is treating the CSRD as a reporting framework. It is not. The CSRD is the legal directive, the legislative instrument that creates the obligation. The ESRS are the reporting standards that specify what must be disclosed and how. Saying “we report under the CSRD” is technically imprecise; a company reports under the ESRS because the CSRD requires it to do so. This distinction matters when mapping compliance obligations, because the ESRS are the documents that contain the actual datapoint requirements, disclosure timelines, and materiality guidance.

A related error is assuming that the Omnibus I revisions eliminated the CSRD for most companies. The revisions raised the thresholds and delayed the timeline, but the directive remains in force. Companies that now fall below the thresholds are no longer legally required to report, but many still face pressure from investors, lenders, and supply chain partners who expect ESRS-aligned disclosures regardless of the legal mandate.

Another point of confusion involves the relationship between the CSRD and the ISSB standards. Some assume that reporting under one framework satisfies the other. While EFRAG and the ISSB have published interoperability guidance to help companies identify overlapping datapoints, the two systems are not equivalent. The CSRD, through the ESRS, requires impact materiality disclosures that go beyond the ISSB’s financial materiality lens. A company reporting only under ISSB standards would not meet the CSRD’s requirements without additional disclosures on outward impacts.

Key points to retain

• The CSRD is the EU directive; the ESRS are the reporting standards it mandates.
• Double materiality (inward financial risk and outward impact on people and environment) is the core principle.
• After Omnibus I, scope applies to companies with more than 1,000 employees and over 450 million euros in turnover, with first reports due in 2028 for financial year 2027.
• Non-EU companies, including Brazilian groups, may be in scope if they meet revenue thresholds within the EU.
• In Brazil, CVM Resolution 193 adopted the ISSB standards, which follow a different materiality approach; compliance with one regime does not satisfy the other.
• Independent assurance of the sustainability report is mandatory, initially at a limited assurance level.

Primary sources: Directive (EU) 2022/2464, Corporate Sustainability Reporting Directive (EUR-Lex, 2022); Directive (EU) 2026/470, Omnibus I amendments to the CSRD and CSDDD (EUR-Lex, 2026); Directive (EU) 2025/794, “stop-the-clock” postponement (EUR-Lex, 2025); Delegated Regulation (EU) 2023/2772, European Sustainability Reporting Standards (EUR-Lex, 2023); CVM Resolution 193/2023 on ISSB-based sustainability reporting, as amended (CVM, 2023-2026).