The CSRD has evolved from the previously applicable Non-Financial Reporting Directive (NFRD). The CSRD aims to strengthen the nature and extent of sustainability reporting, significantly enhancing the scope of NFRD.

There are some key differences between the directives.

Primarily, the number of companies that are covered by the regulation. Where NFRD was focused on public interest entities, listed companies, banks and insurance companies with more than 500 employees, CSRD includes public interest entities, companies with securities admitted to trading on a regulated market in the EU, in addition to all large companies meeting at least two out of three criteria.

This means that while around 12,000 companies were subject to NFRD reporting, an estimated 49,000 companies will be required to report under CSRD.

Companies reporting under NFRD were to include information on environmental protection, social responsibility relating to employees, human rights, anti-corruption and bribery, and diversity on company boards. Under CSRD, companies must follow the double materiality process, evaluating sustainability risk affecting the company, as well as the company’s impact on society and the environment.

Finally, CSRD requires a least a limited level of assurance on reported data, which has not previously been mandated under NFRD.

Crucially, companies that have previously fallen within the scope of reporting under NFRD will be some of the first to report under CSRD.