Corporate Sustainability Reporting Directive 2026

The Corporate Sustainability Reporting Directive (CSRD) has become a regular topic in boardrooms and among compliance teams and investors. But what exactly is it, and why has it become so relevant to ESG today? The importance of sustainability performance reporting is well established. Investors want to understand how a company is working to be a responsible corporate citizen and reduce its exposure to risk. That picture becomes clear only when the information is presented clearly and in a structured way. ESG rating agencies are equally important, as they assign performance scores to companies based on the information reported. This makes ESG reporting, ESG performance reporting, corporate sustainability reporting and ESG sustainability reporting important parts of how a company’s performance is assessed. Corporate sustainability reporting - Finance is also part of this discussion, as investors rely on well-presented information to understand a company’s efforts and risk exposure. For these purposes, the framework most commonly used worldwide to date has been the GRI, or Global Reporting Initiative. However, compliance in certain jurisdictions requires companies to present information in a specific way. In the European Union, that format is the CSRD, or Corporate Sustainability Reporting Directive. The CSRD is widely discussed outside Europe because its relevance is shaped more by scope than by geography. One of its defining features is its emphasis on the value chain. This means that suppliers to covered companies, as well as their distributors, will also have to report ESG performance information if they are above a certain size. Non-EU companies with EU operations and turnover or employee numbers above a certain value also have the same CSRD reporting obligations. One of the hallmarks of the CSRD, and one of the areas that causes the most confusion for companies, is the concept of ‘Double Materiality’. A company must evaluate its material ESG issues from two perspectives: how an issue affects the company’s operations, and how the company’s operations affect the issue or resource. This connects ESG reporting with sustainability risk management. For example, a company may determine that water scarcity could affect its operations in a particular location. It would then need to adopt mitigation measures for its own operations. At the same time, the company may find that its extraction of groundwater is contributing to water scarcity in a nearby village. In that case, it would need to adopt mitigation measures for the community. Understanding the Corporate sustainability reporting Directive (CSRD requirements) calls for a long-term perspective. A company may not currently fall within the scope of the CSRD. However, management should consider the company’s future expansion plans and whether it may wish to work with EU clients. This could make reporting under EU regulations obligatory in the future. Once a contract has been signed, it is usually too late to begin adjusting the company’s governance and reporting practices to the CSRD. It is therefore beneficial to be prepared by establishing a yearly reporting practice and improving it consistently. Having the relevant reporting practice already in place can also improve the chances of collaboration with an EU client. Navigating a company’s eligibility under the CSRD, understanding the different aspects of CSRD reporting and presenting information through double materiality can feel complex. SgurrEnergy can help you work through these requirements. To discuss your company’s reporting needs, please contact business@sgurrenergy.com.