If you are an SME based in the EU (or an international firm with an EU presence), you’ll most likely be aware of the EU Corporate Sustainability Reporting Directive (“CSRD”), however, you may not yet be considering what you as an organisation need to do to comply with the directive’s obligations. The purpose of this article, the first of a two part series, is to brief you on what’s included in the EU Corporate Sustainability Directive (CSRD), when your firm falls into scope, and what you need to do in order to comply, once eligible. The second instalment in the series will address what SMEs need to consider regarding CSRD in the short term in order to meet their sustainability obligations and stay competitive.  Throughout, we also aim to explain sustainability terms and jargon, to make it easier for you to navigate CSRD and begin building your sustainability strategy. 

What is CSRD?

The Corporate Sustainability Reporting Directive (CSRD), is a European Union (EU) directive that requires companies to report on their sustainability practices. It aims to increase transparency and accountability by ensuring that companies provide clear information about their environmental and social impacts. This helps investors, consumers, and other stakeholders understand how companies manage issues like climate change, human rights, and diversity. The CSRD replaces the previous Non-Financial Reporting Directive (NFRD), expanding the number of companies covered and the scope of required disclosures.

When does my company fall into scope?

CSRD eligibility by company size and type applies as follows: 

Timeframe	Company Type
2024 Fiscal Year; reports published in 2025	EU Listed Companies (including international companies listed in the EU) > 500 employees Firms already applicable under NFRD (current legislation)
2025 Fiscal year; reports published in 2026	Large companies not currently subject to NFRD> 250 employees €50m plus net turnover*
2026 Fiscal year; reports published in 2027	EU Listed SME’s> 50 Employees€10m+ net turnover€5m total assets*Note: Potential opt out exemption until 2027; reports published in 2028
2028 Fiscal year; reports published in 2029	Subsidiaries of non-EU companies with €150m + net turnover. Further details to follow.

*must meet two of three applicable thresholds.

What will I be required to report under CSRD, once eligible?

The CSRD requires companies to disclose a broad range of data relating to their environmental, social, and governance practices.  

General disclosures		Governance	●
		Strategy	●
		Impacts, risks and opportunities	●
		Metrics and targets	●
Topical	Environmental	Climate change	○
		Pollution	○
		Water	○
		Biodiversity	○
		Resources and circular economy	○
	Social	Own workforce	○
		Workers in value chain metrics in progress	○
		Consumers and end-users metrics	○
		Affected communities metrics	○
	Governance	Business conduct	○

●Mandatory for all companies 

○  Mandatory if material 

Companies will need to disclose the sustainability information in their management reports, which means that financial and sustainability information will be published at the same time. 

The submitted data will then be subject to “limited third-party assurance,” meaning that an auditor will need to evaluate the data. 

What is meant by Scope 1, 2, and 3 Emissions? 

Green House Gas (GHG) emissions are classified into categories being Scope 1, Scope 2 or Scope 3 emissions.  This is a way of grouping emissions between those created by the company and those created by its wider value chain.

Scope 1 Emissions: These are the direct emissions from sources that a company owns or controls, such as emissions from owned company vehicles. 

Scope 2 Emissions: These are indirect emissions from the generation of electricity, heating, and for example, HVAC (Heating, Ventilation and Air Conditioning), that the company buys from another source. 

Scope 3 Emissions: These are all other indirect emissions that occur in a company’s value chain. They can include emissions from the production of raw materials, business travel, or the use and disposal of products the company sells. We will expand further on Scope 3 Emissions and the obligations for SME’s in part two of the series. 

Explain Double Materiality in the context of CSRD

Double materiality is a concept that requires companies to look at both how their business is affected by environmental and social issues and how their actions impact the world. They must consider how things like climate policies or consumer preferences can influence their profits and how their operations affect the environment and communities. This idea ensures that companies give a complete view of their financial health and their role in the world around them. It is one of the most challenging aspects of CSRD. 

We hope you found this article helpful. Keep an eye out for part two in the series which will focus on CSRD and obligations for SMEs. This will be shared on our social channels over the coming weeks and added to the dedicated ‘news and insights’ page on our website. 

As always, our experts here at Ormsby & Rhodes are on hand to help you navigate your regulatory and compliance obligations. 

Connect with our team directly by emailing info@ormsby-rhodes.ie or browse our business solutions at www.ormsby-rhodes.ie.