With growing environmental awareness and stricter regulations on sustainable development, the European Union is introducing new legislation to increase corporate transparency. A key step in this process is the CSRD Directive (Corporate Sustainability Reporting Directive), which replaces the previous NFRD Directive (Non-Financial Reporting Directive). The new regulations significantly expand the number of companies required to report non-financial information and tighten requirements for reporting ESG (Environmental, Social, Governance) metrics.
What is the CSRD Directive?
The CSRD Directive is an EU regulation aimed at harmonizing non-financial reporting standards for businesses. Its main goal is to enhance the transparency and comparability of sustainability information, which is crucial for investors, consumers, and public institutions. The changes introduced by CSRD also aim to improve the credibility and usefulness of non-financial reports.
Who is covered by the CSRD Directive?
Compared to the previous NFRD, the CSRD significantly broadens the scope of companies obliged to report. The new requirements apply not only to large public-interest entities but also to small and medium-sized enterprises (SMEs) and certain financial institutions. This means that thousands of companies across the European Union, including in Poland, will need to comply with the new regulations.
CSRD Directive Implementation Timeline
The obligations under the CSRD will be introduced gradually:
From 2024: Reporting obligations apply to large public-interest entities with over 500 employees.
From 2025: The new rules cover all large companies meeting at least two of the following criteria:
Balance sheet total exceeding EUR 20 million,
Revenues over EUR 40 million,
Average number of employees exceeding 250.
From 2026: Reporting obligations extend to SMEs and other public-interest entities.
From 2028: The new requirements include parent companies from non-EU countries generating over EUR 150 million in net turnover within the EU.
Which companies in Poland will be affected by the CSRD Directive?
Estimates suggest that the CSRD Directive will impact around 3,000 to 4,000 companies in Poland, a significant increase compared to previous regulations. Across the EU, the number of companies required to report will grow from about 11,000 to over 50,000. Polish businesses must prepare for increased ESG reporting requirements.
Indirect reporting obligation – how does it work?
Even if many companies are not directly subject to CSRD reporting obligations, they may be indirectly required to provide data to their business partners. Large corporations that must comply with ESG reporting may demand information from their suppliers about environmental, social, and governance practices to meet their own obligations.
In practice, this means that even SMEs not formally covered by the CSRD will need to align with the new standards to maintain business relationships with larger companies. Therefore, every business, regardless of size, should begin preparing to meet sustainability reporting standards now.
Challenges businesses face
Implementing the CSRD Directive presents several challenges:
Adapting reporting systems: Companies need to upgrade their systems to meet new requirements for collecting and reporting non-financial data.
Lack of specialists: Businesses may struggle with a shortage of qualified personnel responsible for ESG reporting. Investing in training and hiring experts becomes essential.
Reputational risk: Incomplete or incorrect reporting can lead to sanctions and loss of trust from customers and investors.
Benefits of implementing ESG reporting in line with CSRD
Despite the challenges, complying with CSRD offers numerous benefits:
Competitive advantage: Companies that successfully adopt ESG standards will be seen as more responsible and transparent, attracting investors and customers.
Market credibility: Reports aligned with European ESRS standards enhance a company's credibility with partners and consumers.
Better risk management: Monitoring ESG indicators allows early detection and response to sustainability-related risks.
FAQ – Frequently Asked Questions about the CSRD Directive
What is the CSRD Directive? It's an EU regulation requiring companies to report on ESG metrics, replacing the previous NFRD Directive.
Who does the CSRD Directive apply to? Large public-interest entities, SMEs, financial institutions, and parent companies from non-EU countries operating within the EU.
When do the CSRD regulations come into force? The first reports are required from 2025 for the largest companies, and from 2026 for SMEs.
What are the main challenges of implementing CSRD? Adapting reporting systems, a lack of ESG specialists, and reputational risks due to incorrect reporting.
Summary
The CSRD Directive marks a significant shift in how businesses approach sustainability. The new regulations will affect thousands of companies that must prepare for these changes. Companies that effectively implement ESG reporting requirements will gain in reputation and competitive edge. Regardless of direct reporting obligations, it's advisable for all businesses to start preparing to meet the new standards now.