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Preparing Indian Companies for EU's Corporate Sustainability Reporting Directive (CSRD)

  • Lorenzo, Monomita and Suman
  • Apr 26
  • 5 min read

Over the years, the European Union (EU) has introduced numerous initiatives aimed at regulating corporate sustainability. Growing concerns about sustainability and sustainable development, starting from the 1987 Brundtland Report, which have played an active role in shaping EU corporate regulation.


The EU’s Corporate Sustainability Reporting Directive (CSRD) is a new rule that makes it mandatory for more companies to report clearly about how they impact people and the planet. It’s like asking businesses to show not just their profits, but also how they are treating workers, the environment, and society. The idea is to make sure investors, customers, and the public get honest and detailed information so they can make better choices. This rule applies to big companies now and will later include smaller ones too, making sustainability reporting a normal part of doing business in Europe.


Evolution of CSRD


Initially, there were voluntary initiatives, such as the 2001 Green Paper, which, although non-binding, helped pave the way for the concept of Corporate Social Responsibility (CSR). A binding regulatory framework only came later, with the Non-Financial Reporting Directive (NFRD) in 2014. This directive came into effect in 2017 and targeted large public interest companies inEU, requiring them to disclose non-financial information with a focus on environmental matters, social and employee issues, human rights, and anti-corruption practices.


In 2015, with the United Nations 2030 Agenda, the EU incorporated the Sustainable Development Goals (SDGs) into its policies. The 2030 Agenda thus served as a strong strategic reference point for later EU legislation. Following this, several initiatives were launched: Financing Sustainable Growth (2018), Sustainable Finance Disclosure Regulation (SFDR) (2019), European Green Deal (2019), and Taxonomy Regulation (2020). All these policies established the legal and cultural context that led to the development of the Corporate Sustainability Reporting Directive (CSRD).


In 2020, a public consultation was launched to revise the NFRD, setting the stage for the CSRD. The main shortcomings of the NFRD identified during the consultation were limited comparability, lack of detail, and a narrow scope. In 2021, the European Commission presented the CSRD proposal, aimed at expanding and deepening sustainability reporting obligations for companies. Following negotiations between the European Parliament and the Council of the EU, the CSRD was adopted in 2022 and entered into force in 2023, although there have been barriers to its adoption (Damiano and Valenza, 2025).


The first application of the CSRD applies to the 2024 fiscal year for companies already subject to the NFRD, so the first report should be published in 2025 (for the 2024 fiscal year). This directive provides for the implementation of several key aspects concerning sustainability (Hristov and Searcy, 2025). Among its most important features, the CSRD introduces: more detailed sustainability reports, the concept of double materiality (how companies impact society and the environment and how ESG factors impact the company), and mandatory assurance by independent auditors. The latter aspect, particularly, could help restore trust in sustainability reporting (Pizzi et al., 2024). Another pivotal aspect is the introduction of the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG) and adopted by the European Commission, which define the detailed requirements for sustainability disclosures under the CSRD.


CSRD and SFDR


The CSRD is closely linked to the sustainable finance framework, as its objectives ( ESG transparency, preventing greenwashing, and directing capital towards sustainable activities ) are aligned with the SFDR. The SFDR applies to financial market participants (e.g., funds and insurances), who must disclose how they integrate ESG risks into financial products. The CSRD and SFDR, both aligned with the sustainable activities of the EU Taxonomy are interconnected: financial entities rely on standardised ESG data published by companies under the CSRD to fulfil their SFDR obligations.


Under the SFDR, financial operators must report on sustainability risks and Principal Adverse Impacts (PAIs) of their investment decisions (e.g., GHG emissions, energy consumption, board gender diversity) (the list was introduced with the supplement to SFDR in 2022). To do this, they can rely on company-level data disclosed under the CSRD.

Some key overlaps between CSRD and SFDR are summarised below:

Topic

GHG emissions (Scope 1-2-3)

Energy consumption

Emissions to water

Human and labour rights violations
CSRD (ESRS)

ESRS E1

ESRS E1

ESRS E2

ESRS S1-S2
SFDR

PAI Indicator 1

PAI Indicator 6

PAI Indicator 8

PAI Indicators 10-12


In summary, it is essential, in the context of sustainable finance, that companies fully comply with CSRD guidelines to ensure the reliability of data used by financial market participants. This allows companies to appropriately report the sustainability impact and risks of their investments following the SFDR, ensuring that investors interested in sustainable projects can make informed decisions without risking the selection of the wrong investment.


Indian Business in the EU:


Indian companies with subsidiaries or operations within the EU must assess eligibility and prepare proactively, as compliance begins next year for most.


Who Needs to Comply?


1.Subsidiary-Level Reporting (2026 for FY 2025):


Indian companies with EU subsidiaries classified as "large companies" will report if they meet at least two of these criteria:

  1. 250+ employees

  2. €50 million annual turnover

  3. €25 million total assets


2.Group-Level Reporting (2029 for FY 2028):


Companies generating €150 million+ annually within the EU and meeting branch/subsidiary-specific criteria will report at the group level.


Key Steps for Compliance


Understand CSRD Eligibility and Requirements


Indian companies must navigate complexities in corporate structures and determine an appropriate reporting framework, such as consolidated or subgroup reporting, while decoding eligibility. Additionally, the concept of double materiality must be adopted, analyzing sustainability from financial and impact perspectives. This will involve stakeholder engagement, risk assessment, and aligning outcomes with the required assurance process.


Establish Governance and Accountability


Compliance requires clear governance frameworks and annual reporting structures:

  • Designate responsibility to senior management for report accuracy and completeness.

  • Form cross-functional teams to streamline data collection and reporting.

  • Budget for initial and recurring costs, including assurance fees.


Build Capabilities and Systems


Capacity building is critical for reliable compliance. Companies must:


  • Train teams to understand reporting intent and requirements.

  • Develop systems for data validation to ensure accurate, comparable, and auditable disclosures.


Implement ESRS and Engage Assurance Providers


Comprehend European Sustainability Reporting Standards (ESRS) to define the reporting scope and align with double materiality outcomes. Independent third-party assurance is mandatory, starting with limited assurance.


Alignment between ESRS and BRSR


The Corporate Sustainability Reporting Directive challenges Indian companies to enhance sustainability reporting while aligning with global standards. Though compliance requires robust governance, validated data, and assurance but it also offers opportunities to elevate ESG practices and gain global recognition.


Companies already adhering to SEBI's Business Responsibility and Sustainability Reporting (BRSR) can leverage this experience to streamline CSRD adoption. Familiarity with frameworks like the Global Reporting Initiative (GRI) reduces complexity, allowing for smoother compliance. Beyond regulations, CSRD drives transparency and accountability, fostering trust and sustainable value creation. For Indian companies, it is a great chance to continue their leadership in global sustainability efforts.


AUTHORS


Lorenzo Coronella
Research Scholar
University of Rome Torvergata, Italy


Prof Monomita Nandy (corresponding author )
Professor in Accounting and Finance
Brunel University of London , UK
Suman Lodh
Associate Professor in Finance
Kingston University, UK

References



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