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CSRD

Although CSRD does not directly affect most companies, responsibility reporting and responsibility work indirectly affect most companies. Indirect pressure to report is generated by, among other things, value chains, financial markets and maintaining competitiveness.

What is CSRD?

CSRD, or the Corporate Sustainability Reporting Directive, is a new European Union legislation that came into force on January 1, 2023, and became applicable from January 1, 2024. It replaces the previous NFRD directive and significantly expands corporate sustainability reporting obligations.

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The goals of CSRD are to:

  • Increase transparency regarding companies’ impacts on people and the environment

  • Strengthen access to information for investors and stakeholders

  • Promote a sustainable economy and responsible business practices

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Who does CSRD apply to?

CSRD affects approximately 50,000 companies across Europe, including:

  • Large listed and non-listed companies (over 250 employees, more than €40M turnover, or over €20M balance sheet total)

  • Listed SMEs (with simplified requirements)

  • Non-EU companies operating in the EU with turnover exceeding €150M

In Finland, the reporting obligation will expand to around 1,000–1,200 companies.

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Timeline

CSRD reporting obligations will be phased in:

  • 2025: Large companies already reporting under NFRD

  • 2026: Other large companies

  • 2027–2028: Listed SMEs and certain non-EU companies

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What must be reported?

Reporting must follow ESRS standards (European Sustainability Reporting Standards). The report is published as part of the management report and must include:

  • Environmental responsibility: climate change, emissions, biodiversity, circular economy

  • Social responsibility: working conditions, human rights, workforce, value chain impacts

  • Good governance: risk management, business ethics, anti-corruption

Additionally:

  • The report must be machine-readable

  • Information must be externally verified

  • Reporting is based on double materiality: the company’s impact on society/environment and vice versa

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How can a company prepare?

CSRD reporting requires:

  • A materiality analysis based on double materiality

  • Building a data foundation and identifying gaps

  • Planning and resourcing the reporting process

  • Internal collaboration across teams

Early preparation helps distribute costs and ensure high-quality reporting.

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Why is CSRD important?

CSRD is not just a reporting obligation—it is a tool for:

  • Risk management

  • Operational development

  • Building stakeholder trust

  • Attracting financing and investment

It guides companies toward more sustainable and competitive business practices.

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Which SMEs are covered by CSRD?

CSRD applies to listed SMEs whose securities are traded on regulated markets. These companies must start reporting in 2026, but may defer until 2028.

Other SMEs are generally not subject to the directive unless they exceed two of the following thresholds for two consecutive financial years:

  • Over 250 employees

  • Over €40 million in turnover

  • Over €20 million in balance sheet total

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Indirect impacts on SMEs

Even if not directly obligated, SMEs may face significant indirect impacts:

  • Value chain requirements: Large companies reporting under CSRD need sustainability data from suppliers and subcontractors

  • Financing: Banks and investors favor companies with transparent sustainability communication; ESG data may affect loan terms and investment decisions

  • Competitiveness: Sustainability efforts can enhance brand, customer perception, and employer image. Voluntary reporting can be a competitive advantage

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Changes and reliefs for SMEs

The EU Omnibus package (2025) introduced major changes:

  • Reporting obligations postponed by two years: second-phase companies report in 2028, third-phase in 2029

  • Scope narrowed: CSRD would only apply to companies with over 1,000 employees and turnover over €50M or balance sheet total over €25M, exempting around 80% of previously obligated companies

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Voluntary reporting for SMEs

EFRAG has developed the VSME standard (Voluntary Standard for SMEs), offering a lighter and clearer way for SMEs to report sustainability data voluntarily.

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Benefits for SMEs:

  • Readiness for future regulation

  • Cost savings through energy efficiency and risk management

  • Understanding nature impacts and securing raw material availability

  • Strategy-driven sustainability work

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Summary for SMEs

Impact - AreaExplanation

Direct obligation - Only listed and large SMEs

Indirect pressure - Value chain requirements, financing, competitiveness

Reliefs - Omnibus package delays and narrows scope

Opportunity - VSME standard supports voluntary reporting and ESG communication

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