Navigating the ESG Disclosures Maze

An Overview of the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards.

In a rapidly evolving regulatory landscape, understanding and complying with sustainability reporting frameworks can be overwhelming. Companies face myriad mandatory and voluntary reporting requirements, some are considered “global baselines," some are ostensibly interoperable, and some depend on where you do business and whether you are listed on a regulated market. Many firms are finding it challenging to prioritise where to deploy efforts, against aggressive compliance timelines, and how best to utilise resources to fulfill the dynamic requirements that are unfolding. 

At the same time, an opportunity is emerging for companies to use the common themes amongst these frameworks, regulations, guidance, and directives to make a meaningful shift toward embedding sustainability and resilience in the heart of their businesses. This blog focuses on the European Union’s Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) as potential catalysts for business transformation in this reporting maze.


Understanding the CSRD

On the 21st of April 2021, the European Commission (EC) announced the adoption of the CSRD as an important component of the European Green Deal. The CSRD replaces and consolidates the Non-Financial Reporting Directive, makes key amendments to the Accounting Directive1, and substantially increases sustainability disclosure requirements and the number of companies subject to mandatory sustainability reporting requirements. 


What Does the CSRD Require?

Companies that fall within the scope of the CSRD will have to report in line with the mandatory ESRS, including a requirement to obtain external limited assurance of their sustainability reporting. The CSRD requires disclosures based on robust information about business models, strategy, and entire value chains, greatly enhancing the connectivity between financial and non-financial reporting. By requiring in-scope entities to apply a double materiality lens (determining what matters have a material impact on the organization and how the organization impacts the environment and people), affected stakeholders and users of sustainability statements will have a holistic view of the impact of companies on people and the environment, and, by implication, an increased focus and better understanding of specific financial risks and opportunities arising from sustainability matters. 


What is the ESRS?

The ESRS include two cross-cutting standards and 10 topical standards across environmental, social, and governance (ESG) matters. The standards purposefully replicate the four-pillar structure presented by the Task Force on Climate-Related Financial Disclosures (TCFD)2 and those published by the International Sustainability Standards Board (ISSB)3 to improve interoperability and alignment. The ESRS is arguably the most prescriptive and granular standard across the “big three” reporting frameworks (US Securities and Exchange Commission, ISSB, and ESRS).

When Should Companies Comply?

The Directive applies to all companies listed on EU-regulated markets (including listed Small and Medium Enterprises and excluding listed micro-companies). CSRD will also apply to “large” unlisted undertakings that meet at least two of the following criteria: 

  1. A net turnover over 50 million EUR 
  2. A balance sheet total of at least 25 million EUR
  3. 250 employees on average over the forecasted year

CSRD Chart


5 Key Considerations for Those Entities Preparing for CSRD Reporting

Build on a Solid Base
Historically, organizations have conducted single ESG materiality assessments through the lens of stakeholders by focusing on the impact of sustainability issues on their operations. The CSRD and ESRS require a fundamentally different approach to complete the double materiality assessment. Traditional ESG materiality assessments (even those that consider a broad set of stakeholders) lack key required components defined by ESRS.

We recommend that companies dedicate sufficient resources and effort to the double materiality assessment process, treating it as a catalyst for strategy refinement and business improvement, rather than a mere compliance exercise.

Elevate Established Efforts
The ESRS was not created in a vacuum, and it is evident that there have been significant efforts to build upon existing foundations of the Global Reporting Initiative (GRI)4, Carbon Disclosure Project (CDP)5, TCFD, and to align with ISSB standards, especially regarding climate change disclosures.

We recommend that firms in scope for CSRD reporting should leverage the work they have done to date, applying a risk-based approach to the prioritization of actions to address gaps that are unique to ESRS.

Document Your Process
Sustainability statements are subject to limited assurance from the date of initial reporting. Compliance with the CSRD reporting rules as well as the process carried out by the undertaking to identify material impacts, risks, and opportunities, the information reported, digitalising it, and complying with the requirements under the Taxonomy Regulation6, will form part of the scope for assurance engagements.

We recommend that entities must document their approach, assumptions, stakeholder engagement plan, double materiality methodology, and value chain assessment clearly to be well-prepared for independent assurance work.

Report Smart
There is a broad spectrum of reporting possibilities under CSRD — ranging from individual entity reporting to artificial consolidation, to global consolidated reporting — which may provide a company with flexibility in its reporting approach. Despite this flexibility, the reporting decision will dictate how a company assesses materiality and will significantly influence the design of new systems, processes, and controls.

We recommend that companies should assess their reporting approaches critically by considering factors such as availability of disaggregated information, ease of accessing data, business strategy and homogeneity of operations; timing of reporting requirements; obtaining a clear understanding of available exemptions under the ESRS; and embracing the potential to change reporting approaches over time.

Involve to Evolve
Two main groups of stakeholders are defined in the ESRS: affected stakeholders and users of sustainability reporting, which include employees and investors, but also other users such as the undertaking’s business partners, trade unions, social partners, and silent stakeholders (e.g., nature).

We recommend that companies should map out and disclose the manner and frequency of direct involvement of the undertaking in engaging with affected stakeholders on sustainability matters, including how feedback is used and relayed from targeted stakeholder engagement and the communication of concerns about adverse impacts to the undertaking.



By mid-2024, EU member states are required to transpose the CSRD into national legislation. It remains to be seen what enforcement mechanisms member states will introduce and to what extent select member states will “gold-plate” some of the requirements. Additional sector-specific standards as well as standards that apply to third-country parent undertakings will also be released in the coming years.

The CSRD and ESRS are not mere regulatory hurdles in the ordinary course of business. Instead, these artefacts present opportunities to foster transparency, enhance stakeholder engagement, and drive sustainable growth and value creation. Through strategic advisory support, companies can navigate the regulatory maze, ensuring a resilient and future-fit business in an increasingly volatile business environment.

How Guidehouse Can Help

Our global team of sustainability experts help clients stay ahead of evolving regulations by implementing strategic initiatives across all aspects of operations. We are well-positioned to help firms of all sizes undertake complex data gathering and reporting efforts to meet changing requirements and work proactively toward mandatory disclosures.


This article is authored by Leo van der Westhuijzen and David Einerhand.

1. European Commission, July 31, 2023, "Questions and Answers on the Adoption of European Sustainability Reporting Standards,"
2. TCFD. 2022. “Task Force on Climate-Related Financial Disclosures | TCFD - About.” TCFD. 2022.
3. IFRS, July 24, 2023, "IFRS Foundation publishes comparison of IFRS S2 with the TCFD Recommendations,"
4. Global, September 5, 2023, "EFRAG-GRI Joint Statement of Interoperability,"
5. CDP, November 8, 2023, "EFRAG and CDP announce cooperation to drive market uptake of European Sustainability Reporting Standards,"
6. Review of EU Taxonomy Regulation 2020/852. 2020. Official Journal of the European Union, June.


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