CSRD Reporting Requirements for Mid-Market Companies

What Is the CSRD and Why Does It Matter?

The Corporate Sustainability Reporting Directive (Directive 2022/2464) entered into force on 5 January 2023, amending the Accounting Directive (2013/34/EU), the Audit Directive (2006/43/EC), the Audit Regulation (EU/537/2014), and the Transparency Directive (2004/109/EC). It replaces the Non-Financial Reporting Directive (NFRD), which since 2018 had required roughly 11,700 large public-interest entities across the EU to disclose non-financial information.

The NFRD was widely criticised for its limited scope, lack of standardisation, and inconsistent enforcement. Companies could choose from multiple frameworks — GRI, TCFD, UN Global Compact — producing reports that varied dramatically in depth, structure, and comparability. Investors, regulators, and civil society organisations called for a common reporting language.

The CSRD answers that call. It expands the reporting population to approximately 50,000 companies operating in the EU, introduces mandatory European Sustainability Reporting Standards (ESRS), requires limited assurance of reported data, mandates digital tagging in XHTML/iXBRL format, and embeds sustainability information directly in the management report rather than allowing standalone CSR documents.

Who Must Report Under the CSRD?

The directive defines three main groups of reporting entities, each with different thresholds and start dates.

1. Large Public-Interest Entities Already Under NFRD

Companies already subject to the NFRD — listed companies, banks, and insurance undertakings with more than 500 employees — report first. They apply ESRS for financial years starting on or after 1 January 2024, with initial reports published in 2025.

2. Other Large Companies

Large companies not previously covered by the NFRD must report for financial years starting on or after 1 January 2025. A company qualifies as “large” under the EU Accounting Directive if it exceeds at least two of the following three thresholds on its balance sheet date:

• Balance sheet total: €25 million
• Net turnover: €50 million
• Average number of employees: 250

Note that the European Commission adopted a delegated act in October 2023 raising the monetary thresholds by approximately 25% to account for inflation (balance sheet total to €25 million from €20 million, net turnover to €50 million from €40 million). These updated thresholds apply from 2024 financial years onwards.

3. Listed SMEs, Small Credit Institutions, and Captive Insurance Undertakings

Small and medium-sized enterprises whose transferable securities are admitted to trading on an EU regulated market must report for financial years starting on or after 1 January 2026. These entities may opt out for up to two years (until FY 2028 reporting) and, when they do report, may use proportionate ESRS standards specifically designed for SMEs (the LSME standard set).

4. Third-Country Companies

Non-EU parent companies that generate more than €150 million net turnover in the EU for each of the last two consecutive financial years and have at least one EU subsidiary or branch exceeding certain thresholds must publish a sustainability report for financial years starting on or after 1 January 2028. The European Commission is tasked with adopting separate reporting standards for these entities.

Phased Implementation Timeline

The CSRD deliberately phases in requirements to give companies time to build capacity. Here is the full rollout schedule:

• FY 2024 (reports in 2025): Large public-interest entities already under NFRD (>500 employees)
• FY 2025 (reports in 2026): All other large companies meeting two of three size criteria
• FY 2026 (reports in 2027): Listed SMEs, small credit institutions, captive insurance undertakings (with opt-out until FY 2028)
• FY 2028 (reports in 2029): Third-country companies with >€150M EU revenue

Each wave benefits from transitional provisions. First-time reporters in every wave can omit certain data points during their first year, including scope 3 greenhouse gas emissions, biodiversity-related metrics, and some workforce data points for entities with fewer than 750 employees.

European Sustainability Reporting Standards: Structure and Scope

ESRS are developed by the European Financial Reporting Advisory Group (EFRAG) and adopted by the European Commission as delegated acts. The first set, adopted in July 2023 via Delegated Regulation (EU) 2023/2772, includes 12 standards organised in three categories:

Cross-Cutting

• ESRS 1 — General Requirements: defines the architecture, materiality assessment rules, reporting boundaries, and due process for disclosure
• ESRS 2 — General Disclosures: mandatory for all reporting entities, covering governance, strategy, impact and risk management, and metrics and targets

Environment

• ESRS E1 — Climate Change
• ESRS E2 — Pollution
• ESRS E3 — Water and Marine Resources
• ESRS E4 — Biodiversity and Ecosystems
• ESRS E5 — Resource Use and Circular Economy

Social

• ESRS S1 — Own Workforce
• ESRS S2 — Workers in the Value Chain
• ESRS S3 — Affected Communities
• ESRS S4 — Consumers and End-Users

Governance

• ESRS G1 — Business Conduct

ESRS 2 is always mandatory. The topical standards (E1 through G1) are subject to materiality assessment — a company need only report on a topical standard if the related sustainability matter is material. However, if a company concludes that climate change (E1) is not material, it must provide a detailed explanation of why, given the systemic significance the EU framework assigns to climate risk.

Understanding Double Materiality

The CSRD's most conceptually important innovation is the double materiality principle. Unlike single materiality (used in most financial reporting frameworks and by the ISSB), double materiality requires companies to evaluate sustainability matters from two distinct perspectives:

• Impact materiality: Does the company have actual or potential positive or negative impacts on people or the environment? This looks outward — how the company affects the world.
• Financial materiality: Do sustainability matters create risks or opportunities that could reasonably be expected to affect the company's financial position, performance, or cash flows? This looks inward — how the world affects the company.

A sustainability matter is material if it meets the threshold on either dimension. In practice, this means a company cannot dismiss a topic like water scarcity simply because it does not yet affect the balance sheet. If the company's operations meaningfully impact local water resources, it triggers disclosure under impact materiality regardless of short-term financial consequences.

Conducting a robust double materiality assessment is the single most critical step in CSRD preparation. It determines which topical standards apply, which data points must be collected, and which stakeholders must be engaged. EFRAG's implementation guidance (IG 1) and its materiality assessment guidance (IG 2) provide detailed instructions, including suggested stakeholder engagement processes and scoring matrices.

What Mid-Market Companies (50–500 Employees) Need to Prepare

Mid-market companies occupy a unique position in the CSRD landscape. Some fall directly into scope as “large companies” (if they exceed two of the three size thresholds), while others are affected indirectly through value chain reporting requirements of their larger customers or through national transposition choices that may expand scope beyond the directive's minimum.

Direct Scope: Check the Three Thresholds

A company with 300 employees and €30 million in revenue already exceeds two thresholds (employees >250, turnover potentially below €50M but check the balance sheet). Companies near the boundary should model their two-year average headcount and review whether their balance sheet total has crossed the €25 million line, especially given asset revaluations or acquisitions that can move the needle.

Indirect Scope: Value Chain Requests

Even if your company is below the thresholds, expect data requests from larger customers who need to report on their upstream and downstream value chains under ESRS S2 (Workers in the Value Chain), E1 (scope 3 emissions), and E5 (resource use). Having structured ESG data ready positions your company as a preferred supplier in regulated industries.

Listed SMEs: Proportionate Standards

If your company is listed on an EU regulated market, you will use the LSME (Listed SME) set of ESRS, which reduces the reporting burden by limiting mandatory data points and simplifying narrative disclosures. EFRAG submitted the LSME exposure draft in January 2024, and the final standard is expected to be adopted as a delegated act by the Commission. Even listed SMEs should begin double materiality screening now to identify which topics are in scope.

Practical Steps: From Gap Analysis to Assurance

Step 1: Conduct a Gap Analysis

Map your existing reporting (GRI, CDP, EcoVadis questionnaires, customer sustainability surveys) against ESRS data points. EFRAG publishes an interoperability mapping between ESRS and GRI, ISSB IFRS S1/S2, and the TCFD framework. Identify where you already collect data, where proxies exist, and where net-new data collection processes are needed.

Step 2: Perform Double Materiality Assessment

Engage internal and external stakeholders. Use EFRAG's suggested scoring approach to rate impacts, risks, and opportunities on a severity and likelihood matrix. Document decisions with clear rationale — auditors will review this process as part of limited assurance engagement. A robust materiality assessment also protects against greenwashing allegations by demonstrating a structured, evidence-based approach.

Step 3: Establish Data Collection Infrastructure

CSRD reporting requires granular, auditable data across environmental, social, and governance dimensions. Mid-market companies often lack the integrated ERP systems of large corporates. Prioritise:

• GHG emissions: Secure energy consumption data from facilities, fleet, and travel. For scope 3, start with spend-based estimates and refine to activity-based calculations over time.
• Workforce metrics: ESRS S1 requires data on gender pay gap, training hours, work-related incidents, and workforce composition broken down by contract type, gender, and country.
• Governance data: ESRS G1 covers anti-corruption policies, lobbying activities, payment practices, and supplier relationship management.
• Value chain data: Begin requesting sustainability data from key suppliers and freight partners early. Many will need 6–12 months to respond adequately.

Step 4: Prepare for Limited Assurance

All CSRD sustainability reports must receive at least limited assurance from an independent auditor or assurance provider. The European Commission is working on limited assurance standards (through CEAOB) and may move to reasonable assurance by 2028. Practically, this means:

• Your data must have a documented trail from source to reported figure.
• Internal controls around ESG data should mirror the rigour of financial controls.
• Engage your auditor early — many firms require 6+ months lead time for first-time sustainability assurance engagements.

Step 5: Digital Tagging and Filing

CSRD requires sustainability information to be digitally tagged using the ESEF (European Single Electronic Format) taxonomy, specifically iXBRL tagging aligned with the ESRS taxonomy developed by EFRAG. This enables machine-readable extraction of sustainability data by regulators, investors, and civil society platforms. Companies should factor in the cost and timeline for iXBRL tagging tools or services.

Staying Ahead of Evolving Requirements

The CSRD regulatory landscape is not static. EFRAG continues to develop sector-specific standards (the first batch covering oil and gas, mining, road transport, and agriculture is expected soon), and the Commission has delegated authority to amend ESRS as implementation experience accumulates. National transposition may also introduce country-level variations — Germany's transposition, for instance, may align CSRD requirements with the existing Lieferkettensorgfaltspflichtengesetz (LkSG), creating additional domestic compliance layers.

For mid-market compliance teams with limited headcount, manually tracking every ESRS interpretation, FAQ update, EFRAG guidance document, and national transposition bill across 27 member states is impractical. Regulatory monitoring platforms like Polzia automate this surveillance by continuously scanning official sources — the EU Official Journal, EFRAG publications, national legislative databases, and regulatory authority announcements — and classifying updates by topic, jurisdiction, and severity. This ensures your team is alerted to material changes the moment they are published, rather than discovering them during annual reporting preparation.

Beyond monitoring, keeping a structured compliance calendar with key CSRD milestones — your reporting financial year start, the assurance engagement kick-off, the iXBRL tagging deadline, and the annual report filing date — reduces last-minute scrambles and gives leadership clear visibility into the sustainability reporting workstream.

Key Takeaways for Mid-Market Leaders

• Check your thresholds now. Two of three criteria (€25M balance sheet, €50M turnover, 250 employees) bring you into direct scope as a large company with FY 2025 reporting obligations.
• Even out-of-scope companies face value chain pressure. Larger customers will request structured ESG data under their own CSRD obligations.
• Double materiality drives everything. The outcome of your materiality assessment determines which standards, data points, and disclosures apply.
• Start data collection 12–18 months before your reporting year. Scope 3 emissions, value chain social data, and biodiversity metrics take time to establish.
• Engage auditors early. Limited assurance is mandatory, and assurance providers are capacity-constrained given the surge in demand.
• Automate regulatory tracking. ESRS interpretations, sector standards, and national transposition details will evolve continuously through 2026 and beyond.