Greenomy claims that the CSRD seeks to improve transparency and provide a consistent reporting environment for more than 50,000 businesses, expanding on the framework of the Non-Financial Reporting Directive (NFRD). Businesses are required by this order to provide comprehensive reports that include up to 1,200 different data points about their effects on environmental, social, and governance (ESG) factors.

Because of their familiarity with materiality assessments and sustainability reporting, companies that were previously subject to the NFRD may find the shift less intimidating. However, the CSRD is a big obstacle for many people who are just starting out in this field. Businesses frequently make the mistake of delaying preparation until mid-2025 as the 2026 deadline for the fiscal year 2025 reports draws near. This approach jeopardizes the thorough and timely collection of essential data and may make auditing procedures more difficult.

The road to compliance begins right now. It is essential to comprehend the needs and timeframe. Large businesses not covered by the NFRD are required by the CSRD to compile their reports using data from 2025, which means they must fulfill at least two of the following requirements: they must have more than 250 workers, a net turnover of at least €50 million, or total assets of at least €25 million. Depending on how the directive is implemented nationally, reports for the fiscal year must be released between six and twelve months following the end of the year.

Many big organizations underestimate the level of rigor needed because they believe the first reporting year will be a trial phase. These "Wave 2" enterprises have been given more time by the European Commission to prepare—not as a grace period, but as a crucial opportunity to set up procedures, undertake dry runs, and guarantee data accuracy for the first reporting cycle. Furthermore, it is clear that regulatory leniency in the first year is unlikely given the severe penalties for non-compliance that are already in place in nations like France and Germany.

The process of preparation is thorough. The majority of businesses are starting Double Materiality Assessments (DMAs), and the results help with the data gap analysis that follows. The European Sustainability Reporting Standards' (ESRS) comprehensive disclosure requirements should be divided into digestible chunks. Start with sections like E1 (Climate Change) and S1 (Own Workforce), where some data may already be accessible.

It might be quite helpful to use a digital reporting tool to speed up the Gap Analysis. These technologies speed up remedial efforts, reveal flaws, and make it easier to consolidate data across departments. By involving auditors early on, such obstacles may be avoided and the gathered data will be guaranteed to fulfill audit criteria right away.

It is essential that businesses that have not yet started their DMA do so right away. This evaluation usually takes three to four months to complete, with the Gap Analysis and material ESRS data gathering continuing until early 2025. In addition to meeting legal requirements, this preemptive strategy lays the groundwork for effective and law-abiding reporting in 2026.