New CRSD Directive: to whom it is addressed and what standards must be complied with

The new CRSD Directive (Corporate Sustainability Reporting Directive) marks a significant turning point in the European regulatory landscape, spawning a new era in corporate sustainability reporting.

In a global economy increasingly focused on corporate engagement in the three ESG (Environmental, Social, Governance) areas, the CSRD urges European companies to position themselves as vanguards in environmental, social and governance responsibility, and invests the European Union with the role of global leader in promoting corporate sustainability.

In this article we explore what the CSRD is, to whom it applies, and what standards ensure compliance.

What is the CSRD?

The CSRD is the legislation issued by the European Union replacing the previous Non-Financial Reporting Directive (NFRD). It addresses the need for increasing the transparency and comparability of non-financial information with the aim of promoting more responsible and sustainable corporate behavior.

The changes introduced by the Directive are numerous, but they can be summarized as follows:

• Extension of scope – As detailed below, the CSRD greatly expands the number of companies subject to mandatory reporting.
• Digitization of reporting – The CSRD prescribes the use of a digital format to facilitate the transmission, comparability and accessibility of sustainability disclosures.
• Integration of financial and ESG information – The CSRD requires sustainability information to be integrated into the Management Report.
• Standardization of reporting – Having an unambiguous reporting framework enables companies to more clearly and consistently communicate their ESG performance.
• Assurance Requirement – The CSRD requires external review of sustainability reports by independent experts to ensure the reliability and accuracy of the information provided.
• Integrating sustainability into business strategies – The CSRD drives companies to integrate sustainability more fully into their business strategies, in favor of a more holistic and responsible approach to business management.
• Focus on sustainability-related risks and opportunities – The CSRD requires companies to identify, assess and communicate risks and opportunities arising from their sustainability practices as well as from the external environment, in favor of more proactive and strategic management.
• Alignment with the Sustainable Development Goals (SDGs) of Agenda 2030 – The CSRD is aligned with the United Nations Sustainable Development Goals, emphasizing the importance of integrating sustainability into business strategies.

The CSRD is thus an important step toward a more sustainable, responsible economy, requiring companies to make a renewed commitment to managing and reporting their ESG impacts.

To whom does the CSRD apply?

The CSRD, an evolution of the previous NFRD, greatly expands the scope of sustainability reporting. It is no longer limited only to large public enterprises with more than 500 employees, but now includes:

• Large unlisted enterprises which, as of the closing date of the financial statement, exceeded at least two of the following criteria: more than 250 employees, 25 million euros in shareholders’ equity, 50 million euros in revenues.
• Listed SMEs excluding micro-enterprises.
• Enterprises with a non-EU parent company which, for the most recent financial statements, generated net revenues of more than 150 million euros in Europe and at least one subsidiary meets the CSRD size criteria or one branch generated net revenues of more than 40 million euros in the previous financial year.

Since this is an impactful change, there will be an adaptation period for each of the entities required to comply with the new European directive. The first to have to comply with the new provisions are large listed companies, followed by the SMEs starting in 2026 and finally, subsidiaries of non-EU companies starting in 2028.

With the CSRD, therefore, the number of companies required to report in detail and transparently on their ESG impact increases dramatically, facilitating the decisions of investors, consumers and other stakeholders, as well as promoting a culture of sustainable, responsible governance.

How the CSRD changes sustainability reporting with the ESRS, LSME and VSME Standards

As mentioned, the CSRD standardizes the reporting of companies’ sustainability information by introducing a set of new Standards called ESRS (European Sustainability Reporting Standards).

The ESRS Standards, drafted by EFRAG under a mandate from the European Commission, establish a detailed regulatory framework for reporting sustainability information, ensuring completeness, accuracy and comparability of data. Complying with these Standards means that companies have to compile comprehensive reports with in-depth information on their environmental, social and governance impacts, and to describe how these impacts are managed and integrated into their business strategies.

To facilitate small- and medium-sized enterprises, EFRAG has also developed the VSME Standard (Voluntary standard for non-listed Small- and Medium-sized Enterprises) and the LSME Standard (Standard for Listed Small- and Medium-sized Enterprises), simplified frameworks compared to the ESRS aimed at non-listed SMEs that report voluntarily, and listed SMEs, respectively.

Adopting the ESRS Standards, or rather, in the case of SMEs, the VSME or LSME Standard, represents a strategic opportunity. Indeed, complying with these Standards means integrating sustainability into the heart of business strategies, promoting a culture of transparency and accountability that can bring important competitive advantages. Companies that dedicate a strong commitment to sustainability improve their reputational returns, attract responsible investment, and respond more effectively to the expectations of consumers and other stakeholders.

In addition, compliance with the ESRS or the VSME/LSME Standards enables companies to anticipate regulatory and market trends, positioning themselves as leaders in sustainable development. Detailed, transparent reporting according to these standards also helps companies better identify and manage sustainability risks, as well as seize opportunities for innovation and sustainable growth.

Way2Global: your ideal language partner for CSRD compliance

Although Way2Global is a small translation agency, not required to report under the new CSRD standards, we have decided to proactively adopt these practices.

As a B Corp certified Benefit Corporation, we report on our ESG commitment both through the Impact Report, which is mandatory for us as a Benefit corporation, and through a full-fledged Integrated Report, which we voluntarily prepare to reflect our ongoing commitment to sustainable development and a culture of sustainability.

At the beginning of the year, we participated in the EFRAG public consultation and field test on the VSME Standard initiatives and shared our experience at various webinars organized by authoritative institutions such as OIBR.

Direct experience and familiarity with the standards introduced by the CSRD Directive not only enable us to report more effectively on our ESG efforts, but also qualify us as an authoritative agency for translation of sustainability reports and statements.

With more than three decades of experience in translating complex financial documents, at Way2Global we guarantee accurate translations that comply with applicable standards, facilitating clear, accurate communication of the information required by the CSRD.

Our team of translators specializing in the financial sector expertly handles the specific terminology of sustainability documentation, ensuring maximum accuracy and uniformity of the translations, thanks in part to the use of advanced terminology management tools that optimize delivery times.

Choosing Way2Global means opting for a competent, reliable partner capable of supporting companies at every stage of the CSRD compliance process, from translation of sustainability reports to strategic language consulting.

Our mission is to help companies effectively communicate commitments and achievements in the area of sustainability, effectively contributing to building a responsible, sustainable future.

If your company is facing the CSRD challenge, contact us today to find out how our specialized translation services can facilitate your compliance journey. Together, we can make a difference.