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Navigating the CSRD: Challenges, Opportunities & Success Factors

Published on 03/02/2025 by Acclaro Advisory

The Corporate Sustainability Reporting Directive (CSRD) is a European Union regulation designed to enhance the scope and quality of corporate sustainability reporting. Building upon the Non-Financial Reporting Directive (NFRD), the CSRD mandates standardised Environmental, Social, and Governance (ESG) disclosures. The directive aims to improve transparency, combat greenwashing, and integrate sustainability considerations into corporate decision-making.

Businesses under CSRD must now apply double materiality, considering both the impact of their operations on society and the environment (impact materiality) and the risks and opportunities sustainability issues pose to their business (financial materiality). CSRD also introduces mandatory third-party assurance, requiring sustainability data to meet the same level of scrutiny as financial reporting.

The importance of sustainability reporting and the CSRD journey

Sustainability reporting is no longer a tick-box exercise—it’s a strategic tool. Effective reporting enables businesses to:

  • Enhance transparency and build trust with stakeholders.
  • Mitigate ESG risks and align with evolving regulatory expectations.
  • Improve decision-making by integrating sustainability data into corporate strategy.
  • Access sustainable finance by demonstrating robust ESG credentials.
  • Create long-term value by embedding sustainability into business resilience strategies.

For businesses unfamiliar with comprehensive ESG reporting, the journey to CSRD compliance will require a shift in mindset. Companies should start by:

  1. Understanding CSRD requirements and mapping them against existing reporting frameworks.
  2. Conducting a double materiality assessment to identify relevant ESG risks and opportunities.
  3. Enhancing data governance and systems to ensure accurate, auditable sustainability disclosures.
  4. Engaging senior leadership and integrating ESG considerations into corporate strategy.
  5. Preparing for third-party assurance by strengthening internal controls and verification processes.

What’s new about CSRD?

The CSRD introduces several new elements that businesses must integrate into their reporting approach:

1. Double Materiality

Unlike traditional financial materiality, CSRD requires companies to assess their own ESG impact alongside the financial risks posed by sustainability issues. This means businesses must engage with stakeholders and assess their value chain impact.

2. European Sustainability Reporting Standards (ESRS)

The ESRS framework defines the mandatory reporting structure, covering areas such as climate change, biodiversity, human rights, and circular economy.

3. Digital Tagging (XBRL Format)

Companies must report sustainability data in a machine-readable format, aligning with EU Taxonomy regulations and ensuring comparability across industries.

4. Mandatory Assurance

CSRD reporting will transition from limited to reasonable assurance by 2028, meaning companies must prepare for external audits of their ESG data.

5. Integration with Financial Reporting

Sustainability disclosures must be included in the management report, ensuring that ESG risks and financial risks are considered together.

Key challenges businesses are facing

While CSRD compliance presents an opportunity, it also introduces significant challenges:

  • Data Complexity: Many companies lack robust systems to track Scope 3 emissions, supply chain impacts, and biodiversity effects.
  • Regulatory Deadlines: Businesses face tight timelines, with first reports due in 2025 for NFRD-covered companies and 2026 for large firms.
  • Skills Gap: ESG reporting demands cross-functional expertise, and many businesses will need to upskill teams or engage external consultants.
  • Third-Party Assurance: Independent verification requires strong internal controls, which many companies have not yet developed.
  • Global and Sectoral Alignment: Companies operating across multiple jurisdictions must integrate CSRD requirements with other international frameworks, such as TCFD, ISSB, and GRI.

Key opportunities for business growth

CSRD compliance isn’t just a regulatory burden—it’s an opportunity to drive value creation:

  • Enhanced Reputation: Transparent reporting strengthens brand trust and competitive positioning.
  • Access to Capital: Investors are increasingly prioritising companies with strong ESG performance.
  • Operational Efficiency: Improved data governance and sustainability measures can reduce costs and drive efficiencies.
  • Risk Mitigation: Embedding scenario analysis and climate transition planning strengthens business resilience.
  • Innovation & Growth: Proactive sustainability leadership can unlock new business models and market opportunities.

Critical success factors for CSRD implementation

To successfully navigate CSRD, businesses should focus on the following success factors:

  1. Engagement from senior leadership – Board-level buy-in is essential.
  2. Robust data management systems – Ensuring audit-ready sustainability data.
  3. Iterative approach to materiality assessment – Sustainability risks evolve, requiring regular reassessment.
  4. Alignment with existing frameworks – Leveraging TCFD, EU Taxonomy, and ISSB to streamline compliance.
  5. Upskilling teams – Building internal capabilities for sustainability reporting.
  6. Collaboration with auditors – Engaging third-party assurance providers early.
  7. Embedding sustainability into corporate strategy – Going beyond compliance to unlock long-term value.

Final thoughts

CSRD is a game-changer for corporate sustainability. While compliance presents challenges, businesses that embrace the directive strategically will strengthen their resilience, build stakeholder trust, and unlock new opportunities. Now is the time for organisations to act—by investing in data infrastructure, governance frameworks, and sustainability leadership, businesses can turn CSRD compliance into a competitive advantage.

The approach to delivering the CSRD however is currently (February 2025) under review. Stay on top of the shifts and evolution of ESG frameworks and standards by subscribing to our newsletter and receiving our monthly ESG Framework and Standards Tracker.

Need help navigating CSRD?

Acclaro Advisory supports businesses in sustainability strategy, reporting, and compliance.

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