As the European Union works toward its 2050 climate neutrality goals, sustainability reporting has become a central regulatory requirement for businesses.
One major step was the Corporate Sustainability Reporting Directive (CSRD), which established stricter disclosure requirements for companies operating in the European Union.
Preparing for CSRD can appear complex, but with the right processes in place, businesses can build reliable carbon accounting systems and sustainability reporting workflows that support audit-ready disclosures.
This guide explains what CSRD requires, the carbon accounting expectations within the directive, and the practical steps enterprises should take now to prepare for carbon reporting.
What are CSRD carbon accounting and climate reporting requirements?
CSRD expands climate disclosure requirements. Companies must report consistent and verifiable data on greenhouse gas (GHG) emissions, carbon emissions, climate risks, and sustainability performance under the European Sustainability Reporting Standards.
These disclosures must also include documented calculation methods, governance processes, and supporting evidence.
ESRS climate disclosure requirements under CSRD
CSRD reporting follows the European Sustainability Reporting Standards, particularly ESRS E1, which covers climate change. These standards define the metrics, policies, and disclosures that organisations must include in sustainability reports, such as emissions data, climate risks, targets, and transition plans.
Organisations must structure their disclosures according to these standards to ensure sustainability information is presented in a consistent and comparable format.
Scope 1, Scope 2 and Scope 3 emissions reporting requirements
Companies are expected to measure and disclose greenhouse gas emissions across three categories.
- Scope 1: Direct emissions from owned or controlled operations
- Scope 2: Indirect emissions from purchased electricity, heating, or cooling
- Scope 3: Value chain emissions, including suppliers, logistics, and product use
Scope 3 emissions frequently represent the largest share of a company’s carbon footprint. As a result, organisations must collect emissions data from procurement activities, suppliers, and operational partners across the value chain.
Double materiality assessment for CSRD reporting
CSRD requires organisations to conduct a double materiality assessment. This process identifies sustainability topics that are material from two perspectives.
- Companies must assess their impact on the environment and society
- Companies must evaluate how sustainability issues create financial risks and opportunities for the business.
Data governance and traceability requirements
CSRD also introduces stronger expectations around sustainability governance. Organisations must document how sustainability data is collected, validated, and approved before disclosure.
This includes defining data ownership across departments, maintaining consistent calculation methodologies, and ensuring emissions data can be traced back to its original source.
Which companies must comply with CSRD reporting?
CSRD significantly expands the number of organisations required to disclose sustainability information. The directive applies to many companies operating in the European Union, including certain businesses headquartered outside the region.
Following amendments introduced through the EU Omnibus I package, the scope of CSRD has been revised. Companies are currently expected to fall within the directive if they have more than 1,000 employees and €450 million in annual turnover, although implementation may vary across EU member states as the legislation is adopted locally.
Large EU companies and listed entities
Large EU companies fall within the scope of CSRD if they meet the updated reporting thresholds introduced under recent regulatory amendments.
In general, companies must report if they have:
- More than 1,000 employees
- More than €450 million in annual turnover
Companies that previously reported under the Non-Financial Reporting Directive transition first, with CSRD disclosures beginning for the 2024 financial year.
Listed SMEs in EU-regulated markets
Small and medium-sized enterprises listed on EU-regulated markets must also report under CSRD. These organisations follow simplified reporting standards but are still required to disclose sustainability metrics, including climate-related data.
Non-EU companies with significant EU operations
CSRD also applies to certain non-EU companies. Businesses headquartered outside the EU must comply if they generate more than €150 million in annual turnover within the EU and have a significant subsidiary or branch in the region.
These organisations must publish sustainability disclosures covering their EU operations in line with CSRD reporting requirements.
CSRD reporting timeline and implementation phases
CSRD is being introduced gradually across several reporting cycles.
- 2024 financial year: companies previously subject to NFRD
- 2025 financial year: other large EU companies
- 2026 financial year: listed SMEs
- 2028 financial year: qualifying non-EU companies
Understanding whether and when your organisation falls within scope is the first step in preparing for CSRD reporting.
7 steps to prepare your organisation for CSRD carbon accounting
The following steps outline how enterprises can begin preparing their carbon accounting systems and sustainability reporting processes ahead of CSRD reporting deadlines.
Step 1: Confirm your CSRD reporting scope and timeline
The first step is to determine whether your organisation falls within the scope of the CSRD and identify the reporting timeline that applies to your business.
This requires reviewing company size thresholds, EU revenue exposure, and legal entity structures. Large organisations may need to assess reporting obligations across multiple subsidiaries, branches, and operating regions.
Once the reporting scope is defined, companies should establish internal ownership for sustainability disclosures and build a preparation timeline that aligns with their first CSRD reporting year.
Practical note: Assess reporting scope at the entity level. Different subsidiaries or EU operations may fall under CSRD at different points in the implementation timeline.
Step 2: Conduct a CSRD double materiality assessment
CSRD requires companies to evaluate sustainability topics through a double materiality assessment. This involves analysing both the organisation’s environmental and social impacts and the financial risks and opportunities associated with sustainability issues.
The results of this assessment determine which topics must be disclosed under ESRS reporting standards. Climate-related topics such as greenhouse gas emissions, energy consumption, and climate transition risks are commonly identified as material.
The outcome of this process defines the scope of sustainability reporting and the carbon accounting metrics that must be included in CSRD disclosures.
Practical note: Document the methodology used for the double materiality assessment and maintain evidence of stakeholder input to support transparency during assurance reviews.
Step 3: Map carbon data sources across your organisation
Accurate carbon accounting depends on identifying where emissions data originates across the organisation and understanding the activities that contribute to the company’s carbon footprint. This includes operational activities, procurement processes, logistics, energy consumption, and supplier relationships.
Many enterprises find that emissions data sits across multiple departments. Facilities teams manage energy consumption, finance teams oversee procurement data, while travel and logistics information may be stored in operational systems.
Organisations should document the systems, teams, and data owners responsible for each emissions category. This helps establish structured data collection processes and reduces gaps in Scope 1, Scope 2, and Scope 3 reporting.
Practical note: Begin by mapping major emissions sources such as purchased energy, business travel, and key suppliers. These areas frequently represent a large portion of total emissions.
Step 4: Establish a GHG Protocol carbon accounting methodology
Once emissions sources are identified, organisations must establish a consistent methodology for calculating greenhouse gas emissions. Most companies align their approach with the Greenhouse Gas Protocol, which provides the standard framework for measuring GHG emissions across Scope 1, Scope 2, and Scope 3 categories.
This step involves defining organisational and operational boundaries, selecting emission factors, and documenting how activity data will be converted into emissions figures.
Consistent calculation rules ensure that emissions data remains comparable across reporting periods and business units.
Practical note: Maintain clear documentation of emission factors, calculation methods, and estimation assumptions used within the carbon accounting methodology.
Step 5: Centralise sustainability and emissions data collection
CSRD reporting requires consistent sustainability data across the organisation. For many enterprises, emissions information is currently stored in spreadsheets, operational systems, procurement platforms, and finance tools.
Centralising this data creates a reliable foundation for carbon accounting and sustainability reporting. A structured data system allows organisations to collect information from multiple departments while maintaining consistent formats and calculation rules.
Clear data ownership is equally important. Each emissions category should have a defined team or individual responsible for providing and validating information.
Practical note: Define responsible data owners for each emissions category and reporting metric to improve accountability and reporting efficiency.
Step 6: Implement emissions data validation and audit controls
CSRD introduces independent assurance requirements for sustainability disclosures. Organisations must demonstrate how emissions data is collected, calculated, reviewed, and approved before it is reported.
Internal validation processes should confirm data completeness, identify anomalies, and ensure calculation methodologies are applied consistently. Many organisations are now introducing AI-assisted validation to detect data inconsistencies and reduce manual review effort.
Companies should also maintain supporting documentation for reported metrics, including source data, calculation logic, and methodology references.
Practical note: Maintain an audit trail for emissions data so that reported figures can be traced back to their original source during sustainability assurance reviews.
Step 7: Prepare ESRS-aligned sustainability disclosures
Organisations must ensure that emissions figures, climate targets, transition plans, and risk disclosures align with ESRS requirements. Climate metrics should also be consistent with governance and financial disclosures included in corporate reporting.
Preparing these disclosures early helps companies identify data gaps and refine reporting processes. This is particularly important for narrative disclosures, where organisations must provide structured explanations of policies, risks, and transition plans. Some organisations are adopting AI-assisted tools to support the drafting and structuring of these narrative disclosures in line with ESRS requirements.
Practical note: Conduct an internal readiness review before the first reporting year to identify gaps in data collection, calculation methods, and documentation.
How KEY ESG supports CSRD carbon accounting and reporting
Many organisations currently manage emissions data across spreadsheets, operational systems, and departmental tools – but this can make consistent reporting difficult.
KEY ESG provides a sustainability management system designed to support these requirements across complex organisations. The platform enables teams to collect, validate, and report sustainability data through structured workflows that support carbon accounting and regulatory disclosures.
Key capabilities include:
- Centralised sustainability data collection across entities, business units, and operational sites
- Structured carbon accounting and sustainability data collection, consistent emissions calculation methods
- Comprehensive Scope 1, Scope 2, and Scope 3 carbon accounting covering all 15 Scope 3 categories
- 70,000+ emission factors sourced from recognised databases, including DEFRA, US EPA, and Climatiq
- Multi-framework reporting aligned with CSRD, VSME, IFRS S1/S2, SFDR, TCFD, California Climate Laws, EDCI, GRI, CDP and Invest Europe.
- Built-in validation checks, approvals, and audit trails that support sustainability assurance
- AI-assisted narrative reporting to support CSRD policy disclosures and ESRS-aligned qualitative responses
- AI-powered data validation and anomaly detection to improve data accuracy and reduce manual review effort
Early preparation also improves data consistency, strengthens governance processes, and reduces reporting risk ahead of the first CSRD disclosure cycle.
Request a demo to see how KEY ESG supports CSRD readiness.
As the European Union works toward its 2050 climate neutrality goals, sustainability reporting has become a central regulatory requirement for businesses.
One major step was the Corporate Sustainability Reporting Directive (CSRD), which established stricter disclosure requirements for companies operating in the European Union.
Preparing for CSRD can appear complex, but with the right processes in place, businesses can build reliable carbon accounting systems and sustainability reporting workflows that support audit-ready disclosures.
This guide explains what CSRD requires, the carbon accounting expectations within the directive, and the practical steps enterprises should take now to prepare for carbon reporting.
What are CSRD carbon accounting and climate reporting requirements?
CSRD expands climate disclosure requirements. Companies must report consistent and verifiable data on greenhouse gas (GHG) emissions, carbon emissions, climate risks, and sustainability performance under the European Sustainability Reporting Standards.
These disclosures must also include documented calculation methods, governance processes, and supporting evidence.
ESRS climate disclosure requirements under CSRD
CSRD reporting follows the European Sustainability Reporting Standards, particularly ESRS E1, which covers climate change. These standards define the metrics, policies, and disclosures that organisations must include in sustainability reports, such as emissions data, climate risks, targets, and transition plans.
Organisations must structure their disclosures according to these standards to ensure sustainability information is presented in a consistent and comparable format.
Scope 1, Scope 2 and Scope 3 emissions reporting requirements
Companies are expected to measure and disclose greenhouse gas emissions across three categories.
- Scope 1: Direct emissions from owned or controlled operations
- Scope 2: Indirect emissions from purchased electricity, heating, or cooling
- Scope 3: Value chain emissions, including suppliers, logistics, and product use
Scope 3 emissions frequently represent the largest share of a company’s carbon footprint. As a result, organisations must collect emissions data from procurement activities, suppliers, and operational partners across the value chain.
Double materiality assessment for CSRD reporting
CSRD requires organisations to conduct a double materiality assessment. This process identifies sustainability topics that are material from two perspectives.
- Companies must assess their impact on the environment and society
- Companies must evaluate how sustainability issues create financial risks and opportunities for the business.
Data governance and traceability requirements
CSRD also introduces stronger expectations around sustainability governance. Organisations must document how sustainability data is collected, validated, and approved before disclosure.
This includes defining data ownership across departments, maintaining consistent calculation methodologies, and ensuring emissions data can be traced back to its original source.
Which companies must comply with CSRD reporting?
CSRD significantly expands the number of organisations required to disclose sustainability information. The directive applies to many companies operating in the European Union, including certain businesses headquartered outside the region.
Following amendments introduced through the EU Omnibus I package, the scope of CSRD has been revised. Companies are currently expected to fall within the directive if they have more than 1,000 employees and €450 million in annual turnover, although implementation may vary across EU member states as the legislation is adopted locally.
Large EU companies and listed entities
Large EU companies fall within the scope of CSRD if they meet the updated reporting thresholds introduced under recent regulatory amendments.
In general, companies must report if they have:
- More than 1,000 employees
- More than €450 million in annual turnover
Companies that previously reported under the Non-Financial Reporting Directive transition first, with CSRD disclosures beginning for the 2024 financial year.
Listed SMEs in EU-regulated markets
Small and medium-sized enterprises listed on EU-regulated markets must also report under CSRD. These organisations follow simplified reporting standards but are still required to disclose sustainability metrics, including climate-related data.
Non-EU companies with significant EU operations
CSRD also applies to certain non-EU companies. Businesses headquartered outside the EU must comply if they generate more than €150 million in annual turnover within the EU and have a significant subsidiary or branch in the region.
These organisations must publish sustainability disclosures covering their EU operations in line with CSRD reporting requirements.
CSRD reporting timeline and implementation phases
CSRD is being introduced gradually across several reporting cycles.
- 2024 financial year: companies previously subject to NFRD
- 2025 financial year: other large EU companies
- 2026 financial year: listed SMEs
- 2028 financial year: qualifying non-EU companies
Understanding whether and when your organisation falls within scope is the first step in preparing for CSRD reporting.
7 steps to prepare your organisation for CSRD carbon accounting
The following steps outline how enterprises can begin preparing their carbon accounting systems and sustainability reporting processes ahead of CSRD reporting deadlines.
Step 1: Confirm your CSRD reporting scope and timeline
The first step is to determine whether your organisation falls within the scope of the CSRD and identify the reporting timeline that applies to your business.
This requires reviewing company size thresholds, EU revenue exposure, and legal entity structures. Large organisations may need to assess reporting obligations across multiple subsidiaries, branches, and operating regions.
Once the reporting scope is defined, companies should establish internal ownership for sustainability disclosures and build a preparation timeline that aligns with their first CSRD reporting year.
Practical note: Assess reporting scope at the entity level. Different subsidiaries or EU operations may fall under CSRD at different points in the implementation timeline.
Step 2: Conduct a CSRD double materiality assessment
CSRD requires companies to evaluate sustainability topics through a double materiality assessment. This involves analysing both the organisation’s environmental and social impacts and the financial risks and opportunities associated with sustainability issues.
The results of this assessment determine which topics must be disclosed under ESRS reporting standards. Climate-related topics such as greenhouse gas emissions, energy consumption, and climate transition risks are commonly identified as material.
The outcome of this process defines the scope of sustainability reporting and the carbon accounting metrics that must be included in CSRD disclosures.
Practical note: Document the methodology used for the double materiality assessment and maintain evidence of stakeholder input to support transparency during assurance reviews.
Step 3: Map carbon data sources across your organisation
Accurate carbon accounting depends on identifying where emissions data originates across the organisation and understanding the activities that contribute to the company’s carbon footprint. This includes operational activities, procurement processes, logistics, energy consumption, and supplier relationships.
Many enterprises find that emissions data sits across multiple departments. Facilities teams manage energy consumption, finance teams oversee procurement data, while travel and logistics information may be stored in operational systems.
Organisations should document the systems, teams, and data owners responsible for each emissions category. This helps establish structured data collection processes and reduces gaps in Scope 1, Scope 2, and Scope 3 reporting.
Practical note: Begin by mapping major emissions sources such as purchased energy, business travel, and key suppliers. These areas frequently represent a large portion of total emissions.
Step 4: Establish a GHG Protocol carbon accounting methodology
Once emissions sources are identified, organisations must establish a consistent methodology for calculating greenhouse gas emissions. Most companies align their approach with the Greenhouse Gas Protocol, which provides the standard framework for measuring GHG emissions across Scope 1, Scope 2, and Scope 3 categories.
This step involves defining organisational and operational boundaries, selecting emission factors, and documenting how activity data will be converted into emissions figures.
Consistent calculation rules ensure that emissions data remains comparable across reporting periods and business units.
Practical note: Maintain clear documentation of emission factors, calculation methods, and estimation assumptions used within the carbon accounting methodology.
Step 5: Centralise sustainability and emissions data collection
CSRD reporting requires consistent sustainability data across the organisation. For many enterprises, emissions information is currently stored in spreadsheets, operational systems, procurement platforms, and finance tools.
Centralising this data creates a reliable foundation for carbon accounting and sustainability reporting. A structured data system allows organisations to collect information from multiple departments while maintaining consistent formats and calculation rules.
Clear data ownership is equally important. Each emissions category should have a defined team or individual responsible for providing and validating information.
Practical note: Define responsible data owners for each emissions category and reporting metric to improve accountability and reporting efficiency.
Step 6: Implement emissions data validation and audit controls
CSRD introduces independent assurance requirements for sustainability disclosures. Organisations must demonstrate how emissions data is collected, calculated, reviewed, and approved before it is reported.
Internal validation processes should confirm data completeness, identify anomalies, and ensure calculation methodologies are applied consistently. Many organisations are now introducing AI-assisted validation to detect data inconsistencies and reduce manual review effort.
Companies should also maintain supporting documentation for reported metrics, including source data, calculation logic, and methodology references.
Practical note: Maintain an audit trail for emissions data so that reported figures can be traced back to their original source during sustainability assurance reviews.
Step 7: Prepare ESRS-aligned sustainability disclosures
Organisations must ensure that emissions figures, climate targets, transition plans, and risk disclosures align with ESRS requirements. Climate metrics should also be consistent with governance and financial disclosures included in corporate reporting.
Preparing these disclosures early helps companies identify data gaps and refine reporting processes. This is particularly important for narrative disclosures, where organisations must provide structured explanations of policies, risks, and transition plans. Some organisations are adopting AI-assisted tools to support the drafting and structuring of these narrative disclosures in line with ESRS requirements.
Practical note: Conduct an internal readiness review before the first reporting year to identify gaps in data collection, calculation methods, and documentation.
How KEY ESG supports CSRD carbon accounting and reporting
Many organisations currently manage emissions data across spreadsheets, operational systems, and departmental tools – but this can make consistent reporting difficult.
KEY ESG provides a sustainability management system designed to support these requirements across complex organisations. The platform enables teams to collect, validate, and report sustainability data through structured workflows that support carbon accounting and regulatory disclosures.
Key capabilities include:
- Centralised sustainability data collection across entities, business units, and operational sites
- Structured carbon accounting and sustainability data collection, consistent emissions calculation methods
- Comprehensive Scope 1, Scope 2, and Scope 3 carbon accounting covering all 15 Scope 3 categories
- 70,000+ emission factors sourced from recognised databases, including DEFRA, US EPA, and Climatiq
- Multi-framework reporting aligned with CSRD, VSME, IFRS S1/S2, SFDR, TCFD, California Climate Laws, EDCI, GRI, CDP and Invest Europe.
- Built-in validation checks, approvals, and audit trails that support sustainability assurance
- AI-assisted narrative reporting to support CSRD policy disclosures and ESRS-aligned qualitative responses
- AI-powered data validation and anomaly detection to improve data accuracy and reduce manual review effort
Early preparation also improves data consistency, strengthens governance processes, and reduces reporting risk ahead of the first CSRD disclosure cycle.
Request a demo to see how KEY ESG supports CSRD readiness.
