What is the difference between NFRD and CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is an updated and expanded version of the existing Non-Financial Reporting Directive (NFRD). The CSRD is an EU legislative initiative that aims to enhance the transparency and comparability of sustainability reporting by companies in the region. Here are the main differences between CSRD and NFRD:

1. The scope of CSRD is much broader than NFRD. The number of companies required to report on CSRD in 2025 will be nearly 50,000 compared to 11,000 under NFRD.
2. The CSRD introduces more comprehensive reporting requirements compared to the NFRD. It includes additional mandatory reporting topics, such as climate change-related information, biodiversity, and social matters. The CSRD also includes specific reporting requirements related to sustainability policies, due diligence processes, and board diversity.
3. The CSRD emphasizes the use of digital reporting to enhance the accessibility, comparability, and usability of sustainability information. It introduces structured electronic reporting, requiring companies to use eXtensible Business Reporting Language (XBRL) format for their sustainability reports. This enables better integration of sustainability data into financial reporting and facilitates data analysis.
4. The CSRD introduces a mandatory external assurance requirement for sustainability reporting. Companies will need to obtain assurance on their sustainability information from independent auditors or assurance providers. This aims to increase the reliability and credibility of sustainability reports.
5. The CSRD aims to achieve greater harmonization and standardization of sustainability reporting practices across the EU. It introduces more detailed reporting standards and mandates the use of European sustainability reporting standards developed by the European Financial Reporting Advisory Group (EFRAG).