Material scope of sustainability reporting – what will actually need to be disclosed?

In the second article of our series exploring the issues related to the Corporate Sustainability Reporting Directive (the so-called CSRD directive), we will take a closer look at the material scope of reporting. In the next paragraphs we will focus on information that obliged undertakings are expected to disclose in their management reports. Please be reminded that due to the entry into force of the new regulations under the CSRD directive on 5 January 2023, the reporting obligations under the existing provisions of 2013/34/EU directive have changed[1].

What information must be disclosed by obliged entities?

The CSRD directive requires entities obliged to report on sustainability to provide information which enable the understanding of:

  • the reporting undertaking's impact on sustainability matters, as well as
  • how sustainability matters affect the undertaking’s development, performance and position.

At the beginning, it is important to clarify what is meant by sustainability matters. This is in fact essential in order to understand the broad scope of the reporting set by the CSRD directive. Sustainability matters are to be understood as environmental, social and human rights as well as governance factors, including sustainability factors (environmental, social and labour matters, as well as those relating to respect for human rights and anti-corruption and bribery). Sustainability issues, therefore, touch on many aspects of operations of the reporting undertakings.

Based on the reported information, it should therefore be possible to understand not only how the undertaking's activities affect sustainability issues, but also how the matter in question affects the company's operations.

What should be included in the provided information?

The CSRD directive regulations broadly identify the issues that entities will need to disclose as part of the information presented in sustainability reporting. The relevant company report will have to include, amongst others:

  • a brief description of the undertaking’s business model and strategy, including, amongst other things, the resilience of the undertaking’s business model and strategy in relation to risks related to sustainability matters,
  • a description of the role of the administrative, management and supervisory bodies of the undertaking with regard to sustainability matters, and of their expertise and skills in relation to fulfilling that role or the access such bodies have to such expertise and skills;
  • a description of the undertaking’s policies in relation to sustainability matters,
  • a description of the due diligence process implemented by the undertaking with regard to sustainability matters, and, where applicable, in line with EU requirements on undertakings to conduct a due diligence process,
  • a description of any actions taken by the undertaking to prevent, mitigate, remediate or bring an end to actual or potential adverse impacts, and the result of such action,
  • a description of the principal risks to the undertaking related to sustainability matters, including a description of the undertaking’s principal dependencies on those matters, and how the undertaking manages those risks,
  • indicators relevant to the disclosed information referred to in the CSRD directive.

In some cases, in addition to information on own operations, obliged undertakings should also disclose data related to the entity's value chain. The said value chain consists of all activities, resources and relationships related to the business model and the external environment in which the entity operates – undertaken and used by the undertaking, from the conception of the creation of a product or service to the end of its life. The information mentioned above includes, in particular, data on the entity's products and services, its business relationships and supply chains.

For large groups, the information in question will be presented to a similar extent in the consolidated management reports prepared by their parent companies. Some entities – primarily small and medium-sized listed companies – will be able to limit their reporting to the individual disclosures required by the CSRD directive, due to the smaller scale of operations.

What about the comparability of disclosed information?

The regulations of the CSRD directive, amending the scope of 2013/34/EU directive, create a framework for sustainability reporting. However, the provisions in question are so general and unspecific (e.g. the requirement to indicate a description of the undertaking's policies with regard to sustainability issues) that entities would be able to arbitrarily disclose data in the reporting process. This, in turn, would make it impossible to compare the information disclosed by different entities, which would defeat the purpose of the changes introduced by the CSRD directive. As we indicated in the previous article, the objective of the CSRD directive is to harmonise standards for reporting sustainability information and to increase the comparability of reported data.

Therefore, pursuant to the regulations introduced by the CSRD directive, the provision of information by obliged entities will be based on the so-called sustainability reporting standards. The standards are intended to ensure the quality of the information presented by obliged entities, as the information will have to be understandable, relevant and – most importantly – verifiable.

The first standards, which will apply irrespective of the sector in which the entity operates, should be adopted by the European Commission in the form of delegated acts by 30 June 2023. While drafting them, the EU Commission should take into account technical advice and materials prepared by the European Financial Reporting Advisory Group (EFRAG).

EFRAG has already prepared a first set of 12 drafts of sector-independent standards and submitted them to the European Commission for review at the end of last year. We will look at the content of these drafts in the following articles. Nevertheless, it should already be emphasised that the drafts of the above-mentioned standards indicate the specific, sometimes very detailed data that undertakings will have to disclose as part of their ESG reporting (i.e. with regard to environmental, social (including labour) matters and corporate governance).


As a result of the revision of 2013/34/EU directive pursuant to the CSRD directive regulations, certain undertakings will have to report information which enable understanding of how their activities affect sustainability matters, as well as how these matters affect the entity's operations. The disclosed information will often not only relate to the internal operations of the obliged entity, but also to its entire value chain.

However, information to be provided as part of sustainability reporting will be specified in the reporting standards currently prepared by the European Commission. We will still have to wait for the adoption of these standards and their entry into force. In the meantime, companies that will be subject to the reporting obligation under the CSRD directive should already start taking the first steps to verify that they have the data to comply with their reporting obligations based on EFRAG's draft reporting standards, for example relevant policies and other documents concerning the company’s operations, and commence introducing procedures that will ensure undertaking’s sustainable performance.

[1] Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ 2013 L. no. 182, p. 19 as amended).


We invite you to read the previous part of the article: CSRD Directive – Part I