According to a recent survey from PwC Luxembourg, there are less than half of companies mandated to report under the new EU Corporate Sustainability Reporting Directive who said they were “fully confident” that they would meet their reporting obligations in the next year. That said, still many firms feel that CSRD will really bring about significant change to how it operates its business, most importantly relating to finance as well as employees’ retention.
The CSRD is the most significant update of the EU’s earlier Non-Financial Reporting Directive, or NFRD. While more than 50,000 companies will be covered by the CSRD, only 12,000 are now covered by the NFRD. Under the CSRD, far more detailed reporting will be expected on a company’s environmental, human rights, social standards, and sustainability-related risks-all against the backdrop of ESRS.
The CSRD will apply to large public-interest companies with more than 500 employees from the beginning of 2024, with first reports submitted in 2025. Other companies, like those with more than 250 employees or €50 million revenue, will be subject to CSRD in 2026, and smaller listed companies and non-EU companies with more than €150 million in revenues in the EU will begin reporting by 2029.
However, most of them are not ready to report CSRD. Only 4% of companies that are obliged to report in 2024 report being completely prepared to issue a CSRD report. Meanwhile, 5% have taken no implementation action at all. Another 22% are still figuring out what the concepts and requirements of the CSRD mean for them. Another 56% report knowing the CSRD and the ESRS. Although there is this mixed readiness, companies consider the CSRD material to their business operations.
On a scale measuring their confidence in successfully implementing the CSRD, 30% of companies that will report in 2024 scored themselves at a 3 or below, while 42% said they were completely confident. For companies that will report in 2025, only 14% said they were completely confident. However, most companies believe the CSRD is highly relevant to value creation.
More than half of companies reporting in 2024 believe that CSRD impacts value creation, including aspects of financing conditions (47 percent), employee retention (42 percent), and company valuation (36 percent). Moreover, over 85 percent of respondents indicated that they would use sustainability data relevant to CSRD within their material KPI when deciding executive compensation.
Michael Horvath, Advisory Partner and Sustainability Leader at PwC Luxembourg, said that CSRD is an important step for Europe in achieving its Green Deal objectives. According to him, the CSRD has brought sustainability reporting to a level comparable to financial reporting and has challenged companies to include sustainability within their core business models and decision-making processes. However, that step to comprehensive sustainability reporting poses some challenges, especially concerning data quality and consistency. In fact, the survey indicates that companies reporting in 2024 are worried about such issues more than those reporting in 2025, with 55% citing data quality as a concern compared to just 24% of those in the latter group. Smaller companies reporting in 2025 were more concerned with resource constraints as 54% of them indicated that aspect, while 45% of larger companies reported the same in 2024.
A huge percentage of companies will have to invest in technology and human resources in order to meet these newly given reporting standards.
More than 90% of the companies that need to report in 2024 or 2025 have already implemented or plan to implement technology solutions for CSRD reporting. However, only 36% of companies reporting in 2024 and 15% of those reporting in 2025 currently have non-financial reporting technology in place.
All companies surveyed have already implemented or are in the process of developing training programs for their staff to familiarise them with CSRD’s sustainability reporting requirements. The survey further reported that significant human resources are being devoted by firms for CSRD compliance. More than half of the companies responding are allocating between 3 to 5 full-time employees to CSRD reporting; more than 20% is also assigning between 6 to 10 employees to CSRD reporting. Olivier Carré, Deputy Managing Partner and Technology & Transformation Leader at PwC Luxembourg, believes the use of advanced technology for managing and integrating these large amounts of sustainability data has been critical in the success of delivering the CSRD. But data quality and consistency problems are still there, yet such a high demand for timely accurate ESG reporting means a huge opportunity. He urged the need for significant investment in robust data management and reporting systems that can help overcome these challenges to comply with the requirements of the CSRD.