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What Is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive (CSRD) is an annual EU commission requirement with a comprehensive set of standard measures that include the key areas of Environment, Social, and Governance (ESG).

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CSRD, or the Corporate Sustainability Reporting Directive, is an EU commission requirement that companies report the impact of their business activities related to environmental, social, and governance (ESG) issues on the environment and society overall. It was signed into law on November 28, 2022, and formally adopted on January 5, 2023. The CSRD is in alignment with the European Green Deal, which has a goal of being the first climate-neutral continent.  

The requirement applies to large companies and also requires that companies have the information they report audited. Prior to CSRD companies were required to publish similar information under the Non-Financial Reporting Directive (NFRD).

What is the impact of CSRD on businesses and HR?

The CSRD is a tangible sign of the recognition that people are essential to business success. It raises the bar for companies to account for their people and the impact they have on the climate. From an HR standpoint, reporting relates to employee safety and well-being, diversity and inclusion, and governance (e.g., board composition, and company structure).

Businesses in the EU with more than 250 employees who are working in the EU must act urgently to get their people data ready for submission. More than 50,000 companies are affected.

While businesses may have to act quickly to understand and begin to gather data to meet the requirements of CSRD, there is potential business benefit in addition to simply meeting requirements. The information gathered can help businesses identify areas of opportunity for improvement. ESG has become a major focus—and one that can impact consumer and employee sentiment, and business performance.

What type of data is required by CSRD ESRS S1?

HR will be impacted through a section of the reporting standards related to people data. The measures and reporting requirements that have been adopted are laid out in the ESRS S1, published by EFRAG

Some of the data is very straightforward data (e.g., FTEs, locations employees work, gender, etc.). But other requirements are more complex—the Annual Compensation ratio, for instance, requires a comparison of the direct compensation of the highest paid person in the company to that of the median employee. Another measure, the Gender Pay Gap, requires complex decisions about how employees are paid, for instance.

The requirements go beyond simply reporting the data to also require explanations of what the numbers mean and how and why they may change.

Using people analytics to aid your CSRD efforts

The data requirements of CSRD can be taxing. But, even absent these requirements, people analytics are important for businesses to understand their human resources and the impacts of various decisions on these resources. Penalties for non-compliance can be stiff. Now is the time to begin getting processes in place to accurately track and report CSRD-required data.

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