As shown in the graphic above, each regulation contributes in a distinctive way to align capital flows towards greener economic activities.
- The EU Taxonomy: The EU Taxonomy is a common system for determining whether an economic activity qualifies as environmentally sustainable.
- The Sustainable Finance Disclosure Regulation: The SFDR introduces disclosure requirements for financial market participants and financial advisors selling sustainable finance products.
- The Corporate Sustainability Reporting Directive: The CSRD defines disclosure by large and listed companies on their sustainability risks and impacts.
In a nutshell: Corporations disclose their sustainability performance under the CSRD and the EU Taxonomy. Financial market participants and advisers use this information to fulfil their disclosure needs and derive how “green” a financial product is (light or dark green products). Moreover, sustainability topics are very relevant to stakeholders, as the still-growing appetite for ESG-aligned investments indicates. So the interaction of the CSRD, SFDR and Taxonomy contributes to aligning capital allocation to sustainable activities.
The CSRD and the ESRS – Two sides of the same coin
So what is the difference between the CSRD and the ESRS ? There is less of a “difference”, but rather a “union” of both since the CSRD and the ESRS are closely intertwined.
|The CSRD is a regulatory initiative that defines corporate sustainability reporting requirements for large and listed corporations in the European Union (and for some Non-EU companies ) – it is about the “why” and defines the “who” and “when“.
||The ESRS is the reporting framework corporations must use to disclose their sustainability performance under the CSRD.
As a reporting framework, the ESRS guides the “how” and “what“.
From “Why” to “How”
Why: There are good reasons for the CSRD – for example, overcoming the shortcomings of its predecessor, the Non-Financial Reporting Directive (NFRD).
Who: The CSRD will apply to around 50.000 companies from the European Union and about 10.000 non-EU companies.
When: The CSRD is being phased in. So only some companies that fall under the CSRD will have to report immediately.
How: This is where the ESRS as a reporting framework comes into play. The ESRS guides how companies report under the CSRD and the disclosure format.
What: The ESRS will also define the scope of information that has to be disclosed – in general and specific to E, S, and G. There will be even sector specific standards at a later stage.
In conclusion, the CSRD and the ESRS are two sides of the same coin. While one represents the regulatory initiative, the other provides a framework for the sustainability reporting of corporations. Therefore, we have compiled a selection of blog posts and links in the following section and invite you to learn more about the CSRD and the ESRS.
Sources and further reading
 European Commission – A European Green Deal
 NordESG – What is the EU Taxonomy?
 What is the Sustainable Finance Disclosure Regulation?
 What is the Corporate Sustainability Reporting Directive?
 The The European Sustainability Reporting Standard
 The CSRD and non-EU companies – The Brussels Effect