GRI ESRS-Professional Exam - Topic 3 Question 7 Discussion

The Corporate Sustainability Reporting Directive (CSRD) replaced the Non-Financial Reporting Directive (NFRD) to address its limitations in scope and reporting requirements. Below are the explanations for each option:

A . False -- The NFRD did not require all companies in the EU to include a non-financial statement. Instead, it applied only to large public-interest entities with 500 or more employees.

B . True -- The NFRD applied to large public-interest entities, including listed companies, banks, and insurance firms with more than 500 employees.

C . False -- The NFRD did not mandate external assurance for sustainability information. The CSRD introduced mandatory assurance at the EU level.

D . False -- The CSRD did not replace the NFRD; rather, it expanded and strengthened reporting requirements. The NFRD was replaced by the CSRD, but not the other way around.

E . True -- The CSRD was introduced to improve the scope and depth of sustainability reporting compared to the NFRD. It expanded the number of entities required to report, standardized disclosures via ESRS, and introduced third-party assurance requirements.

Key Differences Between CSRD and NFRD

Feature

NFRD (Old Directive)

CSRD (New Directive)

Scope

Large public-interest entities (500+ employees)

All large companies + listed SMEs

Assurance

Not required

Mandatory external assurance

Disclosure Requirements

Limited sustainability disclosures

Comprehensive ESRS-based reporting

Reporting Standards

No standardized framework

ESRS-based mandatory framework

Application Date

In force since 2018

Applies from 2024 onwards

Official Reference:

CSRD Directive (EU) 2022/2464 -- Assurance & Reporting Provisions.

ESRS Compilation Explanations January - November 2024.