What is CSRD? A Simple Guide for Supply Chain & ESG Professionals

What is CSRD? A Simple Guide for Supply Chain & ESG Professionals

Aravina Team
ESG Compliance, Sustainability Reporting

What is CSRD? A Simple Guide for Supply Chain & ESG Professionals

Understanding CSRD and Its Impact on Businesses

The Corporate Sustainability Reporting Directive (CSRD) is a European Union regulation that significantly expands sustainability reporting requirements for businesses. It replaces the Non-Financial Reporting Directive (NFRD) and mandates that more companies disclose their environmental, social, and governance (ESG) performance in a standardised format.

CSRD is designed to enhance transparency, improve accountability, and ensure that companies take meaningful steps toward sustainability.

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Who Needs to Comply with CSRD?

CSRD applies to a broad range of companies, including:

  1. Large EU Companies – Organizations that meet at least two of the following criteria:
    • More than 250 employees
    • Over €40 million in net turnover
    • More than €20 million in total assets
  2. Non-EU Companies with EU Operations – Companies generating more than €150 million in annual revenue within the EU.
  3. Listed Small and Medium Enterprises (SMEs) – Although they have a transition period, listed SMEs will also be required to comply

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Key Reporting Requirements Under CSRD

Companies subject to CSRD must disclose detailed sustainability data based on the European Sustainability Reporting Standards (ESRS). These disclosures cover:

  • Environmental Factors – Carbon emissions (Scope 1, 2, and 3), resource usage, climate impact, biodiversity effects.
  • Social Responsibility – Employee treatment, diversity and inclusion, labor conditions, human rights compliance.
  • Governance – Business ethics, anti-corruption measures, risk management frameworks.

Unlike previous regulations, CSRD mandates third-party auditing to verify the accuracy of sustainability reports.

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How CSRD Affects Supply Chains

For supply chain and procurement teams, CSRD compliance means:

  • Supplier Due Diligence: Companies must ensure that their suppliers align with ESG standards.
  • Data Collection Challenges: Gathering verified sustainability metrics across multiple suppliers can be complex.
  • Risk of Non-Compliance: Failure to report accurate ESG data may lead to penalties, reputational damage, and loss of business opportunities

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How to Prepare for CSRD Compliance

  1. Assess Your Current ESG Data – Identify gaps in sustainability reporting and ensure proper documentation.
  2. Implement Automated ESG Data Collection – Relying on manual spreadsheets is inefficient. AI-powered platforms like Aravina can streamline supplier ESG tracking.
  3. Align with European Sustainability Reporting Standards (ESRS) – Ensure your reporting framework meets CSRD requirements.
  4. Engage Suppliers in ESG Compliance – Work closely with vendors to improve sustainability data transparency.
  5. Prepare for External Audits – Establish processes for third-party assurance of sustainability disclosures.

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The Future of ESG Reporting Under CSRD

The CSRD marks a shift toward greater accountability and transparency in corporate sustainability. Companies that proactively adopt ESG best practices will not only avoid regulatory risks but also gain a competitive edge in securing investments, winning contracts, and building brand trust.

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Conclusion

CSRD compliance is a major step forward in corporate sustainability, but it requires strategic planning and advanced ESG data management. Companies should act now to integrate automated ESG reporting solutions and ensure their supply chains align with sustainability goals.

Looking for a simple way to manage CSRD compliance? Speak with Aravina today