The CSRD represents the EU's most ambitious attempt yet to standardise sustainability reporting. Adopted in December 2022, it significantly expands upon the previous Non-Financial Reporting Directive (NFRD), both in the number of companies required to report and in the depth of disclosures demanded.

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Scope

The original CSRD was set to cover approximately 50,000 companies. Then the EU had second thoughts. Following the "Omnibus Simplification" package, the scope shrunk to about 5,500 companies. The regulation now applies to large companies only:

Getting exempted from the CSRD sounds great until you realise the market doesn't care what the regulators say. Sure, you're off the legal hook, but banks and investors still need their ESG data to comply with their own rules. Being exempt from mandatory reporting doesn't mean you're exempt from economic pressure. If your bank needs sustainability data to approve your loan, or if your biggest customer wants to know your carbon footprint before signing a contract, you're still reporting. The difference is that, for many companies, it's now a competitive advantage rather than a legal obligation. Voluntary transparency has become the price of doing business with the big players.

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Implications

Here's where things get serious.The CSRD transformed sustainability reporting from a largely voluntary exercise into a legal obligation with meaningful enforcement mechanisms. Companies must get their sustainability information audited, just like their financial statements. Non-compliance carries real consequences: financial penalties, reputational damage, and potential legal liability.

And there's more! The CSRD also introduced "double materiality," which is exactly as fun as it sounds. Companies must report on how sustainability issues affect their business performance and financial position (financial materiality), and how their operations impact people and the environment (impact materiality). This dual lens acknowledges that companies have obligations beyond shareholder returns.

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Timeline

The implementation schedule has split into two speeds. Wave 1 companies, the largest public interest entities, are sticking to the original timeline and reporting on FY 2024-2025. Everyone else has hit the snooze button. Wave 2 companies (the large corporate sector) just got a two-year extension. They'll start collecting data in FY 2027 for reports published in 2028, which gives them considerably more time to get their systems in order.

While the EU was busy designing its own regulation (and then redesigning it) the ISSB emerged from a collective realisation that sustainability reporting might benefit from everyone following the same rulebook. Established in November 2021 under the IFRS Foundation, the ISSB brought several existing frameworks into one tidy pile. These included the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (which housed the Integrated Reporting Framework and SASB Standards). The aim was simple enough: less fragmentation, fewer acronyms to memorise, and a coherent global baseline.

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Implications

The ISSB standards establish a common language for sustainability-related financial disclosures, with a clear focus on information that actually matters for capital allocation decisions. Unlike the CSRD, ISSB standards are voluntary at the international level, though individual jurisdictions are free to make them mandatory if they want.

The standards focus on enterprise value creation and preservation, requiring companies to explain how sustainability issues affect their prospects, financial position, and performance. To date, 36 jurisdictions have adopted, used, or are in the final stages of introducing the ISSB Standards into their regulatory frameworks. This growing momentum suggests the ISSB may yet succeed in becoming the global baseline, even without everyone being legally forced to comply.

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Scope

In June 2023, the ISSB issued two foundational standards. IFRS S1 establishes general requirements for disclosure of sustainability-related financial information, providing the overall architecture for reporting. IFRS S2 addresses climate-related disclosures specifically, requiring companies to report on climate risks and opportunities, greenhouse gas emissions across all three scopes, and transition planning.

These standards are designed to be universally applicable, being relevant to any company regardless of location or sector. However, actual application depends on whether a company's jurisdiction has adopted them, creating a more complex implementation landscape than the CSRD's geographic specificity.

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Timeline

ISSB standards became effective for annual reporting periods after 1 January 2024. In practice, however, implementation timelines vary widely by jurisdiction. Some countries have moved quickly, while others are still consulting, deliberating, and generally thinking about it very carefully. The result is a patchwork of reporting obligations that depends largely on where a company happens to operate.

The ISSB has made it clear that climate is just the opening act. Future standards are expected to address additional sustainability topics, with biodiversity, ecosystems, and human capital already flagged as likely priorities. The framework is being built gradually, allowing space for lessons learned, stakeholder feedback, and the inevitable refinement that comes with real-world use.

Despite their different origins and philosophies, the two frameworks share significant common ground that reflects broader trends in sustainability reporting.

Both frameworks treat climate disclosure as non-negotiable, incorporating the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Companies under either framework must address four core pillars: governance, strategy for addressing sustainability risks and opportunities, risk management, and relevant metrics and targets.

Both require disclosure of greenhouse gas emissions across scope 1, 2, and 3, though with some variation in specific requirements and phase-in periods. Both frameworks lean heavily into forward-looking information, reflecting the growing consensus that investors care less about last year’s emissions alone and more about where things are heading next.

Critically, both frameworks are trying to drag sustainability reporting into the same league as financial reporting. That means assurance, verification, and all the things that make information trustworthy.

Behind the scenes, this alignment was not accidental. The European Financial Reporting Advisory Group (EFRAG), which developed the European Sustainability Reporting Standards (ESRS) underpinning the CSRD, worked closely with the ISSB during standard development. The goal was to maximise interoperability and minimise the collective headache for companies reporting under both regimes. While perfect harmonisation remained just out of reach, the result is a pair of frameworks that play together far more nicely than they otherwise might have.

The frameworks diverge in ways that reflect genuinely different ideas about why sustainability reporting exists and who it is for.

The clearest difference is materiality. The CSRD applies a double materiality lens, asking companies to look both ways at once: how sustainability issues affect the business, and how the business affects society and the environment. The ISSB, by contrast, sticks to single materiality, focusing squarely on enterprise value, namely, sustainability factors that could influence cash flows, access to finance, or the cost of capital. This reflects fundamentally different views on whether corporate reporting should inform markets alone, or markets and the world beyond them.

Their primary audiences reflect this divide. The ISSB is investor-focused, tailoring its requirements to the needs of capital markets and investment decision-making. The CSRD casts a much wider net, addressing employees, civil society, customers, regulators, and others, reflecting a broader view of corporate accountability that extends well beyond shareholders.

Enforcement and assurance requirement also differ. Companies subject to the CSRD have no choice about compliance, while ISSB reporting may be voluntary or mandatory depending on local regulations. Additionally, The ISSB standards recommend assurance but do not require it, leaving decisions about the level and timing to individual jurisdictions. All companies in scope for CSRD are required to obtain limited assurance from a third-party assurance provider from their first reporting year.

For multinational companies, particularly those with European operations and global capital markets presence, dual reporting under both frameworks may become necessary. The good news is that the frameworks’ similarities create some efficiency: much of the same data, systems, and internal processes can be reused. The less-good news is that the differences still matter, and overlooking them is an excellent way to achieve technical non-compliance in two places at once.

The materiality assessment process presents the most significant challenge. Companies reporting under both frameworks must conduct assessments using different lenses: double materiality for CSRD and enterprise value materiality for ISSB. While these assessments may identify overlapping issues, they may also surface different priorities, requiring distinct disclosure strategies.

For organisations just beginning their sustainability reporting journey, the first challenge is determining which framework applies, bearing in mind that the answer may well be “both”. Building reporting systems that are flexible enough to accommodate multiple frameworks, without unnecessary duplication, will be critical. One thing is certain: the age of informal sustainability reporting is firmly behind us. What replaces it is more structured, more assured, and far less forgiving of shortcuts.

In this environment, good-quality data becomes the real differentiator. Consistent methodologies, clear audit trails, and reliable underlying data are the foundation of credible reporting under both CSRD and ISSB. Spreadsheets and last-minute data collection exercises quickly reach their limits when assurance, comparability, and repeatability enter the picture.

As a result, many organisations are turning to dedicated ESG software solutions to centralise data collection, standardise calculations, manage controls, and support reporting across multiple frameworks. Having robust systems in place not only reduces compliance risk but also frees up teams to focus on analysis and decision-making rather than manual data wrangling.

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