10 Reasons to Track a Corporate Carbon Footprint
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In this article, we’ll explain what a corporate carbon footprint is, why it’s important, how it is measured, and reasons why your company should track it too.
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What is the Non-Financial Reporting Directive (NFRD)?
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“ Since its adoption in 2014, the Non-Financial Reporting Directive (NFRD) has played a central role in shaping how large companies in the European Union disclose information on environmental, social, and governance (ESG) issues. From climate impacts and human rights to anti-corruption policies and board diversity, the directive marked a turning point in the EU’s push for greater corporate transparency. ”
But the regulatory landscape is evolving.
The Corporate Sustainability Reporting Directive (CSRD) has officially taken over from the NFRD, with new reporting rules already in place for some companies and more coming soon.
The CSRD expands the scope of reporting, tightens the standards, and introduces mandatory assurance for ESG disclosures. For companies already reporting under the NFRD, the shift to the CSRD has already begun. For others, the new requirements are just around the corner, though the EU’s 2025 Omnibus Regulation may bring changes to who reports and when.
In this article, we’ll explain what the NFRD set out to achieve, how the CSRD is transforming sustainability reporting in the EU, and what the transition means for your business today.
What is the NFRD: A quick overview
“ The Non-Financial Reporting Directive (Directive 2014/95/EU) was the European Union’s first major step toward improving corporate transparency on environmental and social issues. ”
It applied to reporting from 2018 onwards, requiring large public-interest entities to publish public disclosure documents as part of their annual reports, covering key non-financial information.
Specifically, companies were asked to report on environmental and social issues, as well as provide insights into the undertaking’s business model, its policies, risks, and the outcomes of those policies.
Key reporting areas under the NFRD:
Environmental matters
Details on environmental protection policies, impacts of the company’s operations, and how they manage sustainability risks.
Social and employee issues
Information on working conditions, employee treatment, diversity, inclusion, and relationships with local communities.
Human rights
Measures taken to prevent human rights abuses within the company and its value chain.
Anti-corruption and bribery
Policies and practices in place to prevent corruption and bribery across operations and partnerships.
Board diversity
The company’s diversity policies for management and supervisory boards, including gender, age, and professional background.
The directive applied to public-interest entities (PIEs), such as listed companies, banks, and insurers, with more than 500 employees. Roughly 11,700 companies across the EU fell within its scope.
While the NFRD played an important role in raising the bar for corporate accountability and corporate social responsibility, it was widely seen as too limited in scope and lacking standardization. These shortcomings ultimately led to the introduction of its successor, the Corporate Sustainability Reporting Directive (CSRD), which is now replacing the NFRD as the new sustainability reporting standard across the EU.
What was the purpose of the NFRD?
“ The Non-Financial Reporting Directive was introduced to bring greater transparency, accountability, and corporate responsibility to how large companies in the European Union manage environmental and social issues. ”
At the time, there was growing pressure, particularly from investors and the financial sector, for clearer insight into corporate sustainability practices.
By requiring companies to disclose social and environmental information on a regular basis, the NFRD aimed to:
- Help prevent greenwashing by ensuring credible and consistent ESG reporting
- Improve stakeholder confidence through greater corporate accountability
- Encourage more responsible and sustainable business practices
The directive required companies not only to report on their internal policies but also to provide information on how third parties, such as suppliers, contributed to their overall impact.
These disclosures helped stakeholders understand how sustainability risks were embedded into the company’s business model and overall strategy.
NFRD scope
The Non-Financial Reporting Directive applied to large public-interest entities (PIEs) operating within the EU. These included:
- Listed companies
- Banks and other financial institutions
- Insurance companies
- Other entities designated as PIEs under national law by relevant authorities
To fall within scope, companies also needed to have more than 500 employees.
However, as of January 2024, the CSRD has officially replaced the NFRD for these companies. Those previously reporting under the NFRD are now required to comply with the CSRD, starting with their 2024 financial year reports (due in 2025).
So while the NFRD is no longer active for those companies, its legacy lives on, forming the foundation on which the CSRD has built a broader, more detailed, and more standardized reporting framework.
How did reporting under the NFRD work?
“ Under the Non-Financial Reporting Directive (NFRD), in-scope companies were required to include a non-financial statement in their annual management report, outlining how they addressed principal risks related to sustainability challenges in their operations and value chains. ”
But the directive didn’t just ask companies what they were doing. It also required them to explain:
- Their business model in relation to sustainability risks
- The policies they had in place to manage those risks
- The outcomes of those policies
- Any due diligence processes implemented or KPIs used to track progress
Companies were free to base their disclosures on a mix of national, EU, or international reporting frameworks, such as the UN Global Compact, ISO 26000, or GRI standards, leading to a wide variation in how companies reported.
Links to wider EU sustainability policy
Although the NFRD predated the EU Taxonomy and SFDR, it was later amended to align with these newer regulations.
In particular, companies were expected to report how much of their revenue, CapEx, and OpEx was tied to environmentally sustainable activities. The EU Taxonomy Regulation provided the definitions and technical criteria needed to classify those activities, while the SFDR further strengthened the role of ESG data in financial decision-making.
Together, these policies laid the groundwork for a more unified, sustainable finance framework in the EU – a framework now brought to maturity under the CSRD.
What was the impact of the NFRD?
“ The Non-Financial Reporting Directive (NFRD) was a pioneering step by the EU to integrate environmental, social, and governance (ESG) considerations into corporate reporting. By mandating disclosures from approximately 11,700 large public-interest companies, it brought ESG issues to the forefront of corporate transparency. ”
However, a 2020 review by the Climate Disclosure Standards Board (CDSB) revealed significant gaps in the quality of these disclosures. Analysing reports from Europe's 50 largest listed companies, the study found that 78% fell short in adequately reporting environmental and climate-related risks. Notably, only 15 companies fully disclosed the environmental and climate-related aspects of their business models, and 42% omitted potentially material environmental or climate-related information for their sectors.
Why was the CSRD introduced?
Despite its foundational role, the NFRD faced several criticisms that highlighted the need for a more robust framework:
- Limited Scope: The directive applied only to large public-interest entities with over 500 employees, leaving out a significant number of companies whose activities impact sustainability.
- Lack of Standardisation: Companies had the freedom to choose their reporting frameworks, leading to inconsistent and non-comparable disclosures across the EU.
- Insufficient Detail: The NFRD's requirements were often seen as too vague, resulting in superficial reporting that didn't provide meaningful insights into companies' ESG practices.
These shortcomings were repeatedly flagged by investors, regulators, and civil society organisations, all calling for stronger, more consistent sustainability disclosures. They underscored the need for a more comprehensive and standardised approach, leading to the development of the Corporate Sustainability Reporting Directive (CSRD).
“ The CSRD aims to address these issues by expanding the scope of reporting, introducing standardized and more detailed reporting requirements, and ensuring the reliability of disclosed information through mandatory assurance. ”
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What is the Corporate Sustainability Reporting Directive (CSRD)?
“ The Corporate Sustainability Reporting Directive (CSRD) is the EU’s updated framework for sustainability reporting, one that’s broader, stricter, and far more detailed than its predecessor. ”
Adopted in late 2022 and officially in force as of January 2024, the CSRD replaces the NFRD for all companies previously in scope and gradually extends reporting obligations to tens of thousands more. By the time it’s fully rolled out, nearly 50,000 companies are expected to be covered, up from just 11,700 under the NFRD.
The CSRD aims to ensure that sustainability reporting requirements are treated with the same rigour as financial reporting. It introduces mandatory standards, digital reporting formats, and third-party assurance, making it easier for stakeholders to access and trust ESG information.
Key features include:
These mandatory standards outline exactly what companies need to report on across environmental, social, and governance areas – from carbon emissions and biodiversity impact to workforce treatment and anti-corruption measures.
Companies must assess and disclose not only how sustainability risks and opportunities affect them, but also how their operations impact people and the planet. This approach ensures stakeholders get the full picture.
Reports must be published in xHTML and XBRL formats, allowing regulators, investors, and civil society organisations to easily compare and analyse reported sustainability data.
To boost credibility and prevent greenwashing, companies must get their sustainability disclosures independently verified through external assurance providers.
All of these are designed to bring clarity and credibility to ESG data, while supporting the EU’s wider objectives around sustainability and environmental protection.
While the CSRD is already being applied by the first wave of companies in 2025 (for the 2024 financial year), the EU Omnibus Regulation, introduced in early 2025, proposes to delay reporting deadlines for later waves and narrow the scope of companies in scope. These changes are still being finalised, but could have a significant impact on when and how certain businesses are expected to comply.
“ The CSRD is the EU’s answer to the shortcomings of the NFRD, creating a more standardized, transparent, and enforceable approach to corporate sustainability reporting, with further adjustments on the horizon. ”
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What's the difference between the NFRD and the CSRD?
“ While the CSRD builds on the foundations of the NFRD, the two directives differ in both scope and ambition. Where the NFRD introduced the idea of non-financial reporting, the CSRD transforms it into a structured, enforceable obligation. ”
| Feature | NFRD | CSRD |
|---|---|---|
| Who must report | ~11,700 large public-interest entities (PIEs) with 500+ employees. | ~50,000 companies, including large private firms, listed SMEs, and some non-EU businesses. |
| Reporting standards | No mandatory format – companies chose from various frameworks. | Mandatory use of European Sustainability Reporting Standards (ESRS). |
| Materiality approach | Focus on how ESG risks affect the company. | Double materiality: impact on and from the company. |
| Assurance requirements | No assurance required. | Mandatory third-party assurance for reported data. |
| Format | Free-text reports included in annual filings. | Digital, machine-readable format (xHTML + XBRL tagging). |
| Audit & enforcement | Minimal oversight. | Stronger enforcement, linked to national competent authorities. |
| Timeline | In place since 2018. | In force since 2024 – phased rollout through to 2029 (subject to Omnibus adjustments). |
| Scope for non-EU companies | Not covered. | Yes – applies to non-EU firms generating €150M+ in EU turnover and with a branch/subsidiary. |
When do companies need to report under the CSRD?
“ The CSRD doesn’t apply to all companies at once; its implementation is phased in over several years, depending on company size, listing status, and EU presence. ”
The EU has broken this into distinct waves, with staggered start dates for reporting. However, the EU Omnibus Regulation (introduced in 2025) has proposed delays for Waves 2 and 3, and may change the criteria for who’s required to report. These changes are still awaiting final approval.
Here’s how the timeline currently looks:
Wave 1
Who’s affected: Large public-interest entities already subject to the NFRD.
Reporting starts: FY 2024 (reports due in 2025).
Omnibus impact: No change.
Wave 2
Who’s affected: Large companies not previously under NFRD (EU or listed non-EU).
Original start: FY 2025, due in 2026.
Omnibus adjustment: Delayed to FY 2027 (reports due in 2028).
Wave 3
Who’s affected: Listed SMEs, small and non-complex credit institutions, captive insurers.
Original start: FY 2026, due in 2027.
Omnibus adjustment: Delayed to FY 2028 (reports due in 2029).
Wave 4
Who’s affected: Non-EU companies with €150M+ EU net turnover and a branch/subsidiary.
Original start: FY 2028, due in 2029.
Omnibus adjustment: Expected delay beyond 2029.
A quick note on the EU Omnibus Regulation
In early 2025, the European Commission introduced the EU Omnibus Regulation, a legislative package aimed at simplifying EU sustainability rules, including the CSRD.
So far, one major change has been formally approved:
A two-year delay to CSRD reporting for Wave 2 (large non-listed companies) and Wave 3 (listed SMEs and others).
- These companies will now report in 2028 and 2029, respectively, instead of 2026 and 2027.
- Wave 1 companies are unaffected and must report on FY2024 as planned.
Other proposals, such as raising the company size thresholds, simplifying reporting requirements, and postponing Wave 4 for non-EU firms, are still under negotiation. A final decision is expected in the second half of 2025.
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Does the CSRD apply to non-EU companies?
The CSRD isn’t limited to companies headquartered in the EU. It also applies to non-EU undertakings (including those based in the UK, US, or elsewhere) that generate more than €150 million in net turnover within the EU and have either an EU branch with €40 million+ in turnover or an EU subsidiary classified as a large company or listed SME.
This means that many international companies with substantial operations in the EU will be required to report under the CSRD, even if they are not based there. These businesses will need to publish sustainability disclosures aligned with the European Sustainability Reporting Standards (ESRS), ensuring the same level of transparency and rigour expected of EU-based firms.
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How Greenly can help companies with their CSRD reporting obligations
Is your company ready for CSRD reporting? Greenly's platform and experts are here to streamline your CSRD reporting process.
Key features and benefits:
Conduct a Double Materiality Assessment
- AI-powered value chain mapping: Map your value chain and assess climate risks with Greenly’s AI technology.
- Expert collaboration: Work with Greenly-certified implementation partners or internal experts to define material topics.
Streamline your data collection
- Gap analysis: Identify relevant data points following ESRS guidelines.
- Data integration: Simplify data collection with import connectors and integration features that are compatible with your software.
Ensure audit assurance and high-quality results
- Expert consultation: Consult with Greenly’s network of internal and external experts.
- Auditor access: Provide auditors access to Greenly’s platform for easy progress monitoring and review.
Automatic export
- XHTML format: Export your reports in the required XHTML format, which is suitable for XBRL tagging.
Greenly provides an intuitive and seamless platform to handle the complexities of CSRD reporting, ensuring your company meets regulatory requirements efficiently and accurately. Embrace a streamlined, audit-ready approach to sustainability reporting with Greenly.
Sources:
- Greenly, ESG Criteria: What You Need to Know
https://greenly.earth/en-gb/blog/company-guide/esg-criteria-what-you-need-to-know - EUR-Lex, Directive 2014/95/EU – Non-Financial Reporting Directive (NFRD)
https://eur-lex.europa.eu/eli/dir/2014/95/oj/eng - Greenly, What is the Corporate Sustainability Reporting Directive (CSRD)?
https://greenly.earth/en-gb/blog/company-guide/what-is-the-corporate-sustainability-reporting-directive-csrd - Greenly, Our Guide to the EU Omnibus Regulation
https://greenly.earth/en-gb/blog/company-guide/our-guide-to-the-eu-omnibus-regulation - KPMG Netherlands, Corporate Sustainability Reporting Directive (CSRD)
https://kpmg.com/nl/en/home/topics/environmental-social-governance/corporate-sustainability-reporting-directive.html - UN Global Compact, Homepage
https://unglobalcompact.org/ - Greenly, What Role Does the Standard ISO 26000 Play in CSR?
https://greenly.earth/en-gb/blog/company-guide/what-role-does-the-standard-iso-26000-play-in-csr - Global Reporting Initiative (GRI), GRI Standards
https://www.globalreporting.org/standards/ - Greenly, What is the EU Taxonomy?
https://greenly.earth/en-gb/blog/company-guide/what-is-the-eu-taxonomy - Greenly, What is the Sustainable Finance Disclosure Regulation (SFDR)?
https://greenly.earth/en-gb/blog/company-guide/what-is-the-sustainable-finance-disclosure-regulation-sfdr - CDSB, Falling Short? A Review of Corporate Sustainability Reporting Under the NFRD
https://www.cdsb.net/sites/default/files/falling_short_report_double_page_spread.pdf?utm_source=chatgpt.com - European Commission, Corporate Sustainability Reporting
https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en - Greenly, Our Guide to the CSRD’s Double Materiality Assessment
https://greenly.earth/en-gb/blog/company-guide/our-guide-to-the-csrds-double-materiality-assessment
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