The Corporate Sustainability Reporting Directive (CSRD) is the largest expansion of climate risk disclosure requirements in the EU. For large EU companies and non-EU companies with significant European operations, CSRD climate risk disclosure under ESRS E1 demands granular physical risk data, scenario analysis, and financial effects quantification that goes far beyond previous frameworks like the TCFD.
This guide covers what CSRD requires for climate risk, who must comply (including the 2025 Omnibus changes), the ESRS E1 disclosure requirements, and a practical roadmap for preparing your organization. For the full scope of CSRD reporting requirements across all 12 ESRS standards, see our complete checklist. For a comparison of CSRD with the EU’s due diligence directive, see our CSRD vs CSDDD guide.
What Is CSRD?
CSRD (Directive 2022/2464) is the EU’s corporate sustainability reporting framework that replaced the Non-Financial Reporting Directive (NFRD) in January 2023. Where NFRD applied to roughly 11,000 companies with limited standardization, CSRD originally expanded the scope to approximately 50,000 companies and introduced mandatory reporting under the European Sustainability Reporting Standards (ESRS).
Three features distinguish CSRD from its predecessor:
| Feature | NFRD (Previous) | CSRD (Current) |
|---|---|---|
| Scope | ~11,000 large PIEs | ~50,000 companies (pre-Omnibus) |
| Standards | Flexible, non-binding guidelines | Mandatory ESRS (12 standards) |
| Assurance | Not required | Limited assurance (mandatory) |
| Digital tagging | Not required | XBRL digital taxonomy |
| Materiality | Single (financial only) | Double (financial + impact) |
The shift from voluntary guidelines to mandatory, auditable standards with digital tagging means CSRD climate risk disclosure requires structured data, not narrative statements.
Who Must Comply with CSRD?
CSRD applicability depends on company size, listing status, and jurisdiction. The February 2025 Omnibus proposal significantly narrowed the scope.
Original CSRD Scope
Large EU undertakings meeting at least 2 of 3 criteria qualified: balance sheet assets exceeding EUR 25 million, net turnover above EUR 50 million, or more than 250 employees. Public interest entities (listed companies, banks, insurers) fell in scope regardless of size. Non-EU companies with EUR 150 million or more in EU turnover were also captured.
Omnibus Simplification (February 2025)
The CSRD Omnibus simplification (COM(2025)80) fundamentally changed who must report. Under the new thresholds, companies need more than 1,000 employees plus either EUR 50 million turnover or EUR 25 million in assets.
| Category | Original CSRD | Omnibus Proposal |
|---|---|---|
| EU companies in scope | ~50,000 | ~10,000 (-80%) |
| Employee threshold | 250+ | 1,000+ |
| Listed SMEs | In scope (Wave 3) | Removed entirely |
| Non-EU turnover threshold | EUR 150 million | EUR 450 million |
| Annual admin cost savings | – | ~EUR 4.4 billion |
Even with the narrowed scope, the remaining ~10,000 companies are among Europe’s largest enterprises, many operating across hundreds of physical locations with complex value chains requiring systematic climate risk screening.
CSRD Climate Risk Disclosure Timeline
CSRD reporting rolls out in waves. The Stop-the-Clock Directive (2025/794) delayed Waves 2 and 3 by two years while the Omnibus legislation is finalized.
| Wave | Who | Financial Year | Report Due | Status |
|---|---|---|---|---|
| Wave 1 | Large PIEs (500+ employees, already under NFRD) | FY 2024 | 2025 | Reporting now |
| Wave 2 | All other large undertakings | FY 2027 | 2028 | Delayed (+2 years) |
| Wave 3 | Listed SMEs | FY 2028 | 2029 | Likely eliminated |
| Wave 4 | Non-EU companies (EUR 450M+ EU turnover) | FY 2028 | 2029 | Pending Omnibus |
Wave 1 companies (~500 large PIEs) are already filing their first CSRD-compliant reports. They received a “quick fix” in July 2025 extending certain phase-in provisions and deferring quantitative anticipated financial effects disclosures through FY 2026.
ESRS E1: Climate Change Disclosure Requirements
ESRS E1 (Climate Change) is the most critical standard for CSRD climate risk disclosure. It covers mitigation (emissions, transition plans), adaptation (physical risk, resilience), and energy (consumption, mix). Climate is the only ESRS topic where non-materiality requires justification. Analysis of 646 companies showed 98% mapped E1 as material, making it effectively universal.
The 9 Original Disclosure Requirements
| Requirement | Focus | Physical Risk Relevance |
|---|---|---|
| E1-1 | Transition plan for climate mitigation | Low (mitigation focus) |
| E1-2 | Climate policies (mitigation + adaptation) | Medium (adaptation policies) |
| E1-3 | Actions and resources for climate | Medium (adaptation actions) |
| E1-4 | Climate targets (emission reductions) | Low (emission targets) |
| E1-5 | Energy consumption and mix | Low |
| E1-6 | GHG emissions (Scope 1, 2, 3) | Low |
| E1-7 | GHG removals and carbon credits | Low |
| E1-8 | Internal carbon pricing | Low |
| E1-9 | Anticipated financial effects from physical + transition risks | High |
Physical Risk Under E1-2 (Amended)
The November 2025 ESRS amendment expanded E1-2 into a dedicated risk identification and scenario analysis requirement. Companies must now disclose:
- Data sources and methodology used for physical risk screening (likelihood and severity assessment)
- Hazard coverage across operations and value chain, including asset and activity exposure
- Scenario analysis with at least one high-emissions scenario for physical risks (SSP5-8.5 or equivalent)
- Time horizon coverage across short, medium, and long-term planning periods
- Value chain scope showing which operations and suppliers were assessed
E1-3 (Resilience) builds on this by requiring companies to disclose how scenario analysis outcomes inform strategic responses, adaptive capacity, and key uncertainties.
Financial Effects Under E1-9/E1-11
The amended E1-11 (renamed from E1-9) requires companies to quantify the carrying amount of assets materially exposed to physical risks before adaptation measures, the percentage of those assets covered by adaptation, and net revenue from exposed activities. This moves CSRD climate risk disclosure from qualitative risk descriptions to asset-level financial exposure data.
Double Materiality Under CSRD
CSRD introduced double materiality as its foundational assessment concept. Unlike single-materiality frameworks (such as IFRS S2) that focus solely on financial risk to the company, CSRD requires two parallel assessments:
Impact materiality (inside-out) examines how a company’s activities affect people and the environment. Assessment criteria include the scale, scope, and irremediable character of negative impacts.
Financial materiality (outside-in) examines how sustainability matters affect the company’s enterprise value, financial position, cash flows, and cost of capital. This is where physical climate risk assessment directly feeds into CSRD reporting.
EFRAG’s Implementation Guidance (IG-1) outlines a four-step process: understand organizational context, identify impacts/risks/opportunities across the value chain, assess and determine material items using severity and likelihood criteria, then report findings with methodology transparency.
A matter is material if it meets either perspective’s criteria. For climate, even if a company determines neither perspective triggers materiality, it must provide a detailed justification for that conclusion.
CSRD vs Other Disclosure Frameworks
Multiple climate disclosure frameworks now operate simultaneously. Understanding how CSRD relates to each helps companies avoid duplication and identify overlapping requirements. For companies with Indian operations, BRSR reporting introduces its own ESG disclosure requirements under SEBI, though with a broader scope and shallower climate specifics compared to CSRD.
| Aspect | CSRD / ESRS E1 | TCFD | IFRS S2 | SEC Climate Rule |
|---|---|---|---|---|
| Jurisdiction | EU | Global (voluntary) | Global (ISSB) | United States |
| Materiality | Double (impact + financial) | Financial only | Financial only | Financial only |
| Scenario analysis | Required (high-emissions mandatory) | Recommended | Required (general) | Not required |
| Physical risk depth | Hazard screening + financial effects | Qualitative risk description | Quantitative (Para 29c) | Material expenditure only |
| Assurance | Limited (mandatory) | None | Jurisdiction-dependent | Limited (phased) |
| Status | Mandatory (Wave 1 reporting) | Superseded by ISSB | Adopted by 30+ jurisdictions | Stayed (litigation) |
CSRD is the most comprehensive of these frameworks. For EU companies, it effectively supersedes TCFD. Companies also reporting under IFRS S2 will find significant overlap, particularly in physical risk and scenario analysis requirements, though CSRD’s double materiality adds the impact dimension that IFRS S2 does not require. For a detailed side-by-side breakdown, see our CSRD vs ISSB comparison.
How to Prepare for CSRD Climate Risk Disclosure
Whether your company falls under Wave 1 (already reporting) or Wave 2 (FY 2027), the physical risk data requirements under E1-2 and E1-11 demand structured preparation. Here is a practical five-step roadmap.
Step 1: Conduct a double materiality assessment. Map your operations and value chain against environmental, social, and governance topics. For climate (E1), assess both your company’s impact on the environment and how climate hazards affect your assets, operations, and financial position. Document the methodology per ESRS 2 IRO-1.
Step 2: Screen physical climate risks across your locations. E1-2 (Amended) requires documented data sources, hazard screening, and likelihood/severity assessment across operations and value chain. This means systematic screening of all material sites against physical hazards like flooding, heat stress, wildfire, drought, and sea level rise.
Step 3: Run climate scenario analysis. E1-2 mandates at least one high-emissions scenario for physical risks. SSP5-8.5 is the standard choice, representing fossil-fuel intensive development with ~4.4 degrees C warming by 2100. Running both SSP2-4.5 (moderate) and SSP5-8.5 (high) provides the range of outcomes that ESRS expects.
ESRS E1-2 (Amended) explicitly requires that companies identify physical climate risks using documented data sources, screen across hazard types, and run scenario analysis with at least one high-emissions scenario. Platforms like Continuuiti provide 12-hazard physical risk assessments under SSP2-4.5 and SSP5-8.5 scenarios with methodology documentation that supports E1-2’s transparency requirements.
Step 4: Quantify financial effects for material exposures. E1-11 asks for the carrying amount of materially exposed assets before adaptation and the percentage covered by adaptation actions. For flood-exposed real estate portfolios, this means converting hazard depth data into monetary loss estimates.
Step 5: Document methodology and data sources. ESRS demands transparency on assessment processes, assumptions, data sources, and key uncertainties. Maintaining a clear audit trail from raw hazard data through to financial effects supports both the limited assurance requirement and stakeholder credibility.
Frequently Asked Questions
What is CSRD and who does it apply to?
CSRD (Corporate Sustainability Reporting Directive) is the EU’s mandatory sustainability reporting framework that replaced the NFRD. After the 2025 Omnibus simplification, it applies to approximately 10,000 companies with more than 1,000 employees and either EUR 50 million turnover or EUR 25 million in assets. Non-EU companies with EUR 450 million or more in EU turnover are also captured.
What are the CSRD climate risk disclosure requirements under ESRS E1?
ESRS E1 requires 9 disclosure items covering transition plans, GHG emissions, energy consumption, and anticipated financial effects from physical and transition risks. The amended E1-2 specifically mandates physical risk identification using documented data sources, hazard screening across operations and value chain, and scenario analysis with at least one high-emissions scenario.
How does CSRD differ from TCFD?
CSRD is a mandatory EU directive with auditable standards, limited assurance requirements, and double materiality (both financial and impact). TCFD was a voluntary global framework focused on financial materiality only. For EU companies, CSRD effectively supersedes TCFD. CSRD also requires scenario analysis with a high-emissions scenario, while TCFD only recommended scenario analysis.
What changed with the CSRD Omnibus simplification?
The February 2025 Omnibus proposal raised the employee threshold from 250 to 1,000, reducing the number of companies in scope from approximately 50,000 to 10,000. Listed SMEs were removed entirely. The non-EU company turnover threshold increased from EUR 150 million to EUR 450 million. Sector-specific ESRS standards were also eliminated.
Does CSRD require scenario analysis?
Yes. The amended ESRS E1-2 requires scenario analysis for physical climate risks using at least one high-emissions scenario (such as SSP5-8.5). For transition risks, at least one 1.5 degrees C scenario with no or limited overshoot is required. Companies must disclose the range of scenarios, key assumptions, and how outcomes inform strategy.
What happens if a company does not comply with CSRD?
CSRD compliance is enforced at the Member State level. Penalties vary by jurisdiction but can include financial fines, public disclosure of non-compliance, and potential legal liability for directors. Since reports require limited assurance from an independent auditor, material omissions carry audit and reputational consequences.
