CFO Guide to CSRD Compliance in Manufacturing

CSRD compliance is reshaping how CFOs in manufacturing manage sustainability reporting. Here's what you need to know:

• The Corporate Sustainability Reporting Directive (CSRD) applies to ~50,000 companies, including U.S. manufacturers with significant EU operations or revenue (€450M+).
• Double materiality requires reporting on both financial risks and broader social/environmental impacts.
• Deadlines have shifted: Non-EU companies must comply by 2031 (2028 data).
• Key requirements: ESG disclosures, digital reporting (ESEF format), and third-party assurance.
• Challenges for manufacturers: Complex supply chains, Scope 1-3 emissions tracking, and workforce data collection.

Why act now? Non-compliance risks legal penalties and reputational harm, while early preparation can improve operational efficiency, meet investor demands, and support long-term success.

This guide covers compliance deadlines, reporting standards, and actionable steps to meet CSRD requirements effectively.

CSRD Compliance Deadlines and Who Must Comply

The timeline for CSRD compliance now follows a phased approach, with updated thresholds and extended deadlines reshaping the reporting landscape. Recent legislative changes have narrowed the scope of mandatory reporting, focusing on larger entities and providing additional time for preparation. Below, we break down the revised deadlines and industry-specific challenges.

Compliance Deadlines and Company Size Requirements

The original CSRD framework introduced a staggered rollout, but the February 2025 Omnibus Proposal brought significant changes. It tightened the focus to the largest companies - those with over 1,000 employees and either annual revenue exceeding €50M ($54M) or a balance sheet total over €25M ($27M). This marks a major shift from the previous threshold, which applied to companies with 250 employees.

For non-EU companies, including many U.S. manufacturers, the compliance threshold has increased dramatically. Under the revised proposal, the EU turnover requirement for non-EU companies rose from €150M to €450M. This change means many mid-sized U.S. manufacturers may no longer fall under CSRD's purview.

The Stop-the-clock Directive, finalized in April 2025, also extended compliance deadlines for certain businesses. Large unlisted companies and listed small- and medium-sized enterprises (SMEs) now have an additional two years to prepare their sustainability reporting frameworks.

Manufacturing-Specific Requirements

Manufacturers face distinct challenges when it comes to CSRD compliance, largely due to the complexity of their supply chains. The directive's double materiality principle requires companies to assess both financial impacts and broader societal and environmental effects. This dual focus adds layers of complexity to data collection and reporting.

Around 83% of companies report difficulties in gathering accurate data, and this issue is especially pronounced in manufacturing. Tracking Scope 1, 2, and 3 emissions - from raw material extraction to product disposal - is a daunting task. CFOs must also monitor resource consumption and ensure supply chain transparency, making compliance particularly resource-intensive.

However, the Omnibus Proposal offers some relief for manufacturers. Companies are no longer required to collect optional sustainability data from smaller suppliers, reducing the burden for those with extensive supply chains. Additionally, the proposal eliminates the planned transition to reasonable assurance for sustainability reports by 2028, opting instead for permanent limited assurance. This adjustment is expected to lower audit complexity and compliance costs.

Table: Compliance Timeline by Company Type

These revised timelines highlight the importance of adjusting internal processes, which we’ll explore further in the next section on CSRD reporting requirements.

Manufacturing CFOs should also be aware that even companies no longer directly subject to CSRD may encounter indirect pressure from customers and investors. For example, 89% of investors now incorporate ESG criteria into their decision-making, driving demand for sustainability reporting across supply chains.

Preparing for CSRD compliance remains valuable, even for companies not directly affected. Voluntary reporting and alignment with other emerging requirements - such as California's climate disclosure regulations - can provide strategic advantages. Partnering with experienced advisors, like Phoenix Strategy Group, can help manufacturing CFOs navigate these changes and build effective strategies to meet both regulatory and stakeholder expectations.

CSRD Reporting Requirements for Manufacturing CFOs

Manufacturing CFOs are now tasked with meeting extensive reporting obligations under the CSRD that go far beyond traditional financial disclosures. This directive demands in-depth sustainability reporting across environmental, social, and governance (ESG) dimensions. These reports must follow specific European standards, be presented in digital formats, and undergo third-party verification.

Environmental, Social, and Governance (ESG) Disclosures

Under the CSRD, manufacturing companies are required to include detailed ESG data in their annual reports. The environmental section is particularly intricate, covering emissions across Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (value chain emissions). Additionally, companies must report on resource use, such as water consumption and waste generation, as well as initiatives tied to the circular economy. Biodiversity impacts are another critical focus, especially for operations in sensitive ecological areas or those relying on natural resources.

Social disclosures center on workforce conditions and community effects. Reports must include employee health and safety data, such as workplace accident rates and occupational disease figures. Diversity metrics, like gender representation in management, pay equity, and efforts to support underrepresented groups, are also required. Furthermore, companies must outline their labor practices across supply chains, documenting due diligence processes to address risks such as child or forced labor.

Governance disclosures emphasize transparency in board composition, executive compensation (especially when tied to sustainability goals), and risk management strategies. Companies need to explain how sustainability factors influence strategic decisions and how they manage climate-related financial risks.

These comprehensive disclosures form the foundation for the technical standards that follow.

European Sustainability Reporting Standards (ESRS)

To comply with the CSRD’s ESG requirements, companies must adhere to the European Sustainability Reporting Standards (ESRS). These standards provide a structured framework and consist of 12 specific requirements. For manufacturing CFOs, understanding and applying these standards is critical to creating compliant reports.

The environmental standards (ESRS E1–E5) cover a range of topics, including climate change, pollution, water and marine resources, biodiversity, and resource use. ESRS E1, which focuses on climate change, is mandatory for all companies. It requires detailed climate transition plans with specific emission reduction targets aligned with scientific models, as well as disclosures on risks like production disruptions caused by extreme weather.

Social standards (ESRS S1–S4) address workforce and community metrics. For example, ESRS S1 requires data on employee turnover, training hours, and collective bargaining coverage. ESRS S2 and S3 expand these requirements to include supply chain workers and community impacts.

On the governance side, ESRS G1 (Business Conduct) is the primary standard. It mandates disclosures on anti-corruption measures, political activities, and supplier code of conduct enforcement. Companies must also report on their tax strategy, including country-specific tax information for key jurisdictions.

A key element of these standards is the concept of double materiality, where companies must evaluate both financial impacts and broader societal or environmental effects.

Digital Reporting and Audit Requirements

The CSRD introduces strict digital reporting and audit requirements. All sustainability data must be submitted using the European Single Electronic Format (ESEF) with machine-readable XBRL tags. This digital-first approach facilitates automated analysis and cross-company comparisons but requires significant upgrades to reporting systems.

To meet these standards, companies must establish audit trails to ensure data traceability from initial collection to final reporting. For decentralized operations, this can be particularly challenging. Third-party assurance is also mandatory, with auditors providing limited assurance on data accuracy, internal controls, and the processes used to calculate metrics. This scrutiny extends to Scope 3 emissions and supply chain data, as well as the methodology for determining materiality, which must reflect stakeholder input.

Since CSRD mandates annual sustainability reporting integrated into management reports, manufacturing CFOs must implement continuous data collection systems. This shift enables real-time tracking of sustainability metrics, moving away from a reliance on annual reporting cycles.

For U.S.-based manufacturers subject to CSRD, these requirements often necessitate substantial changes to existing processes. Many companies turn to advisory firms for guidance. For instance, Phoenix Strategy Group specializes in helping manufacturing CFOs implement robust digital reporting systems and improve internal compliance frameworks, making the transition more manageable.

How to Achieve CSRD Compliance: Step-by-Step Process

Meeting CSRD compliance standards requires a structured approach that reshapes how manufacturing CFOs handle sustainability data. This journey involves three key phases, each building on the last to create a solid compliance framework. Here's a closer look at the steps involved.

Mapping Sustainability Impacts Across Your Value Chain

The first step is to conduct a thorough analysis of your value chain, identifying sustainability impacts from raw material sourcing all the way to product disposal. This process lays the groundwork for determining which ESRS standards apply to your operations and helps align strategic decisions with CSRD goals.

CFOs should start by documenting every stage of their value chain, including upstream suppliers, internal processes, and downstream distributors. This includes performing a materiality assessment to evaluate financial impacts alongside environmental and social effects. Social factors, such as worker safety, labor conditions, community impact, and human rights, must be given equal weight.

Most manufacturing companies find that their most substantial impacts occur upstream - particularly in raw material extraction and component production. Pinpointing these areas ensures detailed and accurate CSRD reporting.

Geography adds another layer of complexity. U.S. manufacturers with European operations or customers must track sustainability impacts across multiple jurisdictions, each with its own environmental rules and social expectations. This geographic analysis helps identify compliance gaps and refine reporting requirements.

Data Collection and Supply Chain Transparency

Once you've mapped your value chain, the next step is setting up systems to collect sustainability data with the precision and frequency that CSRD demands. This often requires significant upgrades to data management systems and closer collaboration with suppliers.

Digital platforms that integrate with existing ERP systems are essential. These platforms should capture real-time data on energy use, emissions, waste, water consumption, and social metrics across operations. They also need to automatically calculate Scope 1, 2, and 3 emissions while maintaining audit trails for verification.

Transparency across the supply chain is critical. CSRD compliance requires visibility beyond direct suppliers, extending to their suppliers as well. This means gathering data from multiple tiers, often across various countries and regulatory environments. Companies need to use supplier questionnaires, conduct on-site evaluations, and implement continuous monitoring to ensure data integrity.

Advanced digital tools are invaluable here, simplifying the complexity of multi-tier tracking and reducing the manual workload. For many U.S. manufacturers, implementing these tools requires specialized expertise. Firms like Phoenix Strategy Group help CFOs design data collection systems that meet CSRD standards while aligning with existing financial reporting processes.

Aligning Processes with ESRS and Preparing for Audits

The final phase focuses on aligning your operations with ESRS standards and preparing for audits. This involves embedding sustainability metrics into your business processes so that compliance becomes part of your routine operations rather than a separate task.

CFOs must integrate sustainability reporting with financial reporting, requiring collaboration across departments such as operations, procurement, HR, and environmental health and safety. Each team should have clear roles in collecting, validating, and reporting data on schedule.

Establishing cross-functional committees is a practical way to stay organized. These teams, which include representatives from finance, legal, operations, and procurement, should meet regularly to review sustainability performance, resolve data quality issues, and ensure ESRS alignment.

Audit readiness requires strong internal controls and thorough documentation. CFOs need formal procedures for calculating metrics like emissions, conducting materiality assessments, and engaging stakeholders. Regular internal audits can help identify and resolve gaps before external audits take place.

CSRD’s XBRL tagging requirements add a technical challenge. Companies must ensure their sustainability data is machine-readable and complies with European Single Electronic Format (ESEF) standards. This often calls for new software and staff training to handle digital reporting.

To keep up with evolving CSRD requirements, continuous improvement is crucial. Regularly reviewing data collection methods, internal controls, and reporting processes ensures your compliance framework stays effective. Benchmarking against industry practices and learning from past audits can further refine your approach.

CFOs who establish strong systems early on will find that ongoing CSRD reporting becomes far more manageable. The key is to make sustainability reporting a regular part of your business rhythm, not just an annual task.

Best Practices for U.S. Manufacturing CFOs

Navigating CSRD compliance requires more than just meeting regulatory demands - it calls for a proactive approach, leveraging the right tools, partnerships, and strategies. By doing so, CFOs can turn what might seem like an obligation into a potential edge in the marketplace. Here's how to make that shift.

Using Technology for Real-Time Reporting

With CSRD's emphasis on real-time data, traditional monthly or quarterly reporting cycles simply won't cut it. Advanced technology solutions are essential to meet these demands while maintaining accuracy and efficiency.

Cloud-based platforms that sync with ERP systems like SAP, Oracle, or Microsoft Dynamics can automatically collect and organize data on energy usage, waste, and emissions. The challenge lies in choosing systems that can handle the complexity of manufacturing operations without compromising data accuracy across multiple sites.

IoT sensors are another game-changer. These devices can track energy consumption, water usage, and waste production down to specific production lines or shifts. This granular data helps CFOs pinpoint inefficiencies and assemble the detailed reports auditors expect.

Additionally, advanced platforms can standardize data from various suppliers, flag inconsistencies in real time, and simplify multi-tier tracking. This reduces the manual workload and minimizes the risk of audit issues, especially when dealing with dozens of suppliers.

Beyond compliance, real-time data often uncovers cost-saving opportunities that traditional financial reporting overlooks. Many CFOs find that these insights alone justify the investment in sustainability technology, even without regulatory pressures.

Working with Advisory Partners for Compliance Support

For many manufacturing CFOs, navigating the intersection of sustainability metrics and financial reporting can be daunting. This is where specialized advisory partners come in, offering expertise that in-house teams might lack.

Fractional CFO services provide a cost-effective way to bring in senior-level expertise for short-term CSRD projects, typically lasting 6–12 months. These professionals draw on experience from multiple implementations, helping avoid common missteps and speeding up progress.

Upgrading financial planning and analysis (FP&A) systems is often necessary to integrate sustainability metrics with traditional financial data. Advisory partners can design comprehensive reporting frameworks that meet CSRD standards while also serving internal management needs. They can also develop KPIs that frame sustainability progress in financial terms, making it easier to communicate results to boards and investors.

Take Phoenix Strategy Group, for example. They specialize in data engineering solutions that help CFOs build seamless systems for collecting and integrating sustainability data into existing financial workflows.

When it comes to mergers and acquisitions, CSRD compliance becomes even more critical. Sustainability reporting now plays a role in due diligence, valuation, and integration planning. Advisory partners can guide CFOs through these complexities, ensuring sustainability investments enhance company value and negotiation outcomes.

Preparing for Future Regulatory Changes

While meeting current CSRD requirements is crucial, forward-thinking CFOs are also preparing for what's next. By building flexible compliance frameworks, they can adapt to changes in regulations without scrambling to catch up.

Regulatory monitoring tools can track proposed changes across different regions. For instance, the EU is already discussing expanding CSRD requirements, and U.S. regulators are exploring their own sustainability reporting standards. Early awareness of these developments allows CFOs to plan system upgrades and process adjustments well before deadlines hit.

Scenario planning is another essential tool. By modeling potential regulatory shifts - such as expanded CSRD rules or new U.S. federal mandates - CFOs can justify investments in technology and organizational changes that might seem premature now but will pay off later.

Supply chain management also needs to evolve. Many CFOs are introducing supplier sustainability scorecards to prepare for future demands around transparency. These scorecards not only strengthen compliance but also deepen partnerships with suppliers.

Finally, cross-functional governance structures are key to aligning sustainability efforts with overall business strategy. CFOs are forming sustainability committees that bring together representatives from finance, operations, legal, and procurement. These groups meet regularly to review performance, discuss regulatory updates, and coordinate strategies.

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Conclusion: Achieving CSRD Compliance in Manufacturing

For manufacturing CFOs, meeting CSRD requirements isn't just about checking a regulatory box - it’s a chance to refine sustainability reporting and gain a competitive edge. By prioritizing accountability and embedding strong sustainability practices, manufacturers can better align with evolving market expectations at both domestic and global levels.

The strict timelines and diverse reporting obligations of CSRD call for early action. Delays could lead to rushed processes, higher costs, and potential compliance gaps that might face scrutiny during audits. To stay ahead, manufacturers need to focus on building robust data systems, fostering collaboration across departments, and investing in technologies that simplify data collection while improving operational workflows.

Working with advisors who understand both sustainability metrics and financial reporting can be a game-changer. For instance, firms like Phoenix Strategy Group provide specialized guidance to help manufacturing CFOs navigate the complexities of sustainability reporting and avoid costly missteps.

Additionally, setting up a compliance framework that is both flexible and scalable can prepare manufacturers for future regulatory shifts. By aligning sustainability initiatives with overarching business goals, manufacturers can seamlessly integrate CSRD compliance into their long-term strategies. This approach not only enhances transparency but also strengthens operational resilience, positioning manufacturers to excel in a business landscape increasingly centered on sustainability.

FAQs

What steps should CFOs in the U.S. manufacturing sector take to prepare for CSRD compliance with the extended deadlines?

How U.S. Manufacturing CFOs Can Prepare for CSRD Compliance

Getting ready for CSRD compliance starts with a gap analysis. This involves evaluating your current sustainability data collection and reporting methods to pinpoint areas that fall short of the directive's requirements. Once you've identified these gaps, the next step is to create a compliance roadmap. This plan should align with the extended deadlines, giving large companies until 2028 to meet the new standards.

Another critical step is investing in data management systems. These tools are essential for managing the intricate sustainability metrics required under CSRD. They not only help ensure accurate and detailed disclosures but also simplify the reporting process. By starting early, planning strategically, and keeping a close eye on the phased deadlines, you can avoid the stress of last-minute compliance hurdles.

What is double materiality, and how does it affect sustainability reporting for manufacturing companies?

What Is Double Materiality in Sustainability Reporting?

Double materiality is a concept that plays a crucial role in sustainability reporting. It pushes manufacturing companies to look at two interconnected aspects: how their activities affect society and the environment and how sustainability challenges, in turn, impact their financial health. This two-sided approach offers a more rounded perspective, highlighting both external effects and internal risks or opportunities.

For manufacturers, this involves tackling issues like carbon emissions, resource consumption, and the effects on local communities. At the same time, they need to evaluate how environmental and social factors - like stricter regulations or shifting consumer preferences - could influence their profitability or long-term stability. Following this framework not only helps businesses meet CSRD requirements but also boosts transparency, strengthening relationships with stakeholders and investors.

What are the biggest challenges CFOs in manufacturing face when collecting and reporting ESG data for CSRD compliance, and how can they overcome them?

Challenges for CFOs in Manufacturing with CSRD Compliance

CFOs in the manufacturing sector face some steep challenges when it comes to preparing for CSRD compliance. The hurdles? Managing massive amounts of ESG data, ensuring that data is accurate, and dealing with internal silos that prevent smooth data sharing. These obstacles can make it tough to meet the directive's strict reporting standards.

So, how can CFOs handle this? AI-powered tools are a game-changer. They can automate data collection, improve accuracy, and even highlight inconsistencies. On top of that, encouraging collaboration across different departments can break down those pesky silos, making data more accessible and the reporting process more efficient. By combining cutting-edge technology with teamwork, CFOs can not only simplify compliance but also focus on fostering sustainable growth.

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