Linking the CSRD and financial report
Find out how the integration of CSRD and the financial report promotes corporate transparency. You will receive practical tips.
- The EFRAG Connectivity project helps companies link their sustainability report (CSRD) with their financial report in a coherent, verifiable way.
- Connectivity reduces information gaps, prevents greenwashing, and makes corporate performance more transparent for all stakeholders.
- Financial and sustainability reports differ in purpose, regulatory framework, and audience, but share core principles: transparency, periodicity, assurance, and risk management.
- Double materiality acts as the central filter that determines which sustainability topics must be disclosed and how they connect to financial outcomes.
- Practical integration means cross-referencing strategy, risk management, and performance indicators across both report types rather than duplicating content.
The EFRAG Connectivity Project
The EFRAG Connectivity project represents an innovative approach to linking the sustainability report in accordance with the CSRD and financial reporting. The introduction of the Corporate Sustainability Reporting Directive (CSRD) increases the need for companies in the EU to expand their financial reporting to include sustainability components and to make it more transparent.
The main objective of the EFRAG Connectivity project is to create a clear link between the financial and sustainability reports. In the report "Considerations on connectivity and the boundaries of the different sections of the annual report", EFRAG addresses this issue in detail. The CSRD requires companies to provide sustainability information that is complete, comparable, reliable and comprehensive. This project supports companies in meeting these requirements through improved linkage.
Advantages of connectivity
- Improved credibility: Coordinating financial reporting (FR) and sustainability reporting (SR) teams produces a more accurate and trustworthy picture of company performance.
- Bridging both reports: A closer connection between the financial and sustainability-related parts leads to a more holistic understanding of company performance.
- Promoting complementarity: Combining different types of reporting presents the value a company creates more comprehensively and from multiple perspectives.
- Avoiding information gaps: Connectivity helps prevent gaps and duplications in reported information and promotes a uniform presentation.
- Stakeholder benefit: The combination improves relevance, credibility, comprehensibility, comparability and verifiability, supporting stakeholder decision-making.
- Links between financial and sustainability information: Stakeholders can better understand how financial results and sustainability performance relate to each other.
- Broader use: Financial reports serve investors; sustainability reports matter to numerous stakeholder groups and are increasingly used by investors too.
- Reducing the expectation gap: Connectivity helps explain why certain information cannot be connected, which clarifies stakeholder expectations.
- Avoiding greenwashing: Transparent and verifiable sustainability data prevents misleading environmental or social claims. The Green Claims Directive specifies which environmental claims are permitted for consumers.
Differences between CSRD and financial report
| Dimension | Financial report | CSRD (sustainability report) |
|---|---|---|
| Purpose and content | Presents financial performance and position (income statement, balance sheet, cash flow). Primarily quantitative; supports investor decision-making. | Informs a broader stakeholder group about the company's impact on environment and society (ESG). Contains quantitative and qualitative data. |
| Regulatory framework | Subject to strict accounting standards such as IFRS or US GAAP with clear measurement and disclosure guidelines. | Governed by the ESRS under the CSRD. Standards focus on policies, risks and outcomes related to sustainable practices. |
| Addressees | Mainly investors, lenders and financial stakeholders. | A broader group: customers, employees, NGOs, regulators and the general public. |
Similarities between CSRD and financial report
- Transparency and accountability: Both types of report strive for high transparency and accountability to strengthen stakeholder confidence.
- Periodicity and comparability: Both require regular updates (usually annually) to ensure continuity and comparability.
- Assurance requirements: Under the CSRD, sustainability reports, like financial reports, are subject to an audit to confirm reliability and credibility.
- Risk management: Both include an assessment and disclosure of risks, though sustainability reporting places greater emphasis on social and environmental risk factors.
Integration of CSRD and financial report
The CSRD encourages companies to report on how their environmental and social practices interact with their financial performance. This drives the development of integrated reporting that combines financial and non-financial elements for a holistic picture of corporate performance. Such integration helps demonstrate long-term value creation and risk management, which is of particular interest to investors who value sustainable business models.
EFRAG has published a video presenting the key findings from the EFRAG Connectivity Report.
Structure your CSRD disclosures from the start. The ESRS data points template gives you a clear overview of all mandatory reporting requirements so you can build consistent links between your sustainability and financial reports.
Schematic representation of connectivity
The connectivity framework can be divided into three main categories that represent different aspects of connectivity in the context of corporate reporting.
1. Comprehensive integration of information for value creation
- Communicate the effects of strategic responses on opportunities, risks and performance factors, both financially and operationally.
- Explain how business models, opportunities and risks link to financial performance and long-term objectives, including short- and medium-term metrics.
- Present trade-offs between risks and opportunities in strategy development.
- Connect disclosures on risks affecting the company to mitigation strategies and associated strategic and financial implications.
2. Combination of quantitative and narrative information
- Link quantitative information via cross-references in accordance with ESRS.
- Link quantitative information through reconciliation (indirect connectivity).
- Qualitative disclosures that describe how financial risks and opportunities relate to sustainability performance, covering both current and future financial effects.
- Where certain related information cannot be connected (for example due to different levels of aggregation), an explanation is useful even if not mandatory.
- Correlation and cause-effect relationships are voluntary and can be illustrated in integrated business reports.
3. Other overarching aspects of connectivity
- Consistency: Consistent data, narrative disclosures, assumptions and units of measurement across different sections of the report.
- Coherence: Presentation of information within and across different company reports to ensure a complete view of value creation while showing the interconnectedness of all reported information.
Notes on double materiality
Double materiality is a key concept in reporting. It acts as a filter to determine the type, size and aggregation level of information in different sections of the annual report. This property, crucial for the relevance of information, defines the boundaries and influences the links between report sections both statically and dynamically. Implementing the double materiality assessment is a core element of CSRD sustainability reporting.
The topics you identify as material determine which sustainability disclosures connect to your financial reporting. A robust double materiality assessment is therefore the foundation for credible, integrated reporting.
Run your double materiality assessment with a structured Excel template. Identify relevant ESRS topics efficiently and build the foundation for connected financial and sustainability reporting.
Practical tips for implementation
The following recommendations are derived from the EFRAG Connectivity Report on linking financial and sustainability reporting.
Link strategy information effectively
| Report | What to include |
|---|---|
| Financial report | Strategic objectives, financial implications and risk management strategies described in detail. |
| Sustainability report | Reference to the strategy in the financial report, supplemented by how that strategy supports or influences sustainability goals. |
Present risk management clearly
| Report | What to include |
|---|---|
| Financial report | Financial risks and their management. |
| Sustainability report | Sustainability risks that may have a financial impact and how they integrate into the company's general risk management. |
Align performance indicators
| Report | What to include |
|---|---|
| Financial report | Key financial figures. |
| Sustainability report | Sustainability indicators that could influence or reflect financial results. |
Use cross-referencing
Information should not appear redundantly in both reports. Reference the corresponding sections in the other part of the report instead. This avoids duplication and increases clarity for all readers.
Frequently asked questions about CSRD and financial report connectivity
What is the EFRAG Connectivity project?
The EFRAG Connectivity project aims to create a clear, structured link between sustainability reports (CSRD) and financial reports. EFRAG published a detailed paper addressing the interplay of connectivity and annual report boundaries, providing guidance for companies integrating both report types.
Why does linking the CSRD and financial report matter?
Connectivity helps stakeholders understand how sustainability performance affects financial outcomes, and vice versa. It reduces information gaps, prevents greenwashing, and makes corporate disclosures more credible and useful for decision-making.
How does double materiality relate to financial reporting?
Double materiality determines which sustainability topics are relevant enough to disclose. Those material topics then connect directly to financial reporting because they represent risks, opportunities or impacts that affect the company's financial position. A solid materiality assessment is the starting point for meaningful connectivity.
What is the simplest way to start connecting both reports?
Start with cross-referencing. Identify where the same risks, strategic objectives or performance indicators appear in both reports, then add references rather than duplicating content. This alone significantly improves coherence and reduces the expectation gap for stakeholders.
