CSRD: a complete guide for Brazilian companies with European operations

What the CSRD is

The Corporate Sustainability Reporting Directive (CSRD) is the European Union legislation setting new requirements for companies to disclose sustainability information. Approved in November 2022 by the European Parliament and the Council, the CSRD is a substantial evolution from its predecessor, the Non-Financial Reporting Directive (NFRD), which covered far fewer companies and had a less detailed scope.

The main aim of the CSRD is to standardise and increase the transparency of environmental, social and governance (ESG) information, making companies easier to compare and steering investment towards more sustainable activity. The directive requires sustainability disclosures to sit in the company's management report and to be verified by an independent assurance provider. Entry into force is progressive, as set out below. Once fully in force, around 50,000 companies in the European Union are expected to report under the new standards.

Who has to report

The CSRD applies gradually and covers a considerably wider scope than the NFRD. Brazilian companies with activity in the EU should assess their exposure carefully.

The application timetable is as follows:

• Financial year 2024 (report published in 2025). Applies to large companies already subject to the NFRD. That includes:
  • Companies with more than 500 employees.
  • Companies listed on EU stock exchanges.
  • Banks and insurers.
  • All of these must meet at least two of the following three criteria:
    • Total balance sheet above €20 million.
    • Net turnover above €40 million.
    • Average headcount during the financial year above 250.
• Financial year 2025 (report published in 2026). Applies to other large companies that were not subject to the NFRD. The criteria are:
  • Companies meeting at least two of the following three:
    • Total balance sheet above €20 million.
    • Net turnover above €40 million.
    • Average headcount during the financial year above 250.
  • That includes EU subsidiaries of Brazilian groups meeting those criteria.
• Financial year 2026 (report published in 2027). Applies to small and medium-sized enterprises listed on EU stock exchanges (micro-enterprises excepted). It also applies to small and non-complex credit institutions and to captive insurers. For SMEs the criteria are:
  • Total balance sheet between €4 million and €20 million.
  • Net turnover between €8 million and €40 million.
  • Average headcount between 50 and 250.
• Financial year 2028 (report published in 2029). Applies to non-EU companies. A Brazilian group is covered by the CSRD if it:
  • Generates net turnover above €150 million in the European Union over at least two consecutive years.
  • Has a large subsidiary (meeting the criteria of the earlier phases) or a branch with net turnover above €40 million in the EU.

The CSRD requires companies to report under the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG). We break the ESRS down one by one on the CSRD and ESRS page.

The 12 ESRS standards explained

The European Sustainability Reporting Standards (ESRS) are the set of rules detailing what companies must report under the CSRD, and how. They divide into cross-cutting standards and topical standards (environmental, social and governance).

Cross-cutting standards:

• ESRS 1, general requirements. Covers the general principles for preparing and presenting the sustainability report, including the application of double materiality, due diligence, and how information should be structured. It is the foundational standard, setting the base for all the others.
• ESRS 2, general disclosures. Specifies the disclosure requirements applicable to every company, regardless of materiality on specific topics. It covers governance, strategy, management of impacts, risks and opportunities, and general metrics and targets.

Topical standards:

Environmental (E):

• ESRS E1, climate change. Detailed requirements on greenhouse gas emissions (Scopes 1, 2 and 3), mitigation and adaptation action, climate-related risks and opportunities, and the transition to a low-carbon economy. GHG measurement must follow the GHG Protocol.
• ESRS E2, pollution. Covers impacts on air, water and soil, the production of polluting substances, waste disposal, and light and noise pollution.
• ESRS E3, water and marine resources. Disclosures on water withdrawal, consumption, discharge and management, plus impacts on marine ecosystems.
• ESRS E4, biodiversity and ecosystems. Requirements on preserving biodiversity, deforestation, ecosystem restoration and the company's impact on nature.
• ESRS E5, resource use and circular economy. Focused on resource management, material efficiency, waste reduction, product design for circularity and value chains.

Social (S):

• ESRS S1, own workforce. Covers working conditions, human rights, diversity and inclusion, fair pay, occupational health and safety, and employee training and development.
• ESRS S2, workers in the value chain. Similar to S1, but focused on outsourced workers, suppliers and other value chain actors, including due diligence on forced and child labour.
• ESRS S3, affected communities. Covers the company's impacts on local communities, Indigenous rights, corporate social responsibility and access to essential resources.
• ESRS S4, consumers and end users. Addresses product safety, data privacy, marketing and labelling practices, accessibility and customer satisfaction.

Governance (G):

• ESRS G1, business conduct. Disclosures on corporate culture, business ethics, anti-corruption and bribery, lobbying, fair competition, risk management and internal controls.

Applying these standards requires a robust materiality analysis, covered in the next section. Non-compliance can result in sanctions.

Double materiality in practice

Double materiality is central to the CSRD and one of its biggest innovations relative to other sustainability reporting frameworks. It requires companies to consider materiality from two distinct but connected perspectives.

1. Impact materiality. The company's impacts on society and the environment. That covers positive and negative, actual and potential, direct and indirect impacts, generated by its operations and its value chain. An issue is material from an impact perspective if it is a significant impact on people and/or the environment.
2. Financial materiality. How sustainability issues create or erode value for the company. That covers sustainability risks and opportunities affecting financial performance, financial position, cash flows, access to capital or cost of capital. An issue is financially material if it triggers, or could trigger, relevant financial effects on the company.

An issue is considered material for sustainability reporting if it is material from the impact perspective, from the financial perspective, or both.

How a Brazilian company would run that analysis: a practical agribusiness example

Take a Brazilian agribusiness company producing and exporting soy to the European Union.

1. Identifying relevant ESG topics:
   1. Environmental: deforestation, land use, water management, biodiversity, agrochemical use, GHG emissions (climate change).
   2. Social: working conditions (on the farm and in the grain supplier chain), the rights of local and Indigenous communities, worker health and safety.
   3. Governance: anti-corruption in the supply chain, anti-competitive practice, ethics in stakeholder relationships.

1. Impact materiality analysis:
   1. Deforestation. Buying soy from cleared areas in the Amazon or the Cerrado is a significant negative impact on the environment (biodiversity, GHG emissions, ecosystems). It is therefore material from an impact perspective.
   2. Water use. Intensive irrigation in water-stressed regions can generate a significant negative impact on local communities and ecosystems. Impact material.
   3. Working conditions. Labour rights violations among raw material suppliers are a significant negative impact on workers. Impact material.

1. Financial materiality analysis:
   1. Deforestation. Risks to capital access (EU banks and investors may withdraw financing), supply chain disruption (EU import bans), reputational damage (European consumer boycotts), regulatory fines. Deforestation is therefore financially material.
   2. Water use. Water scarcity risks affecting production, higher costs for withdrawal and treatment, fines for excessive use or contamination. Financially material.
   3. Working conditions. Litigation risk, fines, production disruption (strikes, labour problems), reputational damage with EU consumers and partners. Financially material.

In this example, deforestation, water use and working conditions are material under both perspectives (double materiality) and therefore require detailed disclosure under the relevant ESRS (E1, E3, E4, S1, S2). The company will need to collect data on its water footprint, the origin of the soy (deforestation-free), and value chain audits.

Running a double materiality analysis is the first critical step for any Brazilian company in CSRD scope, because it defines the exact scope of the required disclosures.

The difference between the CSRD and IFRS S2

The CSRD and the International Sustainability Standards Board's IFRS S2 are two prominent initiatives in the global sustainability reporting landscape. Both aim to improve ESG disclosure, but their approaches, scope and audiences differ fundamentally.

The main difference lies in the concept of materiality.

• CSRD (and ESRS). Built on double materiality, requiring disclosure of information that is materially relevant from an impact perspective (the company's impact on society and the environment) and from a financial perspective (the impact of sustainability issues on the company's finances). Its audience is broader, including investors, NGOs, regulators, customers and society at large.
• IFRS S2 (and the ISSB standards). Built primarily on financial materiality, focused on sustainability information useful to investors making economic decisions. The reports are aimed principally at the capital markets.

Here is a comparison table:

It is worth noting that although the CSRD has a wider scope, the disclosures required by IFRS S2 (covering climate risks and opportunities) will frequently be considered financially material under the CSRD, and so will be included in CSRD reports. The CSRD will, however, require additional disclosure on impacts and other ESG topics that do not fall strictly within financial materiality for investors.

For Brazilian companies with global operations, understanding the synergies and distinctions between CSRD/ESRS and IFRS S2 is fundamental to optimising data collection and reporting.

What Brazilian companies need to do now

For Brazilian companies with operations or significant turnover in the European Union, being proactive is decisive. Adapting to the CSRD is complex and demands time, resources and expertise. A clear, practical action plan is indispensable.

Here is a practical checklist of the initial and ongoing steps.

1. Map your CSRD exposure.
   1. Identify legal entities. Which subsidiaries, branches or holding companies in the group meet the size and turnover criteria in the EU?
   2. Check the mandatory financial year. Set the reporting deadline for each entity.
   3. Consolidate the picture. Understand whether reporting will be consolidated at group level or done individually per entity. The CSRD allows non-EU companies to report on a consolidated basis where applicable.

1. Run a gap analysis.
   1. Assess existing systems and processes. Compare the sustainability information you already collect and your current reporting processes with the detailed ESRS requirements.
   2. Identify the gaps. Where is your current data insufficient? Which metrics and disclosures do the ESRS require that you do not have? That covers historical data, projections and collection processes.
   3. Focus on the main gaps. They generally include Scope 3 GHG data, value chain due diligence, and assessment of social risks and opportunities.

1. Implement the double materiality analysis.
   1. Stakeholder engagement. Involve internal stakeholders (management, employees) and external ones (EU customers, NGOs, suppliers, communities) to identify impacts, risks and opportunities.
   2. Prioritisation. Assess the issues identified through both lenses (impact and financial) to determine which are most material and therefore require disclosure.
   3. Documentation. Keep a complete record of the methodology used, the results of the analysis and the justifications for materiality decisions. It will be audited.

1. Develop and audit the GHG inventory.
   1. Coverage. Calculating Scope 1, 2 and 3 emissions under the GHG Protocol for all relevant operations and the value chain is fundamental. ESRS E1 requires detail on GHGs.
   2. Data quality. Prioritise primary data wherever possible. For secondary data (particularly in Scope 3), use reliable, up-to-date emission factors.
   3. Independent verification. The GHG inventory has to be auditable.

1. Map and engage the value chain.
   1. Identify risks. Assess significant environmental and social risks across the whole supply chain, from raw material extraction to final distribution in the EU.
   2. Due diligence. Implement processes to identify, prevent, mitigate and remedy adverse impacts.
   3. Supplier data collection. Build mechanisms to collect relevant sustainability data from suppliers, particularly for Scope 3 GHG and social aspects (ESRS S2).

1. Strengthen ESG governance.
   1. Governance structures. Clearly define the responsibilities of the board and senior management for sustainability.
   2. Internal control systems. Implement robust systems to secure the integrity, accuracy and reliability of sustainability information.
   3. Policies and procedures. Review and update internal policies to reflect CSRD requirements, particularly on ethics, human rights and environmental management.

Implementing the CSRD is not just a compliance exercise, it is an opportunity to improve business resilience and access to markets and capital in the European Union. Ignoring the directive can result in trade restrictions, fines and lost competitiveness. Preparation should start now.

If implementation has already started and stalled somewhere, that is what our CSRD service is for.

How Mangue Tech helps

The transition to CSRD reporting requirements takes more than strategic consulting: it takes technology that streamlines the collection, processing and reporting of sustainability data. Mangue Tech positions itself as a technology partner in that process, focused on data automation and accuracy, both critical to meeting ESRS requirements and mandatory assurance.

Our platform and team offer tangible advantages to Brazilian companies facing the CSRD:

• Automated emissions inventory with a broad database. Mangue automates the calculation of the greenhouse gas inventory for Scopes 1, 2 and 3. Our platform includes an extensive database of more than 60,000 emission factors from internationally recognised sources (Defra, EPA, IEA, AIB and others). That keeps the emissions calculation accurate, traceable and aligned with what ESRS E1 and the GHG Protocol require, however complex your value chain. The accuracy of the emission factors is what makes the GHG report auditable.
• Coverage of multiple regulatory frameworks. We understand the CSRD is only one of several requirements your company may face. Our platform is designed to cover more than 20 sustainability regulatory frameworks, including GRI, CDP, SASB, PCAF, IFRS S2 and, of course, the CSRD/ESRS. That removes duplicated reporting effort, letting the same database be used and adapted for different requirements, with efficiency and consistency across your reports.
• Specialist consulting for CSRD implementation. Beyond the technology, Mangue Tech offers specialist consulting guiding your company at each stage of the CSRD journey. Our team supports:
  • Gap analysis and double materiality. Identifying the gaps between your current practice and the ESRS requirements, and supporting a robust double materiality exercise.
  • Action plan development. Building a detailed roadmap for data collection, system implementation and team training.
  • Managing the journey. Continuous support in data collection, validation, report preparation and process optimisation for future reporting rounds.
  • Audit preparation. Making sure your data and processes match what independent verifiers expect.

Our value proposition combines advanced technology for data automation and market intelligence with strategic consulting to secure the compliance and integrity of your sustainability reporting. Our focus is providing the tools and knowledge your company needs not only to meet the CSRD but to extract strategic value from the journey.