Quick Comparison
| CSRD | SEC Climate Rule | |
|---|---|---|
| Scope | Broad ESG — environmental, social, governance, and human rights | Climate-related financial risks and GHG emissions |
| Applicability | ~50,000 EU and non-EU companies meeting size thresholds | SEC-registered public companies (U.S. and foreign private issuers) |
| Required/Voluntary | Mandatory EU regulation | Mandatory SEC regulation (subject to legal challenges) |
| Geography | European Union (with extraterritorial reach) | United States (SEC registrants globally) |
| Key Focus | Double materiality — impact and financial | Financial materiality — climate risks to investors |
| Assurance | Limited assurance initially, moving to reasonable | Limited assurance for Scope 1 and 2 emissions |
What is the CSRD?
The Corporate Sustainability Reporting Directive entered into force in January 2023 and represents the EU's overhaul of corporate sustainability disclosure requirements. It replaces the Non-Financial Reporting Directive (NFRD) and dramatically expands both the scope of companies required to report and the depth of information they must provide. The CSRD requires reporting under the European Sustainability Reporting Standards (ESRS), developed by EFRAG.
The directive applies in phases: large public-interest entities already subject to the NFRD began reporting in 2024 (for fiscal year 2024), other large companies in 2025, and listed SMEs in 2026 (with an opt-out until 2028). Non-EU companies generating over €150 million in EU revenue will be subject to reporting requirements starting in 2028 under a separate set of standards.
What sets the CSRD apart is its double materiality approach. Companies must report on how sustainability issues affect their business (financial materiality) and how their business affects people and the environment (impact materiality). The ESRS cover ten topical areas spanning climate change, pollution, water, biodiversity, workforce, affected communities, consumers, and business conduct.
What is the SEC Climate Rule?
The SEC's final rule on climate-related disclosures, officially titled "The Enhancement and Standardization of Climate-Related Disclosures for Investors," was adopted in March 2024 after years of deliberation. The rule requires SEC registrants to disclose material climate-related risks, governance and risk management processes, GHG emissions data, and climate-related financial statement metrics.
The final rule was significantly scaled back from the 2022 proposal. Most notably, the SEC dropped the mandatory Scope 3 emissions disclosure requirement and limited Scope 1 and 2 reporting to large accelerated filers and accelerated filers, with an exemption for smaller reporting companies. Even after adoption, the rule has faced ongoing legal challenges that have resulted in stays and implementation delays.
The SEC framed the rule squarely within its existing mandate of investor protection and efficient capital markets. Unlike the CSRD's broad ESG scope, the SEC rule is laser-focused on climate as a financial risk. Disclosures are integrated into annual reports (10-K) and registration statements, placing climate information alongside traditional financial data.
Key Differences
1. Scope of Subject Matter
The CSRD covers the full spectrum of ESG topics through its ten ESRS topical standards — from climate change and biodiversity to workforce conditions, human rights in the value chain, and anti-corruption. The SEC rule addresses only climate. An organization subject to both will find the SEC rule is a subset of what CSRD requires on climate alone, with CSRD demanding extensive additional reporting across environmental and social dimensions.
2. Materiality Standard
The CSRD's double materiality requirement means companies report on sustainability topics that are either financially material or represent significant outward impacts. The SEC rule follows the long-established U.S. securities law definition of materiality — information a reasonable investor would consider important in making an investment decision. This is a narrower, purely financial lens.
3. Emissions Reporting
The CSRD requires disclosure of Scope 1, 2, and 3 GHG emissions for all in-scope companies through ESRS E1 (Climate Change). The SEC rule requires Scope 1 and 2 for large accelerated and accelerated filers only, subject to a materiality threshold, and dropped Scope 3 entirely from the final rule. This is one of the starkest differences between the two regimes.
4. Assurance Requirements
Both regulations require third-party assurance, but with different timelines and scope. The CSRD requires limited assurance on sustainability reporting from the outset, with a planned transition to reasonable assurance. The SEC rule requires limited assurance on Scope 1 and 2 emissions data for large accelerated filers, phased in over time. The CSRD's assurance scope is far broader, covering all ESRS disclosures.
5. Transition Plans
ESRS E1 requires companies to disclose their climate transition plans, including alignment with the 1.5°C Paris Agreement target, interim reduction targets, and decarbonization levers. The SEC rule requires disclosure of transition plans only if the company has adopted one — there is no obligation to create a plan.
6. Value Chain Reporting
The CSRD explicitly requires companies to report on sustainability matters across their upstream and downstream value chain, including Scope 3 emissions, supply chain labor practices, and impacts on affected communities. The SEC rule's elimination of Scope 3 requirements means value chain climate impacts are largely absent from mandatory U.S. disclosure.
7. Filing Location and Format
CSRD reports are filed as part of the management report and must be prepared in XHTML format with digital tagging (ESEF/iXBRL). SEC climate disclosures are embedded in 10-K annual reports and registration statements, tagged in Inline XBRL using a dedicated climate taxonomy.
Which One Do You Need?
CSRD applies if your company is incorporated in the EU and meets size thresholds (250+ employees, €50M+ revenue, or €25M+ balance sheet), is listed on an EU-regulated market, or is a non-EU company with €150M+ in EU net revenue and at least one EU subsidiary or branch.
The SEC Climate Rule applies if your company is registered with the SEC — whether a U.S. domestic issuer or a foreign private issuer. Smaller reporting companies and emerging growth companies face reduced or delayed requirements.
Both apply if you're a large multinational with EU operations and U.S. SEC registration. This is the reality for hundreds of companies, and the compliance challenge is significant. The key is building a reporting infrastructure that satisfies the more demanding CSRD requirements, from which SEC-specific disclosures can be extracted.
Can You Use Both?
Companies subject to both regulations should treat CSRD compliance as the ceiling and SEC compliance as a subset. Every piece of information required by the SEC climate rule is also required under the CSRD (and then some). The practical approach is to build your data collection, governance, and reporting processes around ESRS requirements, then map the relevant outputs to SEC disclosure templates.
There are differences in format, filing timelines, and specific metric definitions that require attention. The SEC rule integrates climate data into financial filings with specific financial statement line-item impacts, while CSRD reporting sits in the management report. But the underlying data — emissions inventories, risk assessments, governance structures — can and should be collected once.
Council Fire's Perspective
We work with several multinational clients navigating dual compliance, and the consistent lesson is that treating these as two separate projects is a recipe for wasted resources and inconsistent data. The CSRD's requirements are broader and more demanding on virtually every dimension, so organizations that build their sustainability reporting infrastructure around ESRS will find SEC compliance falls out naturally with targeted additional work on financial statement integration.
The legal uncertainty around the SEC rule adds complexity to planning, but we advise clients not to use that as a reason to delay. The data infrastructure needed for CSRD compliance is valuable regardless of the SEC rule's final form, and voluntary climate disclosure in SEC filings — aligned with TCFD and ISSB — is increasingly expected by institutional investors even absent a mandate.
Frequently Asked Questions
Does the SEC rule's legal challenges affect CSRD compliance?
No. The CSRD is EU law and is unaffected by U.S. litigation. Companies subject to CSRD must comply regardless of what happens with the SEC rule. If anything, CSRD compliance provides a solid foundation that exceeds current SEC requirements.
Will non-EU companies really have to comply with the CSRD?
Yes. Non-EU companies generating more than €150 million in annual net revenue within the EU, with at least one EU subsidiary exceeding certain thresholds or an EU branch with €40M+ in revenue, must report under a dedicated set of non-EU standards starting in fiscal year 2028. The European Commission adopted these standards in 2024.
How do the timelines compare?
CSRD phased in starting with fiscal year 2024 for the largest companies, with subsequent waves through 2028. The SEC rule's original phased timeline began with fiscal year 2025 for large accelerated filers, but implementation has been delayed by legal proceedings. Companies should track both timelines independently, as they operate on different schedules.
Do I need separate assurance providers for each regulation?
Not necessarily, but the assurance standards differ. CSRD assurance follows the EU assurance framework (expected to be based on ISAE 3000 or a European equivalent), while SEC assurance must follow attestation standards from a PCAOB-registered provider. Some firms can provide both, but the engagement terms and standards will differ.
Need help with CSRD vs SEC Climate Rule: Key Differences Explained?
Our team brings decades of sustainability consulting experience. Let's talk about how Council Fire can support your goals.