CSRD Wave 2: Sustainability Reporting for Mid-Size Fashion Brands (FY2025)

What is CSRD and who is now in scope?

The Corporate Sustainability Reporting Directive (EU) 2022/2464, commonly known as CSRD, fundamentally expands the scope of sustainability reporting in the European Union. While Wave 1 required large listed companies with over 500 employees to report on their FY2023 performance, the regulatory net is now widening significantly. For mid-size enterprises, the focus shifts to the second wave of applicability.

As of the current reporting cycle, companies falling under Wave 2 are required to prepare their first CSRD-compliant report for the financial year 2025 (FY2025). Although the data collection period is currently underway, the formal filing deadline for these initial reports will be in 2026. This transition marks a critical shift from voluntary or limited ESG disclosures to mandatory, standardized, and externally assured reporting for a broader segment of the market.

The Wave 2 threshold: do you qualify?

Determining whether your organization is in scope requires a precise assessment against specific quantitative thresholds. Under the CSRD, a company is subject to reporting if it meets at least two of the following three criteria at the end of the financial year:

• More than 250 employees
• A balance sheet total exceeding €25 million
• Net turnover exceeding €50 million

For many mid-size fashion brands, these thresholds are no longer distant benchmarks. If your brand employs a distributed workforce across design, supply chain management, and retail operations, or if your balance sheet reflects significant inventory and asset holdings, you likely qualify. It is crucial to note that this assessment applies to the standalone entity. However, if you are part of a group, the consolidated figures of the parent company may also trigger reporting obligations for subsidiaries, depending on their size and location. Legal teams should verify these metrics against the most recent audited financial statements to confirm applicability.

What you must report on (ESRS standards)

CSRD reports must adhere to the European Sustainability Reporting Standards (ESRS). These standards provide the detailed framework for what must be disclosed. The structure is hierarchical:

• ESRS 1 (General Requirements): Mandatory for all in-scope entities. It defines the overall structure, data quality, and assurance requirements.
• ESRS 2 (Governance): Also mandatory. This standard requires disclosure on how sustainability matters are integrated into the company’s governance structures, including board oversight and management responsibilities.
• Topic-Specific Standards (E1-E5, S1-S4, G1): These are applied based on materiality. E1 covers Climate Change, E2 covers Pollution, E3 covers Water and Marine Resources, E4 covers Biodiversity and Ecosystems, and E5 covers Resource Use and Circular Economy. S1 through S4 cover workers, value chain workers, affected communities, and consumers. G1 covers Business Ethics.

Companies are not required to report on every topic standard. Instead, they must identify which topics are material to their specific business model and report on those. This requires a rigorous materiality assessment process, which is detailed in the next section.

Double materiality: the key concept

The cornerstone of CSRD is the concept of double materiality. Unlike previous frameworks that focused primarily on financial risk, CSRD requires companies to assess sustainability issues from two distinct perspectives:

1. Financial Materiality: How sustainability risks and opportunities affect the company’s financial position, performance, and cash flows. For example, how climate change impacts supply chain continuity or raw material costs.
2. Impact Materiality: How the company’s activities, products, and services affect people and the environment. This looks outward, assessing the actual or potential impacts on stakeholders and the planet.

An issue is considered material if it is significant from either perspective. This dual lens ensures that companies cannot ignore significant environmental or social impacts simply because they do not currently pose a direct financial threat. For fashion brands, this means that labor conditions in the supply chain and carbon emissions are likely material from both a financial risk and an impact perspective.

Fashion supply chain specifics

The fashion industry’s reliance on complex, global supply chains makes it particularly vulnerable to CSRD requirements. Two areas are typically material for most fashion brands:

• Scope 3 Emissions (E1): The majority of a fashion brand’s carbon footprint lies in its value chain, particularly in raw material production, manufacturing, and logistics. CSRD requires detailed disclosure of Scope 3 emissions, necessitating robust data collection from suppliers.
• Worker Standards (S2): The S2 standard focuses on workers in the value chain. This requires disclosure on labor rights, health and safety, and fair wages not just for direct employees, but for workers in the supply chain. Given the history of labor issues in the fashion sector, this is a high-risk area for non-compliance and reputational damage.

Brands must demonstrate that they have implemented due diligence processes to identify, prevent, and mitigate adverse impacts in their supply chains. This goes beyond policy statements; it requires evidence of monitoring and corrective actions.

How product-level data (DPP) feeds your CSRD report

Aggregating high-level financial data is insufficient for CSRD compliance. The directive demands granular, product-level data to calculate accurate emissions and assess materiality. This is where the Digital Product Passport (DPP) becomes a critical enabler.

DPPs contain detailed information about a product’s composition, origin, and environmental footprint. For CSRD reporting, this data is essential for:

• Calculating Product Carbon Footprint: Accurate Scope 3 emissions reporting requires knowing the exact materials used and the energy consumed in manufacturing each product.
• Verifying Material Sourcing: DPP data helps verify claims about sustainable materials and traceability, supporting disclosures under E4 (Biodiversity) and E5 (Resource Use).
• Assessing Supplier Compliance: Product-level data can be linked to supplier performance metrics, providing evidence for S2 (Value Chain Workers) disclosures.

Without structured, product-level data, companies face significant challenges in producing reliable, auditable CSRD reports. Investing in data infrastructure that supports DPPs is not just a regulatory requirement for the future; it is a prerequisite for meeting the immediate demands of CSRD Wave 2. CFOs and sustainability directors should prioritize the integration of product data systems with their reporting workflows to ensure accuracy and efficiency in the FY2025 reporting cycle.