CSRD Directive for ESG Reporting - Requirements

Gain clarity on how the Corporate Sustainability Reporting Directive impacts your business and what steps you need to take to comply.

» Corporate Sustainability Reporting Directive (CSRD)

Company size

Categories of Undertakings and Groups Defined

Understanding the classification of undertakings and groups is essential for compliance and reporting purposes. The following summarizes the criteria that define micro, small, medium-sized, and large undertakings and groups based on balance sheet totals, net turnover, and average number of employees.

Micro-Undertakings

Micro-undertakings are defined as those that do not exceed at least two of the following three criteria on their balance sheet dates:

• Balance Sheet Total: EUR 450,000
• Net Turnover: EUR 900,000
• Average Number of Employees during the Financial Year: 10

Small Undertakings

Small undertakings are those that do not exceed at least two of the following criteria:

• Balance Sheet Total: EUR 5,000,000
• Member States may set this threshold up to EUR 7,500,000.
• Net Turnover: EUR 10,000,000
• Member States may set this threshold up to EUR 15,000,000.
• Average Number of Employees during the Financial Year: 50

Medium-Sized Undertakings

Medium-sized undertakings are those that are not micro or small undertakings and do not exceed at least two of the following criteria:

• Balance Sheet Total: EUR 25,000,000
• Net Turnover: EUR 50,000,000
• Average Number of Employees during the Financial Year: 250

Large Undertakings

Large undertakings exceed at least two of the following criteria on their balance sheet dates:

• Balance Sheet Total: EUR 25,000,000
• Net Turnover: EUR 50,000,000
• Average Number of Employees during the Financial Year: 250

Small Groups

Small groups consist of parent and subsidiary undertakings to be included in a consolidation and do not exceed at least two of the following criteria on the balance sheet date of the parent undertaking:

• Balance Sheet Total: EUR 5,000,000
• Member States may set this threshold up to EUR 7,500,000.
• Net Turnover: EUR 10,000,000
• Member States may set this threshold up to EUR 15,000,000.
• Average Number of Employees during the Financial Year: 50

Medium-Sized Groups

Medium-sized groups are not small groups and do not exceed at least two of the following criteria:

• Balance Sheet Total: EUR 25,000,000
• Net Turnover: EUR 50,000,000
• Average Number of Employees during the Financial Year: 250

Large Groups

Large groups consist of parent and subsidiary undertakings to be included in a consolidation and exceed at least two of the following criteria:

• Balance Sheet Total: EUR 25,000,000
• Net Turnover: EUR 50,000,000
• Average Number of Employees during the Financial Year: 250

Reporting threshold

Compliance Deadlines for Sustainability Reporting Directive

Accurate and transparent sustainability reporting is essential for companies to meet new regulatory requirements and embark on their journey towards decarbonisation effectively. The following outlines the key deadlines and obligations set by the Directive, detailing when and how different entities must comply with new sustainability reporting measures.

Application of Measures 

For Financial Years Starting on or After January 1, 2024

1. Large Undertakings (Public-Interest Entities) Exceeding 500 Employees
• Definition: Large undertakings as per Article 3(4) of Directive 2013/34/EU.
• Criteria:
• Public-interest entities defined in Article 2(1) of Directive 2013/34/EU.
• Exceed an average of 500 employees during the financial year.
2. Parent Undertakings of Large Groups Exceeding 500 Employees
• Definition: Public-interest entities that are parent undertakings of large groups as per Article 3(7) of Directive 2013/34/EU.
• Criteria:
• Exceed 500 employees on a consolidated basis during the financial year.
3. Issuers (Large Undertakings) Exceeding 500 Employees
• Definition: Issuers defined in Article 2(1)(d) of Directive 2004/109/EC.
• Criteria:
• Large undertakings exceeding 500 employees during the financial year.
4. Issuers That Are Parent Undertakings of Large Groups Exceeding 500 Employees
• Definition: Parent undertakings of large groups as per Article 3(7) of Directive 2013/34/EU.
• Criteria:
• Exceed 500 employees on a consolidated basis during the financial year.

For Financial Years Starting on or After January 1, 2025

1. Other Large Undertakings
• Definition: Large undertakings not previously mentioned, as per Article 3(4) of Directive 2013/34/EU.
2. Parent Undertakings of Other Large Groups
• Definition: Parent undertakings of large groups not covered in the previous category, as per Article 3(7) of Directive 2013/34/EU.
3. Other Issuers (Large Undertakings)
• Definition: Large undertakings not previously mentioned.
4. Issuers That Are Parent Undertakings of Other Large Groups
• Definition: Parent undertakings of large groups not covered in the previous category.

For Financial Years Starting on or After January 1, 2026

1. Small and Medium-Sized Undertakings (Public-Interest Entities)
• Definition: Small and medium-sized undertakings defined in Article 3(2) and (3) of Directive 2013/34/EU.
• Exclusions: Does not include micro-undertakings as defined in Article 3(1) of the same Directive.
• Criteria:
• Must be public-interest entities as per Article 2(1)(a) of Directive 2013/34/EU.
2. Small and Non-Complex Institutions
• Definition: Institutions defined in point (145) of Article 4(1) of Regulation (EU) No 575/2013.
• Criteria:
• Must be large undertakings or small and medium-sized public-interest entities.
• Excluding micro-undertakings.
3. Captive Insurance and Reinsurance Undertakings
• Definition: As per points (2) and (5) of Article 13 of Directive 2009/138/EC.
• Criteria:
• Must be large undertakings or small and medium-sized public-interest entities.
• Excluding micro-undertakings.
4. Issuers (Small and Medium-Sized Undertakings)
• Definition: Small and medium-sized undertakings as per Article 3(2) and (3) of Directive 2013/34/EU.
• Exclusions: Does not include micro-undertakings.
5. Issuers That Are Small and Non-Complex Institutions
• Definition: Institutions defined in point (145) of Article 4(1) of Regulation (EU) No 575/2013.
• Criteria:
• Must be large undertakings or small and medium-sized public-interest entities.
• Excluding micro-undertakings.
6. Issuers That Are Captive Insurance and Reinsurance Undertakings
• Definition: As per points (2) and (5) of Article 13 of Directive 2009/138/EC.
• Criteria:
• Must be large undertakings or small and medium-sized public-interest entities.
• Excluding micro-undertakings.

For Financial Years Starting on or After January 1, 2028

• Reporting obligations to certain large non-EU companies operating within the EU

How to Locate Point (14) of Article 1

Access the Directive Text: Obtain the official text of the CSRD that amends Directive 2013/34/EU.

Navigate to Article 1: This article lists all amendments made to the existing Directive.

Find Point (14): Scroll through the points under Article 1 until you reach point (14).

Read Article 29d: Point (14) introduces Article 29d, so reading this new article will provide the detailed requirements.

Key Takeaways

Point (14) of Article 1 is crucial because it extends sustainability reporting obligations to certain large non-EU companies operating within the EU.

Article 29d ensures that these companies provide transparency on sustainability matters, aligning them with EU standards.

Compliance Deadline: Affected companies need to be prepared to comply starting from financial years on or after January 1, 2028.

» CSRD Requirements

High-level Framework

Comprehensive Sustainability Reporting Framework

Accurate and transparent sustainability reporting is indispensable for companies aiming to understand and communicate their impacts on environmental, social, and governance (ESG) matters. By ensuring data quality, accuracy, and consistency, organizations can effectively align with global sustainability goals and regulatory requirements. The following provides a detailed overview of the Directive’s Article 19a on sustainability reporting, outlining the obligations for large undertakings and small and medium-sized enterprises (SMEs), excluding micro undertakings, that are public-interest entities.

Inclusion of Sustainability Information in Management Reports

Mandatory Reporting Requirements

• Scope: Applies to large undertakings and SMEs (excluding micro undertakings) that are public-interest entities as defined in Article 2(1)(a) of Directive 2013/34/EU.
• Requirement: These entities must include in their management report all necessary information to understand:
• The undertaking’s impacts on sustainability matters.
• How sustainability matters affect the undertaking’s development, performance, and position.
• Presentation: The information must be clearly identifiable within the management report through a dedicated section, ensuring ease of access and clarity for stakeholders.

Detailed Content Requirements for Sustainability Reporting

1. Business Model and Strategy

• Resilience to Sustainability Risks: Describe how the business model and strategy are resilient in relation to risks associated with sustainability matters.
• Opportunities Related to Sustainability: Outline the opportunities that sustainability matters present for the undertaking.
• Transition Plans:
• Alignment with Global Goals: Detail plans, including implementing actions and related financial and investment plans, to ensure compatibility with:
• Transition to a sustainable economy.
• Limiting global warming to 1.5°C in line with the Paris Agreement.
• Achieving climate neutrality by 2050 as established in Regulation (EU) 2021/1119.
• Exposure to Fossil Fuels: Provide information on exposure to coal, oil, and gas-related activities.
• Stakeholder Considerations: Explain how the business model and strategy take into account the interests of stakeholders and the undertaking’s impacts on sustainability matters.
• Implementation of Strategy: Describe how the strategy has been implemented with regard to sustainability matters.

2. Time-Bound Sustainability Targets

• Setting Targets:
• Specific Goals: Include time-bound targets related to sustainability matters.
• Emission Reduction Targets: Where appropriate, provide absolute greenhouse gas emission reduction targets for at least the years 2030 and 2050.
• Progress Tracking:
• Progress Made: Describe the progress made towards achieving these targets.
• Scientific Basis: State whether environmental targets are based on conclusive scientific evidence.

3. Governance and Expertise

• Roles and Responsibilities:
• Administrative, Management, and Supervisory Bodies: Provide a description of their role concerning sustainability matters.
• Expertise and Skills:
• Competency Evaluation: Detail their expertise and skills in fulfilling their sustainability roles or their access to such expertise and skills.

4. Policies in Relation to Sustainability Matters

• Policy Description: Offer a comprehensive description of the undertaking’s policies related to sustainability matters, highlighting key objectives and strategies.

5. Incentive Schemes Linked to Sustainability

• Incentives Overview:
• Existence of Schemes: Provide information about incentive schemes linked to sustainability matters.
• Beneficiaries: Indicate if these incentives are offered to members of the administrative, management, and supervisory bodies.

6. Due Diligence Processes and Adverse Impacts

• Due Diligence Implementation:
• Processes: Describe the due diligence processes implemented regarding sustainability matters.
• Compliance: Where applicable, indicate alignment with Union requirements on due diligence.
• Adverse Impacts Identification:
• Principal Impacts: Identify principal actual or potential adverse impacts connected with:
• The undertaking’s own operations.
• Its value chain, including products, services, business relationships, and supply chain.
• Monitoring Actions: Describe actions taken to identify and monitor these impacts.
• Additional Obligations: Include other adverse impacts required to be identified under Union due diligence requirements.
• Mitigation Measures:
• Preventive Actions: Detail any actions taken to prevent, mitigate, remediate, or bring an end to actual or potential adverse impacts.
• Results: Provide information on the outcomes of such actions.

7. Principal Risks and Risk Management

• Risk Description:
• Risks Related to Sustainability Matters: Describe the principal risks to the undertaking related to sustainability matters.
• Dependencies: Include a description of the undertaking’s principal dependencies on sustainability matters.
• Risk Management:
• Management Strategies: Explain how these risks are managed within the organization.

8. Relevant Indicators

• Quantitative Metrics:
• Key Indicators: Provide indicators relevant to the disclosures, aiding in understanding, comparison, and assessment of performance.

Reporting Processes and Additional Provisions

Identification Process

• Process Description: Report the process carried out to identify the information included in the management report.
• Time Horizons:
• Temporal Scope: Include information related to short-term, medium-term, and long-term time horizons, as applicable.

Value Chain Information

• Comprehensive Scope:
• Own Operations and Value Chain: Provide information about the undertaking’s own operations and its value chain.
• Components: Include products and services, business relationships, and supply chain.
• Transitional Provisions:
• Initial Period: For the first three years of applying the measures:
• If all necessary information about the value chain is not available, explain:
• Efforts made to obtain the necessary information.
• Reasons why not all information could be obtained.
• Plans to obtain the necessary information in the future.

References and Explanations

• Integration with Financial Statements:
• Cross-References: Include references and additional explanations of other information in the management report and amounts reported in the annual financial statements.

Omission of Information

• Exceptional Circumstances:
• Justification: Information relating to impending developments or matters in negotiation may be omitted if disclosure would seriously prejudice the commercial position.
• Balanced Understanding: Omission must not prevent a fair and balanced understanding of the undertaking’s development, performance, position, and impact.

Reporting Standards and Assurance

Use of Sustainability Reporting Standards

• Compliance Requirement:
• Adherence to Standards: Undertakings must report in accordance with sustainability reporting standards adopted pursuant to Article 29b.
• Consistency: Ensures uniformity and comparability across reports.

Workers’ Involvement

• Consultation Process:
• Information Sharing: Management must inform workers’ representatives at the appropriate level.
• Discussion and Verification: Discuss relevant information and means of obtaining and verifying sustainability information.
• Communication of Opinions: Workers’ representatives’ opinions should be communicated to relevant administrative, management, or supervisory bodies.

Specific Provisions for SMEs and Certain Institutions

Simplified Reporting for SMEs

• Applicability:
• Entities: Applies to SMEs that are public-interest entities, small and non-complex institutions, and captive insurance/reinsurance undertakings.
• Limited Reporting Requirements:
• Business Model and Strategy: Provide a brief description.
• Policies: Describe policies in relation to sustainability matters.
• Adverse Impacts:
• Identify principal actual or potential adverse impacts.
• Detail actions taken to identify, monitor, prevent, mitigate, or remediate such impacts.
• Principal Risks: Describe principal risks related to sustainability matters and how they are managed.
• Key Indicators: Provide essential indicators necessary for the disclosures.
• Reporting Standards:
• SME Standards: Report in accordance with sustainability reporting standards for SMEs referred to in Article 29c.

Temporary Exemption

• Opt-Out Provision:
• Time Frame: For financial years starting before January 1, 2028.
• Conditions: SMEs may decide not to include sustainability information.
• Disclosure: Must briefly state in the management report why sustainability reporting was not provided.

Exemptions for Subsidiary Undertakings

Conditions for Exemption

• Eligibility:
• Exempted Subsidiary Undertaking: An undertaking which is a subsidiary may be exempted from reporting obligations under certain conditions.
• Requirements:
• Inclusion in Consolidated Report: The subsidiary must be included in the consolidated management report of a parent undertaking drawn up in accordance with Articles 29 and 29a.
• Third-Country Parent Undertakings:
• If the parent is established in a third country, the consolidated sustainability reporting must:
• Be carried out in accordance with EU sustainability reporting standards or equivalent standards.
• Include an assurance opinion published in accordance with Article 30.
• Cover the activities of the subsidiary undertaking in the Union.
• Information to Be Included in Management Report:
• Parent Undertaking Details: Name and registered office.
• Web Links: To the parent undertaking’s consolidated management report and assurance opinion.
• Exemption Statement: Indicate that the undertaking is exempted from the reporting obligations.

Member State Provisions

• Language Requirements:
• Publication Language: Member States may require the consolidated report to be published in an accepted language.
• Translation: Any necessary translations must be provided.

Special Considerations

• Undertakings Without Management Reports:
• Exemption from Information Provision: Undertakings exempted from preparing a management report under Article 37 are not obliged to provide certain information, provided they publish the consolidated management report.

  Alignments

  Responsibility and Accountability

  Collective Responsibility

  • Governance Bodies:
  • Administrative, Management, and Supervisory Bodies: Have collective responsibility for ensuring compliance with sustainability reporting requirements.
  • Competence: Must act within the competences assigned by national law.

  Alignment with EU Regulations and International Agreements

  Environmental Objectives

  • Paris Agreement Alignment:
  • Global Warming Limitation: Commit to limiting global warming to 1.5°C.
  • EU Climate Law Compliance:
  • Climate Neutrality by 2050: Align with Regulation (EU) 2021/1119.

  Human Rights and Social Standards

  • Respect for Fundamental Rights:
  • International Frameworks: Compliance with:
  • International Bill of Human Rights.
  • UN Conventions (e.g., Rights of Persons with Disabilities, Rights of Indigenous Peoples).
  • International Labour Organization (ILO) Declarations and Conventions.
  • European Convention on Human Rights.
  • European Social Charter.
  • EU Charter of Fundamental Rights.

  Integration with Other Reporting Requirements

  Interconnected Reporting

  • Holistic Approach:
  • Cross-References: Integrate sustainability information with other disclosures in the management report.
  • Financial Statements: Provide explanations of amounts reported in the annual financial statements.

  Sustainability Reporting Standards Development

  Adoption of Delegated Acts

  • Commission’s Role:
  • Delegated Acts: The Commission will adopt delegated acts to provide for sustainability reporting standards.
  • Timeline:
  • By June 30, 2023: Specify information to be reported in accordance with Article 19a(1) and (2).
  • By June 30, 2024: Specify complementary information and sector-specific standards.

  Standards Criteria

  • Quality Assurance:
  • Information Quality: Standards must ensure information is understandable, relevant, verifiable, comparable, and faithfully represented.
  • Avoiding Administrative Burden:
  • Alignment with Global Initiatives: Take into account global sustainability reporting initiatives.
  • Proportionality: Avoid imposing disproportionate burdens on undertakings.

  Environmental, Social, and Governance Factors

  • Environmental Factors:
  • Areas Covered: Climate change mitigation and adaptation, water and marine resources, resource use and circular economy, pollution, biodiversity, and ecosystems.
  • Social and Human Rights Factors:
  • Areas Covered: Equal treatment, working conditions, respect for human rights, and fundamental freedoms.
  • Governance Factors:
  • Areas Covered: Role of governance bodies, internal control and risk management, business ethics, anti-corruption measures, and relationships with stakeholders.

  Transitional Provisions and Third-Country Undertakings

  Transitional Provisions

  • Temporary Measures:
  • Group Reporting: Until January 6, 2030, Union subsidiary undertakings may prepare consolidated sustainability reporting that includes all Union subsidiaries subject to Article 19a or 29a.

  Reporting by Third-Country Undertakings

  • Obligations for Subsidiaries and Branches:
  • Applicability: Applies to subsidiaries and branches of third-country undertakings meeting certain turnover thresholds.
  • Reporting Requirements: Must publish a sustainability report covering specified information at the group level.
  • Standards for Third-Country Undertakings:
  • Commission’s Role: Adopt delegated acts by June 30, 2024, to provide for sustainability reporting standards for third-country undertakings.
  • Assurance and Publication:
  • Assurance Opinion: The report must be accompanied by an assurance opinion.
  • Accessibility: Reports must be published and made accessible to the public.

Adaptation Notice under the Corporate Sustainability Reporting Directive (CSRD)

This text has been adapted in accordance with the guidelines set forth by the Corporate Sustainability Reporting Directive (CSRD). In our efforts to ensure transparency, accountability, and alignment with sustainable practices, we have carefully reviewed and incorporated CSRD principles into the content. This adaptation process reflects our commitment to high-quality, accurate, and comprehensive sustainability reporting, ensuring that the information presented adheres to internationally recognized standards.

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