Who Needs to File ESG Reports in the EU?

What is ESG? Who Needs to File ESG Report?

ESG sustainability reporting is currently the talk of the town, and for all good reasons. The climate crisis is one of the major global crises that must be taken care of. For this reason, investors today require reliable, comparable, and accurate sustainability-related business data to make their investment decisions. Regulators worldwide now demand transparent disclosures of companies’ environmental, social, and governance-related practices.

Currently, sustainability disclosures in the European Union are governed by the Non-Financial Reporting Directive (NFRD), which came into effect in 2018. The scope of NFRD is limited as it applies to just about 11,000 EU companies – publicly listed companies and large companies with 500+ employees.

Under NFRD, companies can choose their sustainability reporting framework for data disclosure. However, due to its limited applicability, The European Commission adopted the Corporate Sustainability Reporting Directive (CSRD) proposal to replace NFRD.

What is Corporate Sustainability Reporting Directive?

Starting in October 2022, the EU will adopt the Corporate Sustainability Reporting Directive that supports the European Green Deal. It is a whole-economy policy measure that intends to make the EU the first carbon-neutral, resource-efficient, and competitive economy by 2050. CSRD reporting will be as per the EU ESG reporting standards, and the companies will need to tag information digitally to ensure machine readability, facilitating the comparability of data.

Which Companies Need to File ESG Reports Under CSRD?

Nearly 50,000 EU companies will have to make sustainability disclosures under CSRD. The directive includes the following companies:-

  • All large undertakings: An EU company or an EU subsidiary of a non-EU company that meets at least two of the three criteria:-
    • A turnover of more than €40 million
    • Balance sheet total above €20 million
    • More than 250 employees
  • All listed companies: These include small and medium-sized enterprises (SMEs) that offer securities on EU-regulated markets. Although it excludes listed micro-undertakings, they can apply the provisions voluntarily.
  • Third-country companies: Non-European countries with at least one subsidiary (large or listed) or branch (generating a net turnover of €150 million or more) must provide a sustainability report.

When Will CSRD Mandate Rules Apply?

The applicability for companies already subject to NFRD will begin in 2024, with initial reporting due in 2025. For new companies under CSRD, the application of regulation will occur in three stages:-

  • The applicability for large undertakings will begin in 2025, with the first report in 2026.
  • The applicability for SMEs will begin in 2026, with initial reporting due in 2027. However, SMEs can opt out during the transition period until 2028.
  • The applicability for non-EU companies will begin in 2028, with reporting starting from 2029.

Get Ready for a Smooth Transition to ESG Reporting With DataTracks!

CSRD requires sustainability reports to be filed in a digital format (iXBRL) as per the EU ESG reporting standards. The format is already used for ESMA’s ESEF reporting in the EU. With more than 18+ years of experience, DataTracks has created 348,000 compliance reports for over 23,400 clients. So if you are looking for reliable and accurate ESG reporting services, DataTracks is the best bang for your buck! Get in touch with an expert @ +31202253702 or email enquiry@datatracks.eu for all your ESG reporting needs!

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