Introduction
The EU's commitment to promoting responsible and sustainable business practices is reflected in its corporate reporting regulations, focusing on non-financial reporting and sustainability reporting, which applies to all companies of a certain size. Insurers are considered as playing a key role in the transition towards a fully sustainable economic and financial system in line with the Green Deal, and are specifically referred to in Article 1 (3)(a) of the CSRD.
The Non-Financial Reporting Directive (Directive 2014/95/EU or "NFRD"), which amended the Accounting Directive (Directive 2013/34/EU), was introduced in 2014 with the primary objective of enhancing transparency regarding the social and environmental data provided by companies across EU Member States. Its aim was to bolster the disclosure of non-financial information, particularly among larger corporations. Notably, the NFRD did not prescribe the use of specific non-financial reporting standards or frameworks, nor did it impose detailed disclosure requirements, granting companies considerable flexibility in how they carried out their reporting.
In a significant development, the European Commission, in its Communication on the Green Deal dated December 11, 2019, committed to revisiting the NFRD in 2020 as part of its strategy to fortify the foundation for sustainable investment. Over the years, it became increasingly evident that the scope and quality of nonfinancial reporting needed to be increased to address pressing global challenges such as climate change, social inequality, and environmental degradation. In response to these imperatives, the Corporate Sustainability Reporting Directive (CSRD) is a key step forward.
It aims to establish a standardized framework for reporting environmental, social and governance data, thereby ensuring greater transparency and comparability across the European Union. This transition underscores the growing importance of sustainability in the corporate landscape and reflects the EU's firm commitment to promoting responsible and sustainable business practices.
Framework legislation
Directive (EU) 2022/2464 Corporate Sustainability Reporting
On 21 April 2021, the European Commission adopted a package of measures, which included a proposal for a Corporate Sustainability Reporting Directive which aims to revise and strengthen the existing rules introduced by the Non-Financial Reporting Directive (NFRD), and to bring - over time - sustainability reporting on a par with financial reporting.
The Corporate Sustainability Reporting Directive, ie Directive (EU) 2022/2464, was published on 16 December 2022 and entered into force on 5 January 2023. Member States are required to implement it within 18 months from the date of publication in the EU Official Journal.
(i) Key innovations
Compared to the NFRD, the CSRD’s main innovations are:
- extending the scope of application to include all large companies, whether they are listed or not as well as listed small and medium-sized enterprises (SMEs), with the exception of listed micro-enterprises;
- standardising sustainability reporting standards, introducing mandatory assurance;
- including the non-financial disclosures within the management report; and
- reporting format in accordance with the European Single Electronic Format regulation.
(ii) Scope of application
A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability. In particular, the CSRD obligations to carry out corporate sustainability reporting will apply to:
- large public interest-entities (such as insurance companies) with more than 500 employees;
- large companies with more than 250 employees and a turnover of EUR 40 million;
- to all listed companies except for micro-undertakings; and
- non-EU companies generating a net turnover of more than EUR 150 million within the EU for two successive financial years, as well as non-EU companies with a subsidiary that qualifies as a listed SME and/or branch with a net turnover of more than EUR 40 million for the previous financial year.
(iii) Timeframe
The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. The rules set by the CSRD will start applying between 2024 and 2028, as follows:
- from 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the NFRD, with reports due in 2025;
- from 1 January 2025 for large companies (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets) not presently subject to the NFRD, with reports due in 2026;
- from 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.
Implementing measures
New reporting standards - European Sustainability Reporting Standards (ESRS)
The CSRD outlines the obligation for companies to use standards to fulfil their legal sustainability reporting obligations. That is why, on July 31, 2023, the Commission adopted the European Sustainability Reporting Standards (ESRS) which are common standards which will help companies to communicate and manage their sustainability performance more efficiently and therefore to have better access to sustainable finance.
By requiring the use of common standards, the Accounting Directive (2013/34/EU), as amended by the CSRD, aims to ensure that companies across the EU report comparable and reliable sustainability information.
The ESRS are based on a technical advice (ie, a set of draft standards) issued by EFRAG (European Financial Reporting Advisory Group) on November 2022, developed with the close involvement of investors, companies, auditors, civil society, trade unions, academics and national standard-setters.
The information to be disclosed is set out in the Annexes of the Delegated Act and includes information related to short-, medium- and long-term time horizons, as applicable, and contains:
(i) a brief description of the undertaking’s business model and strategy;
(ii) a description of the time-bound targets related to sustainability matters set by the undertaking;
(iii) a description of the role of the administrative, management and supervisory bodies with regard to sustainability matters, and relevant expertise and skills or access to them;
(iv) a description of the undertaking’s policies in relation to sustainability matters;
(v) information about the existence of incentive schemes linked to sustainability matters;
(vi) a description of the due diligence process implemented by the undertaking with regard to sustainability matters;
(vii) the principal actual or potential adverse impacts connected with the undertaking’s own operations and with its value chain;
(viii) any actions taken by the undertaking in relation to actual or potential adverse impacts, and the result of such actions;
(ix) a description of the principal risks to the undertaking related to sustainability matters;
(x) indicators relevant to the required disclosures.
Where applicable, the disclosures shall contain information about the undertaking’s own operations and about its value chain, including its products and services, its business relationships and its supply chain.
The European Commission has made available practical Questions and Answers on the Adoption of European Sustainability Reporting Standards Frequently asked questions on the implementation of the EU corporate sustainability reporting rules - European Commission (europa.eu)
See the relevant CDR here: Delegated regulation - EU - 2023/2772 - EN - EUR-Lex (europa.eu)
Supervisory convergence and harmonization
The purpose of the ESRS mandating large and listed companies (except micro-enterprises) to disclose information on social and environmental issues, is to enable stakeholders to assess companies' sustainability performance, in alignment with the European Green Deal.
Existing sustainability reporting has been deemed insufficient, often lacking key information. Comparisons between companies are difficult, and trust in reported information is a concern.
The ESRS Framework is designed to enhance the communication and management of sustainability performance for companies. The standards are mandatory for companies obligated by the Accounting Directive (EU Accounting Directive 2013/34/EU) to report specific sustainability information.
(i) Materiality and Reporting Requirements:
The ESRS adopt a "double materiality" perspective, requiring companies to report on both – their impacts on people/environment and how social and environmental issues create financial risks and opportunities for the company. Disclosure requirements subject to materiality are not voluntary. The information in question must be disclosed if it is material, and the undertaking's materiality assessment process is subject to external assurance in accordance with the provisions of the Accounting Directive.
There are 12 ESRS covering various sustainability aspects, including two ‘general’ or ‘cross-cutting’ standards, five standards on environmental, four standards on social and one on governance issues. Sector-specific standards are yet to be published by the European Commission but are expected to set out specific disclosures companies operating in specified sectors may be required to make in respect of material sustainability matters.
(ii) Timeline for Reporting:
EU legislation mandates that publicly listed companies disclose information concerning the risks and opportunities associated with social and environmental factors. This requirement aims to aid investors, civil society, consumers, and other stakeholders in assessing the ecological and social sustainability of their operations. On July 31, 2023, the Commission introduced comprehensive cross-cutting standards to streamline this reporting process, with sector-specific standards, SME standards, and standards for third-country firms with an EU turnover of €150 million and at least one EU subsidiary or branch to follow suit. These new standards were initially slated for implementation by 30 June 2024.
On 10 April 2024 the co-legislators agreed to extend the deadline for adopting these new standards to 30 June 2026. This extension is intended to allow companies to concentrate on implementing the initial set of ESRS and to afford more time for the development of sector-specific sustainability standards and those tailored for specific third-country entities. The application deadline for third-country companies will remain aligned with the financial year 2028, as outlined in the CSRD. The new rules do not affect the reporting timelines as agreed under the Corporate Sustainability Reporting Directive (CSRD). The delay is intended to give more time for companies to prepare for the sectorial European Sustainability Reporting Standards (ESRS) and for specific standards for large non-EU companies.
(iii) Guidance and Compliance:
EFRAG has provided technical advice, and the Commission made modifications to ensure proportionality.
Companies can expect additional non-binding technical guidance from EFRAG on materiality assessment and reporting on value chains.
As regards other pieces of EU legislation, ESRS contain a series of clearly identified datapoints that correspond to specific information that financial market participants, benchmark administrators and financial institutions need for their own reporting purposes respectively under the Sustainable Finance Disclosure Regulation (SFDR), the Benchmark Regulation (BMR) or the “pillar 3” disclosure requirements under the Capital Requirements Regulation (CRR), in order to facilitate the compliance of financial market participants, benchmarks administrators and financial institutions with their own disclosure obligations respectively under the SFDR, the BMR and the CRR. Further, there is alignment with the standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).
Listed SMEs will face a proportionate reporting regime, with some exemptions, and are not required to report sustainability information until financial year 2026, with the possibility of an additional two-year opt-out after that. They may choose to adhere to the current ESRS or to meet the proportionate standards to be adopted by the Commission by end June 2024.
Please see EFRAG's latest guidance on the materiality assessment here IG 1 Materiality Assessment_final.pdf (efrag.org), on value chains EFRAG IG 2 Value Chain_final.pdf and on ESRS data points EFRAG (sharefile.com)
FAQs on Sustainability Reporting Requirements
On 13 November 2024, the European Commission published a set of frequently asked questionsOpens in a new window (FAQs) to provide guidance and clarification on sustainability reporting requirements introduced by the Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD). It also addresses certain provisions of the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (SFDR).
National implementation
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The CSRD was to be transposed into national law by 6 July 2024. On 25 September 2024 the Commission published its infringement decision that it served a letter of formal notice to Austria and other 16 member states for failing to transpose the CSRD into national law.
To implement this Directive, the responsible department of the Austrian Federal Ministry of Justice has drafted a first draft of a federal law, the Sustainability Reporting Act (Nachhaltigkeitsberichtsgesetz – NaBeG) and has discussed it with the main stakeholders at a meeting in April 2023. The main point of contention is the question of the admission of so-called ‘independent assurance service providers’ (IASPs = Independent Assurance Services Providers). The draft is currently in the political coordination process. So far, the draft law has not yet been discussed in the National Council.
Under certain conditions, an EU directive, which unlike an EU regulation is not directly applicable, may nevertheless attain direct applicability. This occurs when its provisions are unconditional, sufficiently clear, and precise, and when the Member State has failed to implement the directive within the prescribed timeframe. In times of legal uncertainty, it is our responsibility to guide our clients on the relevant legal framework.
We are keen to provide advice to businesses on the direct applicability of the Directive following the currently missing transposition into national law.
Contacts: Jasna Zwitter-Tehovnik | DLA Piper Anže Molan | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
Belgium has not yet implemented the Directive on Corporate Sustainability Reporting (CSRD).
Belgium is one of the countries against which the European Commission has opened an infringement procedure for not implementing CSRD in a timely manner.
On 24 October 2024, a draft law was introduced in Belgian Parliament to implement CSRD. This draft law was adopted on 28 November 2024 and is now pending publication in the Belgian Official Gazette.
Contacts: Pierre Berger / Alexander Hamels
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
Croatia has implemented the CSRD into national legislation on 27 July 2024. The CSRD has been implemented through several key acts, namely:
- the Accounting Act (Zakon o računovodstvu, Official Gazette of the Republic of Croatia No. 85/24),
- the amendments to the Audit Act (Zakon o reviziji, Official Gazette of the Republic of Croatia No. 127/17, 27/24, 85/24) and
- the amendments to the Capital Markets Act (Zakon o tržištu kapitala, Official Gazette of the Republic of Croatia No. 65/18, 17/20, 83/21, 151/22, 85/24).
As far as currently applicable, Croatian local specific reporting requirements are concerned, please note that in March 2021, the Croatian Agency for Control of Financial Services (HANFA) issued Guidelines for the Preparation and Disclosure of ESG-Relevant Information by Issuers (Smjernice za izradu i objavu ESG relevantnih informacija izdavatelja). These Guidelines target issuers on regulated markets in Croatia who are obliged to/or voluntarily choose to report non-financial information according to specific accounting laws.
The Guidelines define sustainable investment and its contribution towards environmental and social goals without significantly harming other goals, highlighting the importance of good governance practices. Importantly, the Guidelines detail the EU and Croatian legislative context, including the Non-Financial Reporting Directive (NFRD), and the importance of disclosing ESG information for regulatory compliance and investor decision-making. Specifically, the Guidelines highlight different frameworks and standards that issuers might use for non-financial reporting, including Global Reporting Initiative (GRI) standards, which are amongst the most widely used for economic, social, and environmental impact reporting.
Contacts: Jasna Zwitter-Tehovnik | Ivan S. Males | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting (CSRD)
Implementation of EU Corporate Sustainability Reporting Directive (CSRD) into Danish law in relation to insurance and reinsurance companies and multi-employer occupational pension funds
The EU Corporate Sustainability Reporting Directive (CSRD) has been implemented in Denmark in relation to insurance and reinsurance companies and multi-employer occupational pension funds. It has been implemented mainly by provisions in the Insurance Business Act and Executive Order no. 503 of 23 May 2024 on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds.
The Insurance Business Act was amended by Act no. 480 of 2 May 2024 on amendments to the Danish Financial Statements Act, the Auditors Act and various other Acts to incorporate the CSRD into Danish law, including in relation to the Insurance Business Act.
The amended Insurance Business Act contains some main provisions on matters in relation to insurance companies' reporting of sustainability information in their annual reports in accordance with the CSRD`. However, most of the provisions on these matters are stated in Executive Order no. 503 of 23 May 2024 on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds. The executive order was made under the amended Insurance Business Act. As regards insurance and reinsurance companies and multi-employer occupational pension funds, the Directive is thus implemented into Danish law to some extent by the Insurance Business Act and to a much larger extent by the Executive Order. Only the main and most important provisions of the Act and executive order are mentioned below.
Insurance Business Act
Under the Insurance Business Act, an insurance company is defined in section 9, subsection 1, item (1), as (1) a non-life insurance company, (2) a mutual insurance company, (3) a life insurance company, (4) a multi-employer occupational pension fund, or (5) a reinsurance company. In the following, these insurance and reinsurance companies and multi-employer occupational pension funds are generally referred to as insurance companies.
Section 182, subsection 1, provides that once the annual report has been made, all members of the board of directors and the executive management must sign it and date the signature. The members must provide their signature in connection with a management statement, in which each member’s name and function in relation to the company is clearly indicated, and in which they declare different matters. Among other matters, they must declare whether the management report contains a true and fair account of the development in the company and, if a consolidated financial statement has been made, the group of companies’ activities and financial conditions, as well as a description of the principal risks and uncertainties that may affect the company and the group, and that any sustainability reporting has been made in accordance with the rules thereon. See section 182, subsection 1, no. 3 of the Act.
Section 187a provides that a company which is required to make a sustainability report must ensure that the sustainability report is accompanied by a statement on sustainability reporting in accordance with the rules thereon and the requirements stated in the CSRD.
Section 189, subsection 3, provides that a company which is required to make a sustainability report and, under other legislation, is obligated to have parts of its sustainability report verified by an accredited independent third party, must make the report from the independent third party available on the company's website.
Section 190, subsection 4, provides that the Financial Supervisory Authority sets rules for sustainability reporting, including rules on content and form.
Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds
The making and scope of application of the executive order
The Financial Supervisory Authority has used the authority under section 190, subsection 4, of the Insurance Business Act to make Executive Order no. 503 of 23 May 2024 on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds.
In the executive order, section 1, subsection 1, provides that the executive order applies to the following undertakings: (1) Insurance companies. (2) Pension funds comprised by the Insurance Business Act (multi-employer occupational pension funds). (3) Insurance holding undertakings and financial holding undertakings whose business consists exclusively or primarily of holding equity interests in insurance companies. Under section section 9, subsection 1, item (1), of the Insurance Business Act, the term insurance company also comprises a reinsurance company. This also applies in relation to the executive orders and its section 1, subsection 1, on its scope of application. The Executive Order thus applies to all these types of insurance and reinsurance companies, multi-employer occupational pension funds, insurance holding undertakings and financial holding undertakings whose business consists exclusively or primarily of holding equity interests in insurance companies. The provisions on sustainability reporting in the executive order generally apply to all these companies, funds and undertakings, subject to the more specific provisions on the scopes and times of application of the provisions on sustainability reporting.
Rules on sustainability reporting in the Executive Order
Section 144a provides, among other matters, that certain undertakings must file a sustainability report and include it in their management report in the annual report. The undertakings which have sustainability reporting obligations are (1) large undertakings and (2) small and medium-sized undertakings which have securities admitted to trading on a regulated market in a member state of the EU or the European Economic Area (EEA). See the comments below on these types of undertakings. Section 144a also provides which information shall be included in the sustainability report. The reporting must include information necessary to understand the undertaking's impacts on sustainability matters and how sustainability matters affect the undertaking's development, performance and situation. This includes a description of the undertaking’s business model and business strategy, sustainability goals, roles of the management, the undertaking’s policies regarding sustainability matters, the undertaking’s sustainability due diligence procedures and many other sustainability reporting matters. Section 144a contains many and comprehensive provisions on the covered undertakings' sustainability reporting obligations and related sustainability reporting matters. The provisions are based on and implement the provisions of the CSRD.
Section 144b provides that small and medium-sized undertakings which have securities admitted to trading on a regulated market in a member state of the EU or EEA, and captive insurance undertakings and captive reinsurance undertakings may limit their sustainability reporting in accordance with the sustainability reporting standards for small and medium-sized undertakings, as established by the EU Commission through delegated acts under article 29c of the EU Directive 2013/34 on annual financial statements, consolidated financial statements and related reports of certain types of undertakings (the Accounting Directive).
Sections 170-172 of the Executive Order contain provisions on sustainability reports to be made by certain Danish subsidiary undertakings and branches of third-country undertakings on behalf of the third-country undertakings as regards the Danish subsidiary's undertakings and branches.
Entry into force of the Executive Order and phased application of its rules on sustainability reporting in relation to different categories of undertakings from different dates of application
It follows from section 174, subsection 1, that the Executive Order entered into force on 1 June 2024.
Section 174, subsections 2-8, provide that the rules on sustainability reporting in sections 144a and 144b apply to different types of undertakings from different dates, in accordance with a phased application as also provided in the CSRD.
The following lays out the phased application of sections 144a and 144b to different types of undertakings from different dates:
Category of undertaking: Large public interest undertakings, as defined in article 2(1) of the EU Directive 2013/34 on annual financial statements, consolidated financial statements and related reports of certain types of undertakings (the Accounting Directive), with an average number of full-time employees of more than 500. See section 174, subsection 2. Under article 2(1)(c) of the Accounting Directive, a public interest undertaking in relation to insurance undertakings generally means an insurance undertaking or a reinsurance undertaking.
Date of application of sustainability reporting rules: Section 144a applies to financial year beginning 1 January 2024 or later.
Category of undertaking: Other large public interest undertakings with an average number of full-time employees of 500 or less. See section 174, subsection 3.
Date of application of sustainability reporting rules: Section 144a applies to financial year beginning 1 January 2025 or later.
Category of undertaking: Small or medium-sized undertakings, which have securities admitted to trading on a regulated market in a member state of the EU or the EEA. See section 174, subsections 4 and 8.
Date of application of sustainability reporting rules: Sections 144a and 144b apply to financial year beginning 1 January 2026 or later. However, such an undertaking may decide not to do any sustainability reporting for financial years beginning before 1 January 2028 but must then state why it does not do so.
Category of undertaking: Large captive insurance or reinsurance undertaking. See section 174, subsection 4.
Date of application of sustainability reporting rules: Sections 144a and 144b apply to financial year beginning 1 January 2026 or later.
Category of undertaking: Small or medium-sized captive insurance or reinsurance undertakings, which have securities admitted to trading on a regulated market in a member state of the EU or the EEA. See section 174, subsections 4 and 8.
Date of application of sustainability reporting rules: Sections 144a and 144b apply to financial year beginning 1 January 2026 or later. However, such an undertaking may decide not to do any sustainability reporting for financial years beginning before 1 January 2028 but must then state why it does not do so.
Category of undertaking: The dates of application of the sustainability reporting rules stated above also apply to parent undertakings which make and submit consolidated sustainability reporting as provided in section 144a(13). When calculating the number of full-time employees under section 174, subsections 2 and 3, the total number of full-time employees in the group of undertakings shall be used. See section 174, subsection 6.
Date of application of sustainability reporting rules: See the rules and dates stated above.
Category of undertaking: Subsidiary undertakings which are comprised by section 144a, are part of a group of undertakings whose total gross premiums in the EU exceed EUR 150 million in each of the last two consecutive financial years, and have an ultimate parent undertaking which is not subject to the legislation of a member state of the EU or the EEA. See section 174, subsection 5.
Date of application of sustainability reporting rules: Sections 170 and 172 apply to financial year beginning 1 January 2028 or later.
Category of undertaking: Branches whose gross premiums in the previous financial year exceeded EUR 40 million, and which are branches of an undertaking which is not subject to the legislation of an EU or EEA country if (1) the foreign undertaking is not part of a group, and the undertaking's gross premiums in the EU exceed EUR 150 million in each of the last two consecutive financial years, or (2) the foreign undertaking is part of a group of undertakings whose ultimate parent undertaking is not subject to the legislation of a member state of the EU or the EEA, and the group’s total gross premiums in the EU exceed EUR 150 million in each of the last two consecutive financial years. See section 174, subsection 5.
Date of application of sustainability reporting rules: Sections 171 and 172 apply to financial year beginning 1 January 2028 or later.
The provisions in section 174 on the phased application of sections 144a and 144b to different types of undertakings from different dates are based on the definitions of different types of undertakings in annex 1 to the Executive Order.
The following lays out the definitions of different categories of undertakings and groups in annex 1, item 13. Figures are in million Danish kroner (DKK) for the financial year.
Different categories of undertaking and groups
Micro-enterprises
Balance sheet total: Less than 3.5m
Gross premium: Less than 7m
Average number of full-time employees: Fewer than 10
Small enterprises
Balance sheet total: Less than 55m
Gross premium: Less than 111m
Average number of full-time employees: Fewer than 50
Medium-sized enterprises
Balance sheet total: Less than 195m
Gross premium: Less than 391m
Average number of full-time employees: Fewer than 250
Large enterprises
Balance sheet total: More than 195m
Gross premium: More than 391m
Average number of full-time employees: More than 250
Contacts: Per Vestergaard Pedersen, Partner | DLA Piper / Pernille Sølling, Partner | DLA Piper / Stine Gellert, Senior Associate | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
Under Article 12 of Law No. 2023-1714 of 9 March 2023, the French government is empowered to adopt measures falling within the scope of the law to transpose the CSRD by ordinance (ordonnance). Accordingly, the government has adopted the following:
Also, two additional orders (arreté) have been published to complete the implementation of the CSRD. Both orders are related to the profession of statutory auditors:
- Order of December 28, 2023 amending Title II of Book VIII of the French Commercial Code applicable from 1st January 2024, and
- Order of December 28, 2023 implementing Article 37 of Ordinance No. 2023-1142 of December 6, 2023 applicable from 1st January 2024,
These orders have been transposed into various Articles, mainly contained in the French Commercial Code (“FCC”), including:
- the thresholds applicable to the definitions of the different sizes of companies and groups of companies (FCC., art. D. 230-1 and D. 230-2),
- the type of sustainability information that must be prepared and published by the various companies concerned (FCC., art. R. 232-8-3 to R. 232-8-8 and R. 232-25 and R. 232-26), and
- the rules applicable to issuers’ annual financial reports (FCC., art. R. 451-1 and R. 451-2).
French companies and companies listed in France with more than 500 employees, more than €40 million in sales, or more than €20 million net balance sheet must file their reporting according to the new rules as of 1 January 2025 for the financial years starting from 1st January 2024.
A phased-in implementation is planned for other companies:
- for all other large companies, i.e., those exceeding two of the following three criteria: average number of 250 employees, turnover of €40 million and a balance sheet total of €20 million: starting from 1st January 2025 with reporting to be filed in 2026.
- for small and medium-sized enterprises (“SMEs”) listed on EU regulated markets, except micro-undertakings: starting from 1st January 2026, with reporting publication in 2027. However, SMEs may defer the first application of their reporting obligations by two years.
- Until 1 January 2028 (reports filed in 2029) for non-EU companies with a European turnover in excess of €150 million and a subsidiary or branch based in the EU.
Contacts: Luc Bigel / Hamza Akli
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The CSRD replaces the Non-Financial Reporting Directive (NFRD), which had been implemented in Germany in the form of the CSR Directive Implementation Act in 2017. Accordingly, the companies concerned had to disclose in their management report or a separate sustainability report non-financial information on the following topics, among others: Environmental, social and employee aspects, human rights, combating corruption and bribery, diversity concept for the composition of the company management, the supervisory bodies and the supervisory board. All capital market-oriented companies, as well as credit institutions and insurance companies were directly affected. It was up to the companies themselves to determine the standard they will use for reporting.
This reporting obligation is now to be extended considerably under the CSRD. In future, companies will have to report more comprehensively and according to more standardised standards. The CSRD enshrines what is known as dual materiality. According to this, companies are obliged to report both on the impact of their own business operations on people and the environment and on the impact of sustainability aspects on the company. Sustainability reporting, like financial reporting, will have to be audited externally.
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The CSRD has been implemented in Italy trough legislative decree no. 125 of 6 September 2024, published within the Official Bulletin on 10 September 2024 (the "Decree"). The Decree will have a gradual implementation from 2024 to 2026.
Contacts: David Marino / Valentina Grande
The deadline for transposing the CSRD into national law was 6 July 2024. The Netherlands has not complied with this deadline. In the Netherlands, the Council of State (Raad van State) had no comments on the proposed implementation of the CSRD and has advised, on 29 August 2024, to submit the implementation proposal to the House of Representatives (Tweede Kamer), which has not been done yet. Any further timing on the Dutch implementation of the CSRD is currently unclear. The European Commission has therefore launched infringement proceedings against the Netherlands for delays in implementing the CSRD. Along with the Netherlands, 16 other member states have been declared in default. The formal letters sent to the 17 member states are the first step in the infringement procedure. Member states have two months to respond. After that, the Commission can send a formal request for compliance. The final step may involve the European Court of Justice to impose sanctions.
Ahead of the introduction of CSRD, the AFM conducted an exploratory study on companies’ climate reporting and the related assurance provided by audit firms and listed companies. The study indicated that much work is needed to ensure compliant reporting as of 2024. However, the AFM also found examples of good practices. The AFM has also set up a website with further guidance on the requirements arising from the CSRD and what the AFM expects from market participants.
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The EU Corporate Sustainability Reporting Directive (CSRD) was transposed into Irish law with effect from 6 July 2024.
The European Union (Corporate Sustainability Reporting) Regulations 2024 amend the Companies Act 2014 and Transparency (Directive 2004/109/EC) Regulations 2007. A copy of the Irish Regulations transposing CSRD can be found here S.I. No. 336/2024 - European Union (Corporate Sustainability Reporting) Regulations 2024 (irishstatutebook.ie)
The Department of Enterprise, Trade and Employment (DETE) has been very engaging in clarifying a number of requests for clarification in respect the Irish Regulations.
Contacts: Naoise Harnett / Lindi Raath | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The Norwegian implementation of the CSRD is in process. The Norwegian law implementing CSRD was adopted by Parliament as of 1 June 2024, but is awaiting entry into force. This is expected to happen this fall with the necessary accompanying regulations and this page will be updated as soon as the law has entered into force.
The Ministry has expressed a wish to follow the EU’s plan for implementation of the Regulation, which would mean that the Regulation would apply for Norwegian entities at the same time as in the rest of the EU and follow the same transitional periods.
In the annual “Financial Market Report” for 2023 (Nor, “Finansmarkedsmeldingen”) published by the Norwegian Ministry of Finance, the Ministry states that the Government expects Norwegian companies to include information in their periodic reporting on how they are affected by and manage climate and environmental risks, and how their activities affect the climate and environment.
We note that the Directive is yet to be incorporated in the EEA-Agreement.
Contacts: Hugo-A. B. Munthe-Kaas, Head of Compliance | DLA Piper / Marthe Oldernes, Associate | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
The CSRD has been implemented in Swedish law by adapting previously existing laws. In the area of accounting, Sweden has generally endeavored to ensure that the national legislation is relatively closely aligned with the wording of the underlying Directives, which is why the Annual Accounts Acts have been adapted based on the directive. The Annual Accounts Acts that have been amended include:
- The Annual Accounts Act (1995:1554)
- The Annual Accounts Act in Credit Institutions and Securities Companies (1995:1559)
- The Annual Accounts Act for Insurance Companies (1995:1560)
The implementation of CSRD primarily means that companies need to provide more detailed sustainability information, and that more companies are subject to the requirement to submit a sustainability report.
The requirements on the content of the sustainability report are regulated in Chapter 6, Sections 12-12e of the Annual Accounts Act and include, for example, a description of the company's business model, strategy and the company's policy and risk assessment regarding sustainability issues.
Contacts: David Johansson, Managing Associate | DLA Piper Frida Nordström, Senior Associate | DLA Piper
The CSRD was adopted after Brexit and therefore does not apply in the UK. However, certain UK firms will be subject to sustainability-related disclosure requirements under either the UK Companies Act 2006 (CA’06) as amended by the Climate-related Financial Disclosure Regulations 2022, or the UK listing rules, or both.
Section 414(CB) CA’06 now requires (amongst others) traded companies, authorised insurance companies, and firms carrying on regulated activity in Lloyd’s, to include a non-financial and sustainability information statement in their strategic report, with information on the “company’s development, performance and position and the impact of its activity, relating to, as a minimum
- environmental matters (including the impact of the company’s business on the environment),
- the company’s employees,
- social matters,
- respect for human rights,
- anti-corruption and anti-bribery matters.”
Disclosures are only required when material, ie “to the extent necessary for an understanding of the company’s development, performance and position and the impact of its activity”.
Section 414CB(2A) CA’06 requires “a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy; and an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios.”
Notably, the UK regime provides for an opt-out under section 414CB (4) and (4A) CA’06. Where the directors of a company reasonably believe that, having regard to the nature of the company’s business, and the manner in which it is carried on, the whole or a part of the climate-related financial disclosure otherwise required by section 414CB(2A) is not necessary for an understanding of the company’s business, they can omit the whole or part of the disclosure, but must provide a clear and reasoned explanation of their reasonable belief.
Under the UK listing Rules, premium listed companies have to report against the eleven disclosure recommendations by the Taskforce on Climate-related Financial Disclosure (TCFD) or explain why they have not done so.
Contacts: George Mortimer / Matthew Hunter | DLA Piper
European texts: Directive (EU) 2022/2464 on Corporate Sustainability Reporting
Slovenia has implemented the CSRD into national legislation by way of amendments to several acts, namely;
- the Slovenian Companies Act (Zakon o spremembah in dopolnitvah Zakona o gospodarskih družbah; the Companies Act), with effect as of 30 December 2024,
- the Slovenian Market in Financial Instruments Act (Zakon o spremembah in dopolnitvah Zakona o trgu finančnih instrumentov; the Market in Financial Instruments Act), which has been in force since 19 June 2024, and
- the Slovenian Auditing Act (Zakon o spremembah in dopolnitvah Zakona o revidiranju; the Auditing Act), which has been in force since 19 October 2024.
The extended reporting obligations under the CSRD were introduced by the amendments to the Companies Act in Article 70 et seq., stipulating that companies must include a sustainability report as a separate section of their already mandatory management report. A phased-in application of sustainability reporting rules is prescribed depending on the size of the reporting entities.
The amended Market in Financial Instruments Act refers to CSRD and the provisions of the Companies Act regarding the sustainability reporting of public companies with a registered seat in the Republic of Slovenia.
The Auditing Act sets strict criteria for the qualification, registration, and monitoring of auditors. As sustainability assurance becomes mandatory, auditors need specific training and expertise in environmental, social, and governance metrics. Sustainability assurance may be provided only by audit firms that have obtained authorization by the relevant authorities.
Contacts: Jasna Zwitter-Tehovnik | DLA Piper Domen Brus | DLA Piper
