European Sustainability Reporting Standards (ESRS)

The ESRS are intended to ensure that sustainability information is understandable, relevant, truthful, verifiable and comparable. The first set of 12 sector-agnostic standards was adopted by the European Commission on 31 July 2023. Adoption of sector-specific standards, originally anticipated for 30 June 2024, have now been pushed back by two years to 2026.

When Do You Need to Report?

Currently approximately 11,600 undertakings are subject to non-financial reporting obligations. Following full implementation of the CSRD, this expands to approximately 50,000 businesses across the EU, with timing based on specific size-thresholds.

Phase 1: 2025 Based on 2024 Data

Large public interest entities (PIEs) will be the first to report under CSRD. PIEs are essentially companies with more than 500 employees on average and:

• with securities listed on an EU regulated market; or
• EU credit institutions; or
• EU insurance undertakings; or
• EU companies designated as PIEs by individual EU member states.

Phase 2: 2026 Reporting Based on 2025 Data

Next come large EU undertakings, i.e. corporations that exceed at least two of the “Largeness Criteria” over two consecutive years:

• 250 employees;
• EUR 40m net turnover;
• EUR 20m balance sheet total (total liabilities + total equity);

Phase 3: 2027 Reporting Based on 2026 Data

Listed SMEs are defined as EU undertakings which do not meet the Largeness Criteria, but which exceed at least two of the following criteria over two consecutive years:

• with securities listed on an EU regulated market; or
• ten employees;
• more than EUR 700,000 net turnover; and/or
• more than EUR 350,000 balance sheet total.

Phase 4: 2029 Reporting Based on 2028 Data

Finally, reporting obligations will also extend to multinational corporations whose ultimate parent undertaking is a non-EU company:

• where the non-EU parent undertaking has at least one EU subsidiary which qualifies as a large undertaking or a listed SME; or
• the non-EU parent undertaking has at least one EU branch that generates a net turnover of more than EUR 40m annually; and
• the parent undertaking generates at least EUR 150m net turnover in the EU for two consecutive years.

Assurance Requirement

CSRD requires sustainability reporting to be subject to external assurance by a statutory auditor, an audit firm or independent accredited assurance provider, to review whether the sustainability information is reported in compliance with ESRS. Initially this will be on a lighter-touch “limited” basis, but “reasonable” assurance will be required as of 1 October 2028.

Companies reporting under CSRD will also have to comply with EU Taxonomy regulation.