This article reflects the current requirements as of the time of writing. However, due to the European Commission’s proposed Omnibus Directive, the number of companies in scope may be reduced in the future. We will update this article as more information becomes available.
The Corporate Sustainability Reporting Directive (CSRD) is the new EU legislation requiring all large companies and listed SMEs, to publish regular reports on their environmental and social impact activities.
The CSRD covers all listed companies on regulated markets within the EU, including large enterprises that meet the reporting criteria as well as listed small and medium-sized enterprises, excluding micro-enterprises.
Which companies will need to make CSRD disclosures?
Companies and subsidiaries that fall into one of the below categories will soon be obliged to report under CSRD requirements.
Please note the following company size thresholds reflect adjustments made to the EU Accounting Directive in October 2023.
Large companies (incl. EU subsidiaries of non-EU parent companies)
Large companies are defined as those with at least two of the following:
Over 250 employees
An annual net turnover exceeding €50 million
Total assets (balance-sheet total) exceeding €25 million
The definition of 'large company' includes both EU companies and EU subsidiaries of non-EU companies. Non-EU parent companies are only required to file CSRD disclosures for relevant EU subsidiaries but can voluntarily disclose at the group level.
Large companies are required to report under the CSRD whether listed or not.
Companies previously required to report under NFRD will have to begin reporting in 2025 for the 2024 financial year, whereas companies previously not subject to NFRD and non-EU companies with EU listings in the scope criteria of CSRD will have to begin reporting in 2026 for the 2025 financial year.
Insurance and credit institutions
Entities within these sectors are required to report under the CSRD and begin reporting in 2025 for the 2024 financial year.
Listed companies, including SMEs (excluding micro-companies)
Listed small and medium-sized enterprises (excluding micro-enterprises) are defined as those with at least two of the following:
Over 50 Employees
An annual net turnover €10M Net Turnover
Total assets (balance-sheet total) exceeding €5M
Listed SMEs have an extra 2 years before they are required to report under the CSRD, with reporting beginning in 2027 for the 2026 financial year.
The standards according to which SMEs will have to report will also be simpler than those that will apply to large companies in order to accommodate for SMEs' relatively smaller resource capacity. The ESRS SME standards, however, are still in the draft stage at present and are yet to be officially published - more information on these are expected later in 2024.
The directive does not apply to non-listed SMEs and micro-enterprises, but they can opt to comply with the standards voluntarily.
Large non-EU companies with EU branches or subsidiaries
Non-EU companies with an annual net turnover of €150 million or more within the EU and an EU branch with a net revenue of €40 million or more are required to report under the CSRD.
These companies will have to begin reporting in 2029 for the 2028 financial year.
Which companies are exempt?
The following exemptions apply:
Group and subsidiary exemption (excluding large listed PIEs)
If an EU parent provides sustainability reporting (in compliance with CSRD and the first set of ESRSs) in the form of a consolidated group report that includes all its subsidiaries, then all in-scope subsidiaries are exempt from producing their own CSRD sustainability report.
This exemption does not apply to large listed Public-Interest Entities (PIEs).
However, exempted EU-based subsidiaries will still need to:
Publish the consolidated management report, the name and registered office of the parent undertaking that is reporting CSRD-compliant sustainability information on their behalf
Include a reference in their own individual management report to the fact that they are exempt from reporting sustainability information under the CSRD
Include clear links and instructions on how to access the consolidated management report.
Non-EU parent exemption
If a non-EU parent has several in-scope subsidiaries in the EU, then one of the largest EU subsidiaries may prepare consolidated sustainability reporting that includes only those in-scope EU subsidiaries (in their own right and under the general scoping requirements).
This exemption is available until 6 January 2030.
Equivalency exemption
If a company reports under certain sustainability reporting standards or regimes that the European Commission determines as ‘equivalent’ to reporting under the CSRD, it will be exempt from CSRD sustainability reporting obligations. What is considered to be an equivalent sustainability reporting framework has not yet been determined.
In this case, exempted EU-based subsidiaries will still need to:
Publish the consolidated management report, the name and registered office of the parent undertaking that is reporting CSRD-compliant sustainability information on their behalf
Include a reference in their own individual management report to the fact that they are exempted from reporting sustainability information under the CSRD
Include clear links and instructions on how to access the consolidated management report.
FAQ
Under which circumstances will non-EU headquartered companies have to report under CSRD?
Under which circumstances will non-EU headquartered companies have to report under CSRD?
The CSRD will apply to UK/non-EU companies as follows.
Reporting in 2026 for the 2025 financial year
Companies with at least one EU subsidiary (either a large EU company or an EU company listed on an EU-regulated market which isn't a micro undertaking) that meets the criteria of being a large company (fulfilling at least two of the following three criteria):
Over 250 employees
An annual net turnover exceeding €40 million
Total assets (balance-sheet total) exceeding €20 million
Reporting in 2027 for the 2026 financial year
Small and medium-sized companies that have listed securities (e.g. bonds or stocks) on an EU-regulated market.
Reporting in 2029 for the 2028 financial year
Non-EU companies (including EU subsidiaries of a non-EU parent) with an annual revenue in the EU of > €150 million and an EU branch with net revenue of > €40 million
Will non-EU headquartered companies in scope have to report for the whole group or only EU subsidiaries?
Will non-EU headquartered companies in scope have to report for the whole group or only EU subsidiaries?
Currently, only EU-based subsidiaries meeting reporting requirements will have to report.
If the parent company publishes non-financial information that is equivalent to EU standards and includes information related to the subsidiary, the subsidiary does not have to report. In this case, exempted EU-based subsidiaries will still need to link to the parent undertaking's non-financial report in their management report.
In 2029, however, large non-EU entities with EU branches or subsidiaries will have to report on the company level for the 2028 financial year.
Do companies that are subsidiaries of a parent undertaking, which is required to report under CSRD, also have to report under CSRD?
Do companies that are subsidiaries of a parent undertaking, which is required to report under CSRD, also have to report under CSRD?
Subsidiaries of EU-based parent undertakings
Subsidiary undertakings of all sizes (and their subsidiary undertakings) do not have to report non-financial information if it is included in the non-financial report of their parent undertaking, provided the parent undertaking's non-financial information is reported in accordance with EU requirements.
However, the subsidiaries do have to ensure that the sustainability information of the parent undertaking is easily and publicly accessible and to bring transparency about which is their parent undertaking.
Subsidiary undertakings are therefore required to:
Include the name and registered office of the parent undertaking that is reporting sustainability information in their management report.
Provide web links to the non-financial report of the parent undertaking (as part of the parent undertaking’s consolidated management report).
Reference in their own management report to the fact that they are exempted from reporting sustainability information.
EU-based subsidiaries of non-EU parent undertakings under the scope of CSRD (from 2029 onwards)
If the parent undertaking publishes non-financial information equivalent to EU standards and includes information related to the subsidiary, the subsidiary does not have to report. However, the subsidiary will need to link to the parent undertaking's non-financial report in its management report.