The European Commission has published new clarifications on the CSRD, ESRS and the SFDR Directive.
As it is a very extensive content we have organized everything in a clear way about who must report, when and how to do it, and what are the implications of not complying.
Large companies (those that meet at least two of the following criteria: more than 250 employees, annual turnover 40M€ or balance sheet greater than 20M€) will have to report sustainability data from 2025 (with data from 2024), while listed SMEs will have until 2027 (with data from 2026.)
In the event that a company changes category, such as moving from medium to large, the obligations of the new category will not automatically apply to it. For this change to be official and trigger its new liabilities, it must meet the criteria of the new category (e.g., revenue, number of employees or balance sheet) for two consecutive years.
On third country subsidiaries and branches with significant operations in the EU (net revenues of more than 150M€ in the EU for two consecutive fiscal years or that a subsidiary or branch generates more than 40M€ in the region) are also required to report in an ESRS-aligned manner.
Subsidiary companies do not have to report their own information if their parent company already publishes a consolidated report that complies with ESRS (European Sustainability Reporting Standards).
However, large companies listed on regulated markets (their shares or securities are traded on regulated markets and also meet two large company criteria) cannot use this exemption. They must report individually, even if their parent company already does so.
There are three specific reporting requirements that must be met.
Sustainability reports will be reviewed by independent auditors or suppliers with sustainability training and a minimum of eight months' experience. Note: in Spain, according to the transposition, they must be registered with the ICAC.
These reviews are reported to be increasingly detailed and comprehensive, so without expert support, there is an increased risk of errors or non-compliance that may result in fines or penalties.
The transposition of Directive (EU) 2022/2464, has already quantified these fines and penalties. If this interests you, read more here.
Intangible resources (such as employee know-how, customer relationships, reputation, or innovation) are not mandatory in the sustainability statement.
However, they should now be included in the management report to explain how these intangibles strengthen the company and how they also contribute to the company's growth and sustainability.
In addition to this information, we’ve prepared a document summarizing the most recent clarifications shared by the European Commission.
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