Non-financial corporate reporting – new obligations for thousands of businesses

Therefore, enterprises that are not subject to specific regulations have considerable flexibility in their non-financial reporting. However, this state of affairs is about to change. 

Current regulations on non-financial reporting as included in the Accounting Act are based on Non-Financial Disclosure Directive 2014/95/EU (NFRD). The NFRD is followed by the Corporate Sustainability Reporting Directive (CSRD). 

The CSRD was passed and became law on 5 January 2023, and EU member states have 18 months to transpose it into their national laws. Once national legislation is in place, the new non-financial reporting requirements will be placed on EU enterprises. 

There is no doubt that the CSRD starts a real revolution in corporate sustainability reporting. The Directive provides for a three-stage application of the new rules by individual entities. 

In the first place, data for the 2024 financial year will be reported by large entities that hire on average more than 500 employees per year. Then, new reporting obligations will also apply to smaller entities. Ultimately, reporting will apply to all large entities, that is entities that meet at least two out of the following criteria:

The reporting requirement will also affect small and medium-sized enterprises that are public interest entities (primarily listed entities). 

The revolutionary nature of the CSRD is not just about extending reporting obligations to a much wider group of enterprises than before. It is foremost about the change in the manner and scope of reporting. 

Reporting will be in line with the EU Sustainability Reporting Standards (ESRS). The ESRS will be adopted by the European Commission in the form of a delegated regulation. This means that the reporting standards will apply to all ESG reporting entities in the member states that have already transposed the Directive. The draft regulation introducing the ESRS was published by the European Commission on 9 June 2023.  

The uniform and mandatory reporting standards across the European Union means that you will need to put more effort to prepare a non-financial report. According to the draft delegated regulation, the first set of ESRS will include 12 standards covering the following issues:

According to the current version of draft ESRS, you may need to collect and disclose more than 1,000 pieces of information, which suggests the level of detail involved. Therefore, you will need to start collecting data for your ESG report for the 2024 financial year well in advance. 

It is a good idea to start preparing for non-financial reporting by checking what legal obligations will apply to your enterprise and what information it will have to disclose. You should also have in place appropriate tools and procedures to collect information to be disclosed – not only within the organisation but also in relation to suppliers and contractors. When taking steps to implement the new ESG reporting requirements, you should also keep in mind the purpose for which these obligations are being introduced. It is about the transformation of the EU economy towards environmental and social sustainability. From the formal point of view, however, you should remember that the ESG report will be audited in a similar way to financial statements, so you will need to obtain an unqualified auditor's opinion on it. 

The requirements listed above make ESG reporting a major challenge for entities that have previously not reported on this area. 

Contact us – we will answer any questions you may have about ESG reporting and will help you meet your new ESG reporting obligations.