ESG Reporting

ESG reporting refers to the structured disclosure of a company's environmental, social, and governance performance, risks, and impacts. Under the Corporate Sustainability Reporting Directive (CSRD), ESG reporting has evolved from a voluntary practice into a comprehensive regulatory requirement for a wide range of companies operating in the EU.

The CSRD applies in a phased rollout: from financial year 2024 for large public-interest entities already subject to the Non-Financial Reporting Directive (NFRD); from 2025 for other large companies meeting two of three criteria (250+ employees, EUR 50M+ net turnover, EUR 25M+ total assets); from 2026 for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings (with an opt-out possibility until 2028); and from 2028 for non-EU companies with EU net turnover exceeding EUR 150 million and at least one EU subsidiary or branch.

Companies must report in accordance with the European Sustainability Reporting Standards (ESRS) adopted by the European Commission as delegated acts. The first set of ESRS includes two cross-cutting standards (ESRS 1 and ESRS 2), five environmental standards (covering climate change, pollution, water and marine resources, biodiversity, and resource use/circular economy), four social standards (covering own workforce, workers in the value chain, affected communities, and consumers/end users), and one governance standard (covering business conduct).

Sustainability reports must be included in the management report, published in a machine-readable digital format (XHTML with ESEF taxonomy tagging), and subject to limited assurance by an independent auditor or assurance services provider. The CSRD represents a paradigm shift from voluntary, fragmented sustainability disclosures to standardised, assured, and digitally accessible ESG reporting that is placed on an equal footing with financial reporting.