ESG

Companies are expected to take responsibility for the climate and society. Companies should not only focus on profitability, but they should also map out the impact of their business on society. As part of this, new (European) legislation has been passed: ESG legislation. ESG stands for: environmental, social, governance.

New laws and regulations

Starting in 2024, large companies must comply with new ESG legislation. These include (among others):

• The Corporate Sustainability Reporting Directive ("CSRD") and its associated European Sustainability Reporting Standards ("ESRS");
• the Corporate Sustainability Due Diligence Directive ("CSDDD").

The CSRD requires companies to include ESG reporting in their financial statements. Companies must report on the effects of their business operations on the environment and society. This involves the entire value chain. In addition, the company will also have to report what impact, risks and opportunities the ESG topics have on the company.

Sustainability reporting should comply with the ESRS standards. The ESRS contains rules and guidance for the design and disclosure of the sustainability report. It is up to the company to perform a double materiality assessment: an assessment of the company's impact on the environment, as well as the impact of the environment on the company. This identifies which sustainability issues are important to the company and its stakeholders. An analysis that requires the right expertise.

The ESRS consists of twelve standards. The first two are general in nature and contain basic principles. These basic principles contain rules on reporting on strategy, governance and decisions related to materiality. The remaining ten standards cover various ESG topics, such as employees, climate change and pollution. ESRS reporting requirements vary by theme.

Who must comply with the reporting requirement and from when?

• From fiscal year 2024: companies already covered by the EU Non-Financial Reporting Directive (NFRD, only mandatory for large listed companies);
• From fiscal year 2025: all large companies (turnover higher than €50 million per year, balance sheet total higher than €25 million per year and/or more than 250 employees over one year);
• From fiscal year 2026: listed SMEs;
• From fiscal year 2028: non-EU companies (turnover within the EU higher than € 150 million, has an EU subsidiary that qualifies as large or is an SME or small listed company and/or has a branch office in the EU with turnover exceeding € 40 million per year).

Wondering when the obligations apply to your company? Use the figure below to assess whether and from when the sustainability reporting obligation applies to your company:

The CSRD requires a big step forward

The reporting requirements are extensive, far-reaching and complex. It is advisable to prepare well for these reporting requirements, even if the CSRD does not yet apply to your company. The urgency to take responsibility for climate and society is reinforced not only by strict laws and regulations, but also by more critical consumer and investor behavior.

Do you doubt whether your company is ready for these new obligations? Then it is advisable to seek advice.

With us you are assured of professional support in the field of ESG. Contact our specialists to receive more information or to schedule a no-obligation consultation.