CSRD: Sustainability reports mandatory for large companies

What is changing?

Do you run a large company? Or do you do business with large companies? From financial year 2026 all listed companies with more than 500 employees must report on sustainability policy and performance. From financial years 2027 and 2028 this will apply to more companies. This is the result of the European Corporate Sustainability Reporting Directive (CSRD). The CSRD requires businesses to disclose the environmental and social impact of their activities. Companies must have this sustainability reporting verified by an auditor.

For whom?

• large companies
• entrepreneurs doing business with large companies (indirectly)

Large companies

From financial year 2027 the CSRD also applies to large unlisted companies that meet at least 2 of the 3 following conditions:

• net turnover of €50 million or more
• total assets of at least €25 million
• 250 or more employees

What do companies need to report on?

Under the CSRD listed and large companies have to draw up a sustainability report. Unlisted SMEs can choose to do so voluntarily.

European Sustainability Reporting Standards (ESRS)

The sustainability report focuses on 3 main themes: Environment, Social and Governance. Exactly what companies must report is detailed in the European Sustainability Reporting Standards (ESRS). 

Currently only general ESRS have been established. In the coming years there will also be specific ESRS for some sectors. Some of the requirements in the ESRS apply to every company. For example reporting on:

• those parts of their strategy that concern sustainability
• how a company takes into account stakeholders interests in their strategy and operating procedure
• how a company organises its processes and checks to monitor and manage sustainability issues
• how a company identifies sustainability impacts, risks, and opportunities and assesses which of those are important (this is called double materiality)

Companies must also report on sustainability issues that are the most relevant to the organisation and its stakeholders. These issues are called material issues. If climate change is, for example, a material sustainability issue, the company also has to report on its own CO2 emissions.

You can find more information in EFRAG's Implementation support European Sustainability Reporting Standards (ESRS).

Supervision

The sustainability report of large and listed companies must be reviewed by an external auditor.

The Dutch Authority for the Financial Markets (AFM) checks whether listed companies comply with the CSRD properly. They may ask for further explanations.

When?

The mandatory reporting enters into effect step-by-step. For financial years starting on or after:

• 1 January 2026, for companies that are already subject to the Non-Financial Reporting Directive (NFRD)
• 1 January 2027, for large companies that are not yet subject to the NFRD
• 1 January 2028, for listed SMEs, and for small and non-complex credit institutions and insurance companies

Medium-sized and small businesses are exempted from the CSRD until at least financial year 2026. However, they will have to deal with demands from their CSRD-compliant customers or suppliers.