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The CSRD Expands ESG Reporting Obligations Depending on the Size of the Company

What will change for your company

CSRD: The EU fleshes out sustainability reporting
Digital Transformation

With the new Corporate Sustainability Reporting Directive (CSRD), the reporting of many EU companies from the 2024 financial year onwards is to include sustainability-related information that is necessary for an understanding of the company's business performance, results, position, and the impact of its activities.

Which Companies Are Subject to the Corporate Sustainability Reporting Directive (CSRD)?

In future, less large and non-capital-market-oriented companies will also be obliged to report on sustainability, which is referred to as "ESG reporting" (Environmental / Governmental / Social) in line with Anglo-American corporate reporting. The European legislator considers companies with an annual average of 250 employees to be subject to reporting requirements. In addition, the balance sheet total at the end of the year must exceed 20 million euros or the turnover for the financial year must exceed 40 million euros - this applies regardless of whether an individual company or a group is capital market-oriented or not. Companies that use a regulated market for financing via equity and/or debt capital are always required to comply with the new sustainability reporting obligations. The only exceptions (as of today) are micro-enterprises with fewer than 10 employees and/or a turnover of less than EUR 20 million. From 2028 at the latest, all companies - with the exception of micro-enterprises - must expect to report ESG information on a mandatory basis.


Number of companies subject to reporting requirements grows massively as a result of the CSRD


Leading auditing firms estimate the number of companies in Germany that will be required to report in the future at around 15,000, and as many as 50,000 across Europe. If the timetable set by the EU works out - and there are no delays in the legislative process - the new CSRD standards should already apply for the 2023 financial year.


The CSRD currently provides for a phased timeline for the entry into force of the new reporting requirements:

  • From the 2024 financial year, public interest entities with more than 500 employees that are already subject to the NFRD ("Non-Financial Reporting Directive" of the EU) will be affected by the CSRD rules, with reports due for the first time in 2025. However, these companies must continue to comply with the previous NFRD rules until January 1, 2024.
  • Large companies that are not subject to the NFRD - i.e. companies with more than 250 employees and/or more than EUR 40 million in net profit and/or more than EUR 20 million in total assets must comply with the CSRD rules from January 1, 2025 (the reporting information must then be published for the first time in 2026).
  • The CSRD contains a time-limited moratorium for listed SMEs. These companies can suspend the reporting obligation until 2028. Otherwise, the corresponding information will become mandatory from 2026 (with effect from 2027).

What Information Must Be Included in Sustainability Reporting According to the CSRD?

The new CSRD follows a doublemateriality perspective ("double materiality"). In principle, this means that in future, users of financial statements will be provided with information that is either 1) material to the success of the business or 2) material from an environmental or social perspective. Previously, both had to apply to the "non-financial statement". So far, however, a conservative interpretation on the part of the company has in many cases meant that reporting on such matters has been rather sparse. While the focus was currently on information on environmental protection, social responsibility, anti-corruption and diversity on company boards on the basis of the CSR EU Directive dating back to 2014, the CSRD now requires specific information in reporting on


  • sustainability goals,
  • the role of the management board and supervisory board,
  • the most important adverse effects of the company and
  • on intangible resources not yet recognized.


European legislators are currently very busy trying to meet their own requirements with regard to the planned new sustainability reporting. Somewhat later than originally planned, the European Expert Forum on Recommendations for International Financial Reporting (the so-called "EFRAG") has now published drafts of new environmental guidelines - the "European Sustainability Reporting Standards" (ESRS). These regulations in turn focus on the six environmental objectives known from the EU taxonomy. The specific environmental protection disclosures are in turn flanked by information on social aspects (such as equal opportunities and working conditions) and core corporate governance issues (such as lobbying activities and risk management). The already familiar individual units of the new disclosures with regard to corporate governance include, for example, the disclosure of potentially adverse effects from the supply chains for production ("Principal Adverse Impacts").


In addition to two basic provisions on requirements and disclosures, the ESRS Set of Standards currently includes a further ten supplementary provisions for specific regulatory areas:



General requirements


General information


Climate change


Environmental pollution


Water and marine resources


Biodiversity and ecosystems


Resource use and circular economy


Own workforce


Workforce in the value chain


Communities affected


Consumers and end users


Corporate policy

The culture of "transparency about the impact of companies on people and the environment" desired by the EU Commission through the new CSRD rules is in any case credibly supported by the "line-up" of the above-mentioned ESRSs.

The Audit Obligation Is Coming

Auditors are also in the starting blocks. The current draft provides for an audit of the information (initially with a so-called "limited assurance"). If a company subject to reporting requirements fails to comply with the obligation to publish the information, official sanctions may also be imposed in the form of fines.


The market for corporate financing is also increasingly demanding assessments from independent rating agencies with regard to the ESG performance of reporting groups.

Increasing Challenges for the Finance Department

The lowering of the size criteria will undoubtedly mean that from 2024, many companies will also be confronted with the new environmental reporting obligations that have not previously published any or only very limited reporting in this regard. Good advice is certainly expensive, especially as the required ESG information will officially become part of the financial statements. This means that the same time and quality requirements apply to CSRD information as to the financial close.


Do the established processes need to be updated?

Very likely, because it will not work without well-functioning information procurement processes and clearly defined responsibilities. Knowing the maturity level of the organization in terms of responsiveness to new reporting requirements will also help to put appropriate measures in place.


Can technology help?

For sure. However, the coming months will show whether Germany's largest software company will be able to set standards in the market for user companies with SAP Cloud for Sustainable Enterprises once the EU has provided more clarity on the content of the specific reporting content. In this context, the integration of CSRD non-financials and the figures for the financial statements on a finance platform that is as consistent as possible and available to everyone in the Group is also a promising option. Distributed responsibility in corporate groups, barrier-free collection of the required information (e.g. via cloud tools with a web interface such as the SAP Data Collection App) and deeply integrated last mile of reporting applications (such as Amana Smartnotes) will certainly help to master the challenges ahead.


green.screen is a platform for holistic strategic sustainability management. The platform developed by Arvato Systems brings together all relevant data. As ESG reporting software, it professionalizes and digitizes environmental reporting and CO2 balancing. The platform makes it possible to collect, analyze, and present data in accordance with ESRS standards. In addition, the LSME (Listed SME) and VSME (Voluntary SME) standards will also be supported in the future to ensure that reporting meets the latest requirements. With this software, ESG data can be recorded correctly and completely in order to create transparent and meaningful reports.


In terms of a balanced cost-benefit situation, the additional effort and investment in this area of finance - if implemented with a sense of proportion and a high level of integration - is certainly offset by a positive return through the safeguarding of value-oriented management decisions, sustainable employee retention, falling refinancing costs and reputational gains. Scientific study results also increasingly indicate that sustainable corporate management has a positive effect on cash flows - and can therefore also sustainably increase the value of the company for stakeholders.

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Written by

Prof. Dr. Martin Wünsch
Expert for SAP S/4HANA Transformation & Finance