CSRD and ESRS

On April 14, 2025, the EU adopted a directive postponing the sustainability reporting obligation by two years for certain companies. The legislative changes will enter into force on December 31, 2025 and will set the following reporting dates:

- Fiscal year beginning after July 1, 2024, with reports due in 2025 or 2026: Large public interest entities with more than 500 employees already subject to the NFRD.

- Fiscal year 2027, with reports due in 2028: Large undertakings not currently subject to the NFRD that meet 2 out of 3 criteria in the last 2 fiscal years: more than 250 employees, turnover of more than SEK 550 million and total assets of more than SEK 280 million.

- Financial year 2028, with reports due in 2029: Listed SMEs, non-complex credit institutions and captives.

The European Commission's Omnibus proposal aims to simplify sustainability reporting under the CSRD, CSDDD and the EU Taxonomy. The proposal can be divided into different parts:

Stop-the-clock gives companies more time to prepare for reporting and regulators more room to finalize negotiations on the broader Omnibus package. This proposal has been adopted by the EU and will enter into force on December 31, 2025. 

- The application of the CSRD is postponed by two years for companies in waves 2 and 3. This means that those companies that were previously required to prepare a sustainability report in accordance with the Annual Accounts Act will still need to report in accordance with these rules for the financial years 2025 and 2026. Companies in wave 1 are not affected and will report according to plan in accordance with the CSRD for the financial year starting immediately after 1 July 2024.

- The application of the CSDDD is postponed by one year to 26 July 2028 for the first group of companies, i.e. the largest companies with more than 5,000 employees and a net turnover of more than EUR 1.5 billion. For the second and third groups, the previously indicated dates continue to apply.

Revised threshold where the reporting requirement under the CSRD will only apply to large companies with more than 1000 employees. Note that for the revised threshold to be approved, the adoption of a new regulation in the EU and transposition into national law is required first, which is unlikely to happen during the reporting period for the financial year 2025.

- Large companies with less than 1000 employees and listed SMEs are exempted from the reporting requirement. This would reduce the mandatory sustainability reporting requirement under the CSRD by around 80 %. Wave 1 companies with 500-1000 employees would thus be excluded from the scope of reporting. 

- Reporting according to the EU taxonomy will only be required by large companies with more than 1000 employees and a turnover of more than 450 MEUR. Companies with more than 1000 employees but a turnover below 450 MEUR can apply voluntary EU taxonomy reporting.

- The proposal aims to bring the CSRD more in line with the CSDDD, which already sets the threshold of over 1000 employees.

Simplification of the ESRS standards is underway to facilitate mandatory sustainability reporting under the CSRD. The number of data points to be reported will be significantly reduced from the current 1 114 by:

- Removing the least relevant data points for general sustainability reporting.

- Prioritizing quantitative data points over descriptive ones. 

- Distinguishing more clearly between mandatory and optional data points. 

EFRAG's revised proposals are expected by the end of October 2025, to be implemented in law no later than 6 months later. This means that the revised ESRSs are likely to become applicable in AR26 at the earliest.

The CSRD is expected to raise the bar significantly for corporate sustainability reporting. Among other things, it introduces new requirements for companies to report based on a double materiality analysis, which means that both the impact on society (impact materiality) and the risks and opportunities for the company (financial materiality) must be considered. Companies must also include their entire value chain in their reporting, which means they must consider the impact of suppliers, customers and other stakeholders involved in production and distribution.

The European Sustainability Reporting Standards (ESRS) are the new reporting standards that companies must follow under the CSRD. The ESRS consist of general standards covering areas such as climate, environment, society and corporate governance. Sector-specific standards will also be published that affect companies depending on their activities. The aim of the standards is to increase transparency and comparability in sustainability reporting.

The standards are divided into three overarching areas:

Environmental aspects: Includes climate change, pollution, impacts on water and oceans, biodiversity, resource use and circular economy.

Social issues: Includes working conditions for employees within the company and at suppliers, impact on society, and consideration for consumers and users.

Corporate governance: Includes disclosure of how the company manages sustainability issues, including impacts, risks and opportunities, metrics and targets for sustainability reporting.

Each category must be reported in four areas: governance, strategy, impact, risks and opportunities, and metrics and targets. These standards should provide both general and topic-specific information.

In addition to the standards related to the ESG aspect of reporting, there are two further categories of standards:

General standards: Includes information on how the reporting should be carried out and what level it should be at.

Sector-specific standards: The sector-specific standards are under development and will contain specific information relevant to the sector in which the company operates. As part of the Omnibus proposal, the European Commission no longer plans to adopt sector-specific standards.

Dual materiality means that companies must work from both an impact materiality perspective and a risk and opportunity perspective (financial materiality). Companies need to consider the impact of sustainability risks on their own business as well as the impact of their business on society and the environment. This shift requires companies to take a holistic view of sustainability by considering both financial and non-financial impacts of their activities.