The CSRD mandates that large companies and all listed companies, excluding listed micro-enterprises, report annually on environmental, social, governance (ESG), and human rights matters in their directors' reports. These reports must adhere to the EU's mandatory European Sustainability Reporting Standards (ESRS). The information must be accompanied by an auditor's opinion with limited assurance and reported digitally.

The legislation specifies a phased approach for compliance based on company size and listing status:

• Large public companies listed on an EU-regulated market that already report under the Non-Financial Reporting Directive will start reporting for financial years beginning on or after 1 January 2024.
• Other large companies will begin reporting for financial years starting or after 1 January 2025.
• Listed SMEs will commence reporting for financial years beginning on or after 1 January 2026, with an option to opt out for an additional two years.
• Non-EU companies with significant activities in the EU must report for financial years beginning on or after 1 January 2028.

All reports must be produced in a single electronic format in line with the regulatory technical standards in Commission Delegated Regulation (EU) 2019/815.

A critical component of the CSRD is the requirement for a limited assurance audit of the sustainability information reported. This audit aims to verify the accuracy and reliability of the data disclosed. The Irish Auditing and Accounting Supervisory Authority (IAASA) has highlighted critical provisions regarding the role of auditors in sustainability assurance:

• Regulatory Powers: IAASA will be able to regulate sustainability reporting for entities under its remit.
• Adoption of Standards: IAASA can adopt a sustainability assurance standard until an EU-wide standard is established.
• Approval of Service Providers: Recognised accountancy bodies (RABs) will have the power to approve and register sustainability assurance service providers.
• Split Oversight: IAASA will oversee public-interest entities, while RABs will regulate other companies.

For employers and business leaders, transposing the CSRD into Irish law presents challenges and opportunities. Companies must invest in systems and processes to comply with the new reporting requirements, which may involve significant upfront costs. However, these regulations offer an opportunity to enhance corporate transparency, build stakeholder trust, and gain a competitive edge in a market that increasingly values sustainability.

Minister Burke highlighted the significance of these Regulations: "The signing of these important Regulations today marks a significant step the government is taking in the context of the European Green Deal and the EU's Action Plan for Financing Sustainable Growth. These Regulations provide a helpful structure to companies for preparing sustainability reporting in a clear and consistent way, that gives the relevant information to investors, consumers, and other stakeholders, whilst minimizing unnecessary burdens on companies."

The same Minister also signed into law the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024, which increases by 25 percent the balance sheet and turnover thresholds for “micro,” “small,” “medium,” and “large” companies under the Companies Act 2014.

This size change will result in more companies falling into the micro and small categories as of 1 July 2024, thus benefiting from reduced reporting requirements and exemption from audit.

However, companies will also have to provide information about their value chain. Consequently, although unlisted SMEs are not directly covered by the directive, they may have to provide information to large companies if they are part of the value chain.

This is relevant to the Irish economy, which, according to recent statistics, was already more than 68 percent SME-based (before the recent change in legislation). It will therefore be important to assess the impact these obligations will have in terms of bureaucracy and costs.

The government has made some support available, such as the Green Transition Fund, that helps companies in their decarbonisation journey through the EU's Recovery and Resilience Facility under Ireland's National Recovery and Resilience Plan (NRRP 2021-2026), and theClimate Toolkit 4 Business, that provides practical support to achieve the goal.

Ireland joins the many European countries that have already implemented the directive, while Malta, Iceland, Portugal and Austria have yet to begin the process.

You can find the updated status of the implementation of the directive in the various countries here.