knowledge 29 October 2024 |

Sustainability Reporting and Ireland’s Transposition of CSRD: Where are we Now?

The Corporate Sustainability Reporting Directive1 (the “CSRD”) was transposed into Irish law by the European Union (Corporate Sustainability Reporting) Regulations 20242 (here) (the “Irish CSRD Regulations”), amending the Companies Act 2014 and the Transparency Regulations 20073, with effect from 6 July 2024.

Some issues were identified in the initial transposition of the CSRD.  The Minister for Enterprise, Trade and Employment recently published amending Regulations4 addressing some (but not all) of the concerns raised by professional advisors (including McCann FitzGerald LLP in conjunction with other leading law firms).  Further clarification is expected from the Department of Enterprise, Trade and Employment (the “Department”) by way of FAQ in due course.

This briefing summarises the key sustainability reporting requirements introduced by the Irish CSRD Regulations for Irish companies and outlines the key aspects of the Irish transposition of the CSRD regime, as they currently stand.

CSRD Reporting – what’s involved

Sustainability reporting: For in-scope companies, the directors’ report that accompanies the company’s annual financial statements must include a clearly identifiable section containing :

  • information necessary to understand the company’s impacts on sustainability matters (“inside-out impacts”); and
  • information necessary to understand how the sustainability matters affect the company’s development, performance and position (“outside-in impacts”). 

This information will need to  comply with the detailed requirements set out in Part 28 of the Companies Act 2014.

Employee consultation: The directors will be required to consult with employees’ representatives in relation to the sustainability reporting.

Electronic format: The directors’ report must be prepared in a prescribed electronic reporting format5 and is required to “mark-up” the sustainability reporting, including the disclosures provided for under Article 8 of the EU Taxonomy Regulation, in accordance with such electronic reporting format.6

Standards: To enhance consistency and comparability, sustainability information must be reported in accordance with the European Corporate Sustainability Reporting Standards (ESRS).  For more information on the ESRS, see our previous briefing here.

Third-party assurance: The sustainability report must be accompanied by an assurance opinion from a statutory auditor or statutory audit firm and based on a limited assurance engagement.

Timeline and Scope

Pursuant to the Irish CSRD Regulations, the sustainability reporting regime will apply on a phased basis to Irish-incorporated companies and to issuers of securities on an EU regulated market, as set out below.

 

Timeframe

Application

For financial years starting on or after 1 January 2024

Companies

  • to a large company with an average number of employees that exceeds 500, and that is a public-interest entity;
  • to a large company that is a holding company of a group with an aggregate average number of employees that exceeds 500, and that is a public-interest entity,

excluding a company that is a small and non-complex institution7or a captive (re)insurance undertaking8.

Issuers9

  • to a large undertaking with an average number of employees that exceeds 500;
  • to a parent undertaking of a large group with an aggregate average number of employees that exceeds 500.

For financial years starting on or after 1 January 2025

Companies

  • to any other large company (excluding a company that is small and non-complex institution or a captive (re)insurance undertaking).

Issuers

  • to other large issuers and parent undertakings of large groups.

For financial years starting on or after 1 January 2026

[Note:  limited sustainability reporting is permitted for entities in this phase]

Companies

  • to a small company or a medium company (but not a micro company) that is an issuer; 
  • to a small and non-complex institution or a captive (re)insurance undertaking that is (i) a large company, or (ii) a small company or a medium company (but not a micro company) that is an issuer.

Issuers

  • to issuers that are small and medium-sized undertakings (but not micro-undertakings); or
  • to issuers that are small and non-complex institutions or captive (re)insurance undertakings, provided they are large undertakings or small and medium-sized undertakings with transferrable  securities admitted to trading on an EU regulated market. 

For financial years starting on or after 1 January 2028

Subsidiary Company

  • to an in-scope Irish-incorporated subsidiary of a third country undertaking with net turnover (at group level or, if not applicable, individual level) of more than €150m for the two preceding consecutive financial years.

Branch

  • to the Irish branch of a third-country undertaking where (a) the Irish branch generated net turnover of more than €40m in the preceding financial year; (b) at a group level (or if not applicable an individual level), the third-country undertaking generated net turnover of more than €150m in the EU for the two preceding consecutive financial years; and (c) the third-country undertaking is not part of a group or is a subsidiary of another third-country undertaking, and does not have an applicable subsidiary (as described above).


The new sustainability reporting provisions also provide for consolidated group reporting and some exceptions and exemptions that may be relevant in particular circumstances.   Consequently, please treat the above table as high-level guidance only.

What is a large company?

As illustrated by the terminology in the above table, the sustainability reporting requirements have been introduced into an already complex legal framework for accounting and non-financial reporting, with many cross-referring concepts and defined terms.

One concept that is particularly important to understand is that certain companies are deemed to be “large companies” (and, therefore, within scope of the reporting requirements introduced by the Irish CSRD Regulations), even if they do not meet the relevant employee, turnover and balance sheet criteria.10 These include (amongst others):

  • public limited companies;
  • companies carrying on business required to be authorised by the Central Bank of Ireland; and
  • credit institutions, insurance undertakings and undertakings with transferable securities admitted to trading on an EU regulated market.

Outstanding questions on the Irish CSRD Regulations

Given the inherent complexity, it is not surprising that there continue to be questions as to whether the Irish CSRD Regulations transposing the CSRD are fully aligned with the scope of the CSRD itself and, as noted above, a number of concerns that have been raised about the Irish CSRD Regulations remain outstanding.  McCann FitzGerald LLP and other professional advisors continue to engage with the relevant government Department and Ministers with a view to ensuring that the shared policy objective of a fully aligned Irish and EU regime is realised. 

As at the date of publication, the next expected development is the publication by the Department of FAQs, which should assist in clarifying how the Department intends to operate the Irish regime. 

Also contributed to by David O’Keeffe Ioiart

 

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.