CSRD Reporting for Non-EU Companies: What You Need to Know

Recent years have seen regulators across the world attempt to align regional and international disclosure standards regarding companies’ sustainability credentials. These efforts aim to ensure that companies trading in different jurisdictions are not overburdened by compliance costs and can rely on comparable data for reporting purposes. In the EU, for instance, a company reporting under the Corporate Sustainability Reporting Disclosure (CSRD), the European Taxonomy, and the Corporate Sustainability Due Diligence Directive (CS3D), will also need to integrate certain requirements from international law such as the OECD Guidelines on Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the ILO Fundamental Labour Conventions.

In a previous blog, we looked at the extra-territoriality of the EU Taxonomy and its interoperability with other green Taxonomies in force or being developed across the globe. In this blog, we'll take a closer look at the impact that the Corporate Sustainability Reporting Directive (CSRD) may have on non-EU companies and financial institutions’ EU activities.

To conclude our analysis of the CSRD’s impact on Non-EU companies, our next article will cover indirect consequences of this extra-territorial scope, namely the different ESRS for international companies, how double materiality affects companies and its value chain, the inclusion of auditors located in third countries and the challenges of the CSRD, such as collecting the data and compliance risks.

Which non-EU Companies Need to Report Under the CSRD?

The CSRD (EU 2022/2464) entered into force in January 2023, to replace the Non-Financial Reporting Directive (NFRD). The new Directive sets forth better-detailed sustainability reporting requirements and extends the scope of the legislation to more companies. In addition, it presents a framework for companies to disclose in their annual reports how they take into account all types of ESG matters, from environmental (e.g. climate change, pollution, management of scarce resources), social (impact on the civil society and employees), and governance (e.g. corporate governance, human rights, anti-corruption, and bribery issues). To learn more about what the NFRD still prescribes for companies not yet in scope for CSRD, see our NFRD blog.

The reporting obligations vested in the CSRD will be gradually rolled out. Large EU-listed companies that fell under the scope of the NFRD need to report as of January 2025 on their 2024 activities. As we analyze in the next section, the scope is then progressively extended to cover large companies not under the NFRD, SMEs, and non-EU companies. To facilitate the reporting exercise for companies, the European Financial Reporting Advisory Group (EFRAG) is finalising the precise set of disclosures that companies will have to report titled the European Sustainability Reporting Standards (ESRS). We set out below the different categories of ESRS for reference, and provide a more detailed analysis of the ESRS in our dedicated publication.

One significant addition of the CSRD to the NFRD requirements is to extend the scope of the reporting obligations to include international companies. A subsidiary company with a parent based outside of the EU may be required to report under the CSRD. In this case, the non-EU parent company will also have to report. It can choose to report alongside its subsidiary or separately (see the example below). If reporting separately, the subsidiary or branch would report alongside the group of European companies of its size. In this case, the CSRD has included transitional provisions on how the subsidiary or branch should prepare its own reporting. The directive also states that subsidiaries are responsible for publishing the sustainability report of the parent company. See our dedicated article on the scope of the CSRD for EU companies to learn more.

For example, a parent company in the United States with a subsidiary in Spain may fall under the scope of the CSRD. If the Spanish company is in the scope of the CSRD, then it will have to collect its sustainability data and disclose it following the ESRS by 2026, reporting on the financial year 2025. Depending on whether the American company would like to disclose on a consolidated level or not, it will also be required to disclose under the CSRD. If it chooses to report separately, it will have to do so  by 2029 reporting on data from the financial year 2028

I Am a Non-EU Company but Have Activities in the EU, Do I Need to Report under the CSRD?

Who Does the CSRD Affect?

The scope of the CSRD includes listed companies in an EU-regulated market, companies that are not listed in the EU,  and companies with securities listed in the EU (including debt securities with denominations lower than €100,000 or equivalent in depositary receipts) within the thresholds found below

1. All non–EU companies in the scope of the NFRD. This includes large EU-listed companies, banking institutions, and insurance companies with more than 500 employees, and an annual balance sheet above €20 million or a net turnover above €40 million.

→ These companies will need to first report in 2025 on their activities for the financial year 2024.

For example, a Brazilian company that has a subsidiary in France, listed on the Euronext index, is already reporting under the NFRD. Under the CSRD, this company will need to collect the french sustainability data from 1st January to 31st December 2024 with the ESRS and make its disclosure in 2025.

1. All non-EU companies that are listed on an EU-regulated market (see ESMA’s list for the European examples and for a national example consult the Spanish CNMV list) and considered large companies. Including, entities or parent entities of a consolidated group which meet (either as a single entity or on a consolidated basis) at least two of the three following criteria:
2. balance sheet total exceeding €20 million,
3. net turnover exceeding €40 million, and
4. average number of employees during the financial year exceeding 250.

→These companies will need to disclose their 2025 financial year in 2026 through the ESRS.

Consider a scenario where a Chinese bank is listed on the Luxembourg Stock Exchange. In 2025 in the EU, it has a balance sheet of €200 million and a net turnover of €400 million. The Chinese bank will be in the scope of the CSRD. It will have to report on its EU activities in 2026 and can choose to disclose its activities at a consolidated level, to centralize its reporting from the start. The assessment of material impacts, risks, and opportunities shall be made for the entire consolidated group (CSRD Art 29a(3a) and ED ESRS 1 ch. 4.9(128 - 129)).

1. All non-EU companies that have securities listed in the EU and fall under the Accounting Directive’s definition of a small and medium-sized enterprise, as indicated in the CSRD.

→ These companies will need to disclose their 2026 financial year in 2027, with the possibility of an opt-out until 2028 through the SME (or simplified) ESRS that will be adopted in June 2024.

For example, a South African company listed in CME Amsterdam, with 300 employees and an annual balance sheet of €15 million in the Netherlands will need to collect the data in the Netherlands from 1st January to 31st December 2026 (this time with the SMEs’ ESRS) and disclose it in 2027.

1. A company outside of the EU with a net turnover over €150 million in the EU for each of the last 2 consecutive financial years and fulfilling one of these conditions:
2. At least one subsidiary in the EU considered a “large company” as stated in the CSRD
3. At least one subsidiary that is listed in an EU-regulated market
4. A branch in the EU with a net turnover the previous year of over €40 million

→ These companies will need to disclose on a consolidated global group level their 2028 financial year in 2029 through the (international) ESRS that adopted in 2024. These disclosures are expected to be less extensive than those applied to EU group companies.

For instance, a Japanese company that is not listed has a subsidiary in Poland that is considered a large company. The parent company will have to collect all the data of its EU activities in 2028 to do its disclosure under the international ESRS in 2029.

To ease the transition, from 2024 until 2030, the EU has a phase-in approach for international companies. Consolidated global group disclosures are mandatory for the fourth group of companies; however, a parent company may want to voluntarily disclose at a consolidated group level before 2029 to report collectively on all its entities so that their large EU and EU-listed entities are exempt from reporting gradually.

For example, a Saudi company in scope of the CSRD has 2 subsidiaries listed in Germany. The parent company may start collecting data in 2025 and disclose on a consolidated level in 2026.

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