The European Union’s new Corporate Sustainability Reporting Directive will bring significant changes to the reporting requirements for Finnish companies. This comprehensive legislative reform will expand sustainability reporting to cover a much larger group of companies than before. The Corporate Sustainability Reporting Directive (CSRD) will fundamentally change the way Finnish organizations collect and communicate information about the environmental and social impacts of their operations. The directive’s requirements will take effect in phases over the coming years, so companies should begin preparing immediately.
What does the CSRD mean for Finnish companies?
The Corporate Sustainability Reporting Directive (CSRD) is an EU regulatory reform that will revolutionize corporate sustainability reporting. The directive significantly expands the number of companies subject to sustainability reporting requirements in Finland and across Europe. The new sustainability reporting framework places companies in an entirely new situation, where transparency and measurable data take center stage.
The aim of the CSRD is to improve the quality, comparability, and reliability of information related to corporate sustainability. The directive replaces the previous Non-Financial Reporting Directive (NFRD) and expands reporting requirements to cover all large companies as well as listed SMEs, with certain exceptions.
For Finnish companies, this means more detailed reporting on environmental, social, and governance issues in a standardized format, which will require significant changes to their data collection processes and reporting practices.
Which companies fall within the scope of the CSRD in Finland?
In Finland, the reporting requirements under the CSRD apply to a significantly broader range of entities than those under the previous NFRD. The reporting requirements apply to all large companies that meet at least two of the following three criteria:
- More than 250 employees
- Revenue exceeds 40 million euros
- Total assets of over 20 million euros
In addition, the requirements apply to all listed companies, with the exception of micro-cap listed companies. This means that many smaller listed companies will also be required to prepare reports in accordance with CSRD requirements. An estimated 600–700 Finnish companies will fall within the scope of the directive, whereas only about 100 companies were covered by the previous NFRD directive.
However, there are exceptions to the scope of application, such as subsidiaries whose parent company already reports at the consolidated level. In such cases, the subsidiaries are not required to file separate reports.
When will CSRD reporting become mandatory for companies of different sizes?
The CSRD Directive will be implemented in phases, giving companies of different sizes varying amounts of time to prepare. This phased schedule allows for a smooth transition to the new requirements:
- Effective January 1, 2024: Public-interest entities (PIEs) that have previously reported in accordance with the NFRD Directive and have more than 500 employees. These companies will publish their first CSRD reports in 2025 covering the 2024 financial year.
- Effective January 1, 2025: Other large companies that were not previously covered by the NFRD. The first reports will be published in 2026.
- Effective January 1, 2026: Listed SMEs, as well as small and non-complex credit institutions and insurance companies. The first reports will be published in 2027.
However, small and medium-sized enterprises have been given the option to defer reporting until 2028 (for the 2027 fiscal year), which gives smaller businesses more time to adapt to the new requirements.
How does the CSRD differ from the previous NFRD Directive?
The CSRD significantly expands sustainability reporting compared to its predecessor, the NFRD. The key changes relate to the scope of application, reporting standards, and assurance:
| Feature | NFRD | CSRD |
|---|---|---|
| Scope | About 100 Finnish companies | About 600–700 Finnish companies |
| Reporting Standards | No uniform standards | Uniform ESRS Standards (European Sustainability Reporting Standards) |
| Verification Requirement | No mandatory external verification | Mandatory external verification |
| Location of reporting | In the annual report or in a separate report | As part of the annual report |
Under the CSRD, reporting requirements are significantly more detailed and, for the first time, are based on uniform European standards. In addition, third-party verification will become mandatory, which will enhance the reliability of reporting but at the same time increase the administrative burden on companies.
What information must companies report under the CSRD?
The reporting requirements under the CSRD cover a wide range of sustainability-related topics. The dual materiality principle is a key new element: companies must report both on how sustainability factors affect their business operations and how they themselves impact society and the environment.
The data sets to be reported are:
- Environmental issues: climate change, pollution, water and marine resources, biodiversity, and the circular economy
- Social issues: workers’ rights, equality, working conditions, and human rights throughout the value chain
- Governance issues: business ethics, anti-corruption measures, political lobbying, and corporate culture
- The Sustainability of Business Models: Strategy, Objectives, the Role of Management, and Risks and Opportunities Related to Sustainability
The directive also requires the establishment of specific indicators and targets, as well as the monitoring and reporting of progress in this regard, which makes reporting more standardized and comparable than before.
How can companies prepare for the changes brought about by the CSRD?
The CSRD Directive requires companies to take significant steps and allocate substantial resources. It is advisable to start preparing proactively now, even though the first reporting requirements will not take effect until in the coming years:
- Analysis of the current situation: Map existing reporting practices and identify key gaps in relation to CSRD requirements.
- Developing data collection processes: Establish systematic processes for collecting sustainability data across the organization.
- System investments: Consider implementing software and tools designed for managing sustainability data.
- Skills development: Train staff on the basics of sustainability reporting and CSRD requirements.
- Stakeholder engagement: Engage in dialogue with key stakeholders to conduct a materiality analysis.
Most companies need external expert assistance to meet CSRD requirements. Experts, such as those at HSolutions, can help automate data collection, design reporting processes, and deliver reporting and analytics solutions.
CSRD and the Future of Finnish Companies: Key Measures
Developments in sustainability reporting present both challenges and opportunities for Finnish companies. While the CSRD increases the administrative burden, it also encourages the development of more sustainable business models and the identification of new business opportunities.
Companies should focus on the following measures:
- Integrating sustainability into the strategy and business model
- Development of data-driven decision-making processes
- The Use of Automation in Data Collection and Reporting
- Developing sustainability expertise throughout the organization
At HSolutions, we offer expert services that help companies effectively meet the requirements of the CSRD Directive. Our data-driven approach, analytics expertise, and experienced team of experts help build a sustainable reporting process that also supports business development. We help ensure that compliance with CSRD requirements brings genuine added value to your company’s operations and stakeholder relationships.