The EU Corporate Sustainability Reporting Directive (CSRD) imposes significant sustainability reporting obligations on Finnish companies. This directive significantly expands the group of companies subject to reporting requirements in Finland and sets more detailed requirements for the publication of sustainability information. The directive aims to increase corporate transparency on sustainability issues and ensure the availability of comparable information to investors and other stakeholders. Next, we will examine who is required to report, when the obligations take effect, and what compliance entails in practice.
Which companies are subject to the CSRD in Finland?
Under the directive, all large companies and listed companies, with certain exceptions, are subject to sustainability reporting requirements. A large company is defined as one that meets at least two of the following three criteria:
- The balance sheet total exceeds 20 million euros
- Revenue exceeds 40 million euros
- The average number of employees during the fiscal year is more than 250
In addition, the directive applies to listed companies, with the exception of micro-listed companies (fewer than 10 employees and a turnover or balance sheet total of less than €2 million). The reporting obligation also extends to companies from third countries whose revenue in the EU exceeds €150 million and which have either a subsidiary or a branch in the EU with revenue exceeding €40 million.
Overall, it is estimated that there are approximately 1,000–1,200 companies in Finland that are required to report in accordance with the CSRD, whereas only about 100 companies were covered by the previous NFRD directive.
When is CSRD reporting mandatory for Finnish companies?
Sustainability reporting will be introduced in Finland in phases, and the effective date of the requirements depends on the company’s size and classification. In the first phase, the reporting requirement applies to large listed companies (more than 500 employees) that are already covered by the NFRD Directive. These companies must report for the 2024 fiscal year, which means that the first reports will be published in 2025.
For other large companies, the reporting requirement begins with the 2025 fiscal year, with reports to be published in 2026. Listed SMEs (excluding micro-enterprises) will begin reporting for the 2026 fiscal year, with reports to be published in 2027. However, SMEs may, if they wish, defer reporting by two years, i.e., to the 2028 financial year.
For subsidiaries and branches of companies from third countries, the reporting obligation begins with the 2028 financial year, with the first reports to be published in 2029. It is important to note that many companies may need to collect data even before the actual reporting obligation begins in order to present comparative data.
How can a company determine whether it falls within the scope of the CSRD?
The company must first verify whether the aforementioned size-related thresholds have been met for two consecutive fiscal years. Finnish companies can easily verify their balance sheet total and revenue based on their financial statements. The number of employees is calculated as an annual average, taking into account both full-time and part-time employees.
If a company is part of a group, it is important to determine whether the criteria apply to the individual company or to the group as a whole. As a general rule, the CSRD Directive requires group-level reporting, but the reporting obligation of an individual subsidiary may depend on the group’s structure and the location of the parent company.
In cases of uncertainty, we recommend consulting with experts who can help determine your company’s status under the CSRD Directive. Your statutory auditor can also assist in assessing your company’s reporting obligations.
What does CSRD reporting require of Finnish companies?
CSRD reporting requires companies to disclose significantly more sustainability information than before. The information to be reported includes environmental, social, and governance (ESG) issues.
With regard to environmental issues, companies must report on, among other things, greenhouse gas emissions (Scope 1, 2, and 3), energy consumption, biodiversity, and the circular economy. Social reporting covers employee rights, occupational safety, diversity, and human rights issues. Regarding governance, companies must report on matters such as executive compensation, anti-corruption measures, and internal controls.
Data reporting must comply with the European Sustainability Reporting Standards (ESRS) adopted by the European Commission. In addition, reports must be verified by an external party, initially with limited assurance and subsequently with reasonable assurance.
What happens if a company fails to comply with CSRD reporting requirements?
Failure to comply with reporting obligations may result in administrative sanctions, the specific nature of which is determined by national law. In Finland, such sanctions may include, for example, administrative fines or other measures imposed by the authorities.
In addition to financial penalties, failure to comply with reporting requirements can have significant implications for a company’s reputation and business opportunities. Investors, customers, and partners are paying increasing attention to companies’ sustainability data, and inadequate reporting can undermine stakeholder trust.
In addition, access to financing may become more difficult, as financial institutions and investors increasingly require comprehensive ESG data to support their investment decisions. It should also be noted that in many procurement and supply chains, reporting on sustainability is becoming a prerequisite for cooperation.
The Benefits of CSRD Reporting for Finnish Companies
Although CSRD reporting requires significant investment and resources from companies, it also offers considerable benefits. Comprehensive sustainability reporting helps companies identify risks and opportunities, streamline their operations, and improve decision-making.
Standardized reporting also allows for better comparability with competitors and can help a company stand out in the market. Collecting and analyzing sustainability data promotes innovation and can lead to the development of new products or services.
For many Finnish companies, CSRD reporting can also serve as a competitive advantage, particularly in international markets. Transparent and comprehensive reporting strengthens investor and customer confidence and enhances the company’s reputation as a responsible actor.
At HSolutions, we help our clients meet their CSRD reporting obligations. Our data platform and analytics solutions help gather the necessary data from disparate systems and format it to meet reporting requirements. Our experts also help identify data gaps and develop processes to ensure that sustainability data collection is continuous and efficient.
Preparing for CSRD reporting – start early
Sustainability reporting requirements represent a significant change for many Finnish companies. Meeting these requirements calls for careful preparation, process development, and possibly the implementation of new systems. A proactive approach offers companies the opportunity to leverage reporting as a strategic tool and a competitive advantage.
Although the reporting requirements will take effect in phases, it is advisable to begin preparations well in advance. This will give the company time to develop the necessary processes, train staff, and ensure that data collection is efficient and accurate.
Sustainability reporting is not just a legal obligation, but also an opportunity to make business operations more sustainable. When done right, it helps companies improve both their financial performance and their positive impact on the surrounding society and environment.