The EU's Corporate Sustainability Reporting Directive (CSRD) brings significant sustainability reporting obligations for Finnish companies. This Directive significantly expands the range of companies in Finland that are required to report and sets out more detailed requirements for the publication of sustainability information. The Directive aims to increase transparency on sustainability issues and ensure the availability of comparable information for investors and other stakeholders. We now look at who is obliged to report, when the obligations come into force and what is required in practice to comply with them.
Which companies are covered by CSRD in Finland?
Among Finnish companies, the Directive covers all large companies and listed companies, with certain exceptions. A large company is defined as one that meets at least two of the following three criteria:
- Balance sheet total exceeds EUR 20 million
- Turnover exceeds EUR 40 million
- The average number of staff during the financial year is over 250
The Directive also applies to listed companies, with the exception of micro-listed companies (less than 10 employees and a turnover or balance sheet of less than €2 million). The reporting obligation also extends to third country companies with a turnover in the EU of more than €150 million and which have either a subsidiary or a branch in the EU with a turnover of more than €40 million.
In Finland as a whole, it is estimated that between 1000 and 1200 companies are obliged to report under the CSRD, compared to only around 100 under the previous NFRD.
When is CSRD reporting mandatory for Finnish companies?
Sustainability reporting will be introduced in Finland in phases, with the starting date of the obligations depending on the size and classification of the company. In the first phase, the reporting obligation will apply to large listed companies (over 500 employees), which are already covered by the NFRD. These companies will have to report for the financial year 2024, which means that the first reports will be published in 2025.
For other large companies, the reporting obligation will start from the financial year 2025, with reports published in 2026. Listed SMEs (excluding micro-enterprises) will start reporting from the financial year 2026, with reports published in 2027. However, SMEs may choose to defer reporting for two years to the financial year 2028.
For subsidiaries and branches of third country companies, the reporting obligation will start in the financial year 2028, with the first reports being published in 2029. It is important to note that many companies may need to collect data before the actual reporting obligation starts in order to provide comparative information.
How can a company determine whether it is covered by the CSRD?
The first step is to check whether the above size thresholds are met for two consecutive financial years. Finnish companies can easily check their balance sheet total and turnover on the basis of their financial statements. The number of employees is calculated as an annual average, taking into account both full-time and part-time employees.
If the company is part of a group, it is important to clarify whether the criteria apply to the individual company or to the group as a whole. As a general rule, the CSRD Directive requires reporting at group level, but the reporting obligation of an individual subsidiary may depend on the structure of the group and the location of the parent company.
In case of doubt, we recommend consulting experts who can help determine your company's position with regard to the CSRD Directive. A statutory auditor can also help assess the reporting obligations of the company.
What does CSRD reporting require from Finnish companies?
CSRD reporting requires companies to publish much more extensive sustainability information than in the past. The information to be reported includes environmental, social and good governance (ESG) issues.
On environmental issues, companies are required to report on issues such as greenhouse gas emissions (Scope 1, 2 and 3), energy consumption, biodiversity and the circular economy. Social reporting covers workers' rights, occupational safety, diversity and human rights issues. For governance, the company has to report on issues such as executive remuneration, anti-corruption measures and internal control.
The data must be reported in accordance with the European Sustainability Reporting Standards (ESRS) adopted by the European Commission. In addition, reports must be externally verified, initially with limited assurance and subsequently with reasonable assurance.
What happens if a company does not comply with CSRD reporting obligations?
Failure to comply with the reporting obligation may result in administrative sanctions, the exact form of which is determined by national law. In Finland, sanctions may include administrative fines or other measures imposed by the authorities.
In addition to the financial penalties, failure to comply with reporting obligations can have a significant impact on a company's reputation and business opportunities. Investors, customers and business partners are increasingly looking at corporate responsibility information, and poor reporting can undermine stakeholder trust.
In addition, access to finance may be reduced 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, sustainability reporting is becoming a requirement for collaboration.
Benefits of CSRD reporting for Finnish companies
While CSRD reporting requires significant investment and resources from companies, it also offers significant benefits. Comprehensive CSR reporting helps companies to identify risks and opportunities, improve efficiency and decision-making.
Standardised reporting also allows for better comparability with competitors and can help a company differentiate itself in the market. The collection and analysis of sustainability data drives innovation and can lead to the development of new products or services.
For many Finnish companies, CSRD reporting can also be a competitive advantage, especially in international markets. Transparent and comprehensive reporting strengthens investor and customer confidence and enhances a company's reputation as a responsible corporate citizen.
At HSolutions, we offer our customers support in meeting their CSRD reporting obligations. Our data platform and analytics solutions help to aggregate the necessary data from disparate systems and transform it into a format that meets reporting requirements. Our experts also help identify data gaps and develop processes to make sustainability data collection continuous and efficient.
Preparing for CSRD reporting - start early
Sustainability reporting requirements are a major change for many Finnish companies. Meeting the requirements will require careful preparation, process development and possibly the introduction of new systems. A proactive approach will allow companies to use reporting as a strategic tool and competitive advantage.
Although the reporting obligations will enter into force in stages, it is advisable to start preparing well in advance. This will give companies time to develop the necessary processes, train staff and ensure that data collection is efficient and accurate.
Sustainability reporting is not only a legal obligation, but also an opportunity to make business more sustainable. If implemented properly, it helps companies to improve both their financial performance and their positive impact on society and the environment.