Some questions about sustainability

Do undertakings have to include Art. 8 Taxonomy Disclosures in the sustainability report prepared under Article 40a of the Accounting Directive?

No. Undertakings reporting in accordance with Article 40a of the Accounting Directive do not have to include Article 8 Taxonomy Regulation disclosures in the sustainability report.

In which language should the sustainability report be published?

The linguistic regime for the sustainability report is laid down by each Member State in accordance with Article 21 of the Company Law Directive.

Which authorities are in charge of supervising compliance with the requirements for the sustainability report?

The CSRD does not introduce any changes to the pre-existing sanctioning regime under the Accounting Directive, which requires Member States to have in place penalties that are effective, proportionate, and dissuasive for the cases of non-compliance by undertakings subject to Accounting Directive requirements. Undertakings’ compliance with sustainability reporting requirements is therefore subject to the national sanctioning regime in place for the management report of the undertakings subject to the Accounting Directive. In any case, the sustainability report must be always subject to assurance by an assurance provider under Article 40a(3) of the Accounting Directive.

What are the format requirements for the sustainability report to be provided under Article 40a of the Accounting Directive?

The Accounting Directive does not require a specific format for the publication of the sustainability report. However, Article 33a – introduced by Directive (EU) 2023/2864 for the functioning of the European Single Access Point (ESAP Omnibus Directive) – requires subsidiaries and branches subject to Article 40a to submit to the collection body designated by the Member State the sustainability report in a data extractable format together with the relevant accompanying metadata. The Commission is also empowered to adopt implementing measures to specify further metadata to accompany the sustainability report and to require a machine-readable format.

Can the Union subsidiaries subject to Article 40a of the Accounting Directive benefit from the exemption regime under Article 19a(9) and 29(8) of the Accounting Directive?

The sustainability statement prepared in accordance with Articles 19a/29a of the Accounting Directive and the sustainability report prepared in accordance with Article 40a of the Accounting Directive have a different content and operate under separate regimes. Therefore, a Union subsidiary publishing a sustainability report at the group level of its third-country parent company according to the provisions of Article 40a does not exempt the Union subsidiary itself nor its own subsidiaries from complying with the reporting obligations of Articles 19a and/or 29a. However, a third-country parent undertaking falling under the scope of Article 40a may choose to publish a consolidated sustainability statement under Article 29a (prepared in accordance with the sustainability reporting standards adopted under Article 29b or in a manner equivalent to those sustainability reporting standards), instead of having its EU subsidiary or EU branch publish a sustainability report at the group level under Article 40a. In this case, the EU subsidiary is exempted from publishing the sustainability report under Article 40a, provided that the conditions set out in Articles 19a(9) and 29a(8) are met.

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If a third-country parent undertaking subject to Article 40a of the Accounting Directive chooses to prepare and publish a consolidated sustainability statement prepared in accordance with ESRS instead of a sustainability report, is that third-country parent undertaking required to report Article 8 Taxonomy Regulation disclosures?

A third-country parent undertaking subject to Article 40a of the Accounting Directive that chooses to publish a consolidated sustainability statement prepared in accordance with ESRS instead of a sustainability report is not required to report under Article 8 Taxonomy Regulation. However, in order for the Union subsidiaries of that third-country parent to be exempted from their sustainability reporting requirements under Articles 19a/29a of the Accounting Directive (where these Union subsidiaries are subject to sustainability reporting requirements under Articles 19a/29a Accounting Directive), Article 8 Taxonomy Regulation disclosures covering the activities carried out by those Union subsidiaries must be included in their own management report or in the consolidated sustainability reporting carried out by the third-country parent undertaking.

When should the undertakings/branches publish the sustainability report?

Article 40d(1) of the Accounting Directive requires subsidiary undertakings and branches referred to in Article 40a(1) of the Accounting Directive to publish the sustainability report – together with the assurance opinion and, where applicable, the statement mentioned in the fourth subparagraph of Article 40a(2) of the Accounting Directive – within 12 months of the balance sheet date of the financial year for which the report is drawn up.

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