What is ESG reporting and who is required to do it

ESG reporting is a strategic tool that allows companies to make their performance and actions in terms of sustainability transparent. It is a concrete opportunity to integrate ESG criteria into the business model. Drafting an ESG report means clearly and measurably communicating the company's impact on the environment, the social fabric, and internal governance, thus providing essential information for investors, customers, regulators, and stakeholders. In the European context, ESG reporting has been made mandatory by the CSRD Directive, which expands the range of companies involved compared to the previous NFRD. The CSRD requires the adoption of the ESRS, developed by EFRAG and approved by the EU Commission. ESRS Set 1 is mandatory from January 1, 2024, for large companies, while the sectoral standards and those for non-EU companies have been postponed to 2026, as provided by the Omnibus package.

From January 1, 2024, the CSRD, a European directive, came into effect, expanding the obligation to prepare the sustainability report to an increasing number of companies. Currently, large listed companies with more than 500 employees are required to comply. From 2025, ESG reporting will be extended to all companies meeting at least two of the following criteria: over 250 employees, revenues exceeding 50 million euros, or assets exceeding 25 million euros. Initially, even listed SMEs were supposed to comply starting from 2026. However, the European Commission's Omnibus Package, particularly Directive (EU) 2025/794, has changed the sustainability reporting (CSRD) and due diligence (CSDDD) obligations. In summary, the package has delayed the reporting obligations by two years for large unlisted companies and listed SMEs, which will now need to comply by 2028 and 2029, respectively (instead of 2026).

In the landscape of corporate reporting, it's crucial to distinguish between sustainability report, social report, and financial statements. The sustainability report (or ESG report) is the tool that illustrates the company's impact on environmental, social, and governance issues, following standards like ESRS or GRI. The social report, on the other hand, has a narrower focus on the company's impact on the community, staff, and local community, and is often adopted by public entities and the third sector. The financial statement, finally, is mandatory for all companies and summarizes the company's economic and financial situation at the end of the year, including the balance sheet, income statement, and explanatory notes. While the financial statement is regulated by the Civil Code and accounting principles, the ESG report follows international guidelines.

Implementing ESG reporting brings tangible benefits even to companies not subject to regulatory obligations. Clearly communicating its ESG performance increases the trust of customers, investors, and partners. Furthermore, access to green financing or public incentives is often conditional on the presence of a certified ESG report. Reporting also helps identify non-financial risks and opportunities, improve internal management, and strengthen corporate reputation. SMEs that start voluntarily drafting an ESG report today, perhaps adopting the new VSME standards, will be advantaged tomorrow when regulatory obligations become extended to a wider audience. Additionally, the digitization of reporting procedures allows for agile and integrated management of ESG data.

This article was created as part of the "Biodiversity services EU expansion" project (CUP: E43D22000480009) under the Regione Lombardia call "PR FESR 2021-2027 – LINEA INTERNAZIONALIZZAZIONE 21-27", aimed at supporting the internationalization of Italian companies. 3Bee is the naturetech company that develops innovative technologies for monitoring, protecting, and regenerating biodiversity, supporting businesses in defining customized climate strategies based on the analysis of their impacts and dependencies on nature. With a consolidated portfolio in Italy, Germany, and France and significant partnerships, 3Bee continues its expansion into international markets to create a tangible impact through technology.