As the focus on ESG reporting increases, EU companies are now required to comply with stricter sustainability disclosure rules.
The EU’s Corporate Sustainability Reporting Directive¹ (“CSRD”), which replaced the Non-Financial Reporting Directive² (“NFRD”), entered into force on 5 January 2023. It represents an ambitious initiative to improve corporate transparency, ESG reporting and accountability.
The CSRD is intended to work together with the EU Taxonomy Regulation,³ which provides for a classification system for environmentally sustainable activities, to ensure that improved corporate sustainability disclosures align with the EU’s green finance strategy and climate goals.
Key changes introduced by the CSRD:
- it covers around 50,000 companies in the EU, in contrast with the previous regime under the NFRD, which only covered 11,700;
- the ESG reporting rules and requirements are much stricter, as companies must disclose and report any impacts on sustainability, risk and key performance indicators;
- the sustainability reports require auditing by third-party assurance providers; and
- companies subject to the CSRD will have to comply with the European Sustainability Reporting Standards (“ESRS”), which contributes to the alignment with global ESG standards.
CSRD transposition in Greece
The CSRD was transposed into Greek legislation with Law 5164/2024⁴ (the “Law”). This article outlines the key components of the Law, which marks a pivotal shift in corporate reporting and accountability for many companies as Greece aligns with EU sustainability objectives.
Entities subject to reporting obligations
- large companies, small and medium-sized enterprises (“SMEs”)⁵ which are of public interest (the definition of which has expanded and now also includes sociétés anonymes (“SAs”) in which the Greek state has a stake (regardless of its participation), subsidiaries of the Hellenic Corporation of Assets and Participations, investment firms, collective investment undertakings, management companies and microfinance institutions);
- parent companies of large groups, which must submit a consolidated sustainability report; and
- third-country undertakings generating (either at group level or individually) a net turnover of €150m+ in the EU for the last two financial years through either: (i) a subsidiary established in the EU which is a public interest company; or (ii) a branch established in the EU with a net turnover of more than €40m during the previous financial year.
The Law raises the thresholds regarding the classification of entities into micro, small, medium-sized and large. Briefly:
- micro entities do not exceed on their balance sheet date the thresholds of at least two of the following criteria:
Total assets: €450,000.
Net turnover: €900,000.
Average number of employees: 10 people.
- small entities are not micro entities and do not exceed on their balance sheet date the thresholds of at least two of the following criteria:
Total assets: €5m.
Net turnover: €10m.
Average number of employees: 50 people.
- medium-sized are not micro or small entities and do not exceed on their balance sheet date the thresholds of at least two of the following criteria:
Total assets: €25m.
Net turnover: €50m.
Average number of employees: 250 people.
- Large entities exceed on their balance sheet date the thresholds of at least two of the following criteria:
Total assets: €25m.
Net turnover: €50m.
Average number of employees: 250 people.
Sustainability report
The Law introduces a requirement that a board’s annual management report must include a sustainability report including the following information:
- the company’s business model and strategy, their resilience against sustainability risk and the way in which they take into account its stakeholders’ interests and their impact on sustainability issues;
- actions and relevant financing and investment plans, so as to ensure the business model and strategy are consistent with the transition to a sustainable economy and the limitation of global warming to 1.5°C;
- the company’s progress towards achieving sustainability related objectives, including meeting the 2030 and 2050 greenhouse gas emissions reduction targets;
- the role of the company’s administrative, management and supervisory bodies regarding sustainability and information on existing sustainability-related incentive schemes related provided by said bodies;
- the company’s sustainability policies;
- the sustainability-related due diligence processes implemented by the company;
- the primary actual or potential negative impacts linked to the company’s activities and its value chain, including its products and services, business relationships and supply chain, the measures taken to identify and monitor such impacts, as well as other adverse impacts that the company is required to identify in accordance with other EU requirements for the due diligence process conducted by the company;
- the measures taken by the company to prevent, mitigate, correct or terminate actual or potential negative consequences and the effect of such measures;
- the company’s main sustainability-related risks, how dependant it is on them and how they are managed; and
- indicators related to all the above information.
Sustainability reports need to be drafted in accordance with the sustainability reporting standards issued by the Ministry of Development that follow the European Sustainability Reporting Standards (“ESRS”).
Statutory auditors, audit firms or independent assurance services providers must also provide written assurance on the compliance of companies’ sustainability reporting with the Law’s requirements.
The sustainability report and the names of the persons responsible for its publication have to be published on the General Commercial Registry (in Greek: GEMI).
Additionally, the company has to include information on the diversity policies applicable to its administrative, management and supervisory bodies and make a relevant reference to them in the annual corporate governance statement.
Key deadlines
The requirements of the Law will be phased in gradually within the next few years and the compliance deadlines differ by category:
| Financial Year Start Date | Entities Covered | Additional Notes |
|---|---|---|
| 1 January 2024 | Large companies, which are of public interest and exceed on their balance sheet date an average of 500 employees during the financial year; and Parent companies of large groups, which are of public interest and exceed on their balance sheet date an average of 500 employees, on a consolidated basis, during the financial year. | For financial years starting within 2024, the assurance of the sustainability reports may also be carried out by the statutory auditor or audit firm already appointed by the ordinary general meeting of shareholders for the mandatory audit of the financial statements of the same financial year. |
| 1 January 2025 | Large entities and parent companies of large groups, other than the aforementioned. | |
| 1 January 2026 | SMEs of public interest, small and non-complex institutions (which are either large companies or SMEs of public interest) and captive insurance and reinsurance companies (which are either large companies or SMEs of public interest). | To be noted that for the financial years starting prior to 1 January 2028, SMEs of public interest may opt not to include the sustainability-related information mentioned above in their management report but must state the reasons for not doing so. |
| 1 January 2028 | Third-country undertakings. |
Sanctions
If the management report does not include the required sustainability-related information, penalties may be imposed on the members of the company’s board of directors, including a maximum prison sentence of three years and a fine of between €5,000 and €50,000.
In the event that the statutory auditor or independent assurance services provider knowingly expresses a false opinion regarding the content of the submitted sustainability report, they shall be punished by maximum imprisonment of three years or a fine of €10,000 to €100,000 or both.
The Hellenic Accounting and Auditing Standards Oversight Board (in Greek: ELTE) may impose (along with other disciplinary sanctions depending on the severity of the violation) fines of up to €100,000 to statutory auditors (natural persons) and up to €500,000 to audit firms (legal persons) in case that the assurance reports do not meet the requirements of the Law. In case of a repeat offense, such fines can be doubled.
A fine of €100 to €100,000, may imposed by the Service of GEMI on companies that do not comply with the disclosure requirements of the sustainability report provided for in the Law.
Final remarks
Greece’s laws on transparency requirements for listed companies⁶ and on audit of financial statements⁷ have also been amended respectively to comply with the CSRD.
The transposition of the CSRD into Greek law revolutionises corporate reporting obligations and improves transparency, whilst the new rules will ensure investors and other stakeholders can obtain the required information to assess the impact of companies on the environment as well as the opportunities and risks arising from sustainability-related issues.
Companies have to integrate the required sustainability information into their operations and planning, by creating and implementing effective systems for data collection and processing, the drafting and adoption of new policies, engagement with all stakeholders as well as efficient and continuous monitoring, in order to comply with the new Law obligations.
Though substantive compliance with the new requirements is challenging, companies that adopt ESG principles and sustainability framework can build stakeholder trust and attract investors to gain competitive advantage in the market.
As ESG is now a key component of corporate and finance law, should you require further guidance regarding the above, please do not hesitate to contact WFW Athens’ team of experts.
[1] Directive 2022/2464/EU
[2] Directive 2014/95/EU
[3] Regulation (EU) 2020/852
[4] Government Gazette A 202/12.12.2024
[5] Except micro-undertakings.
[6] Law 3556/2007
[7] Law 4449/2017
