Are you CSRD prepared?

Authors: Kurt Hyzler, Annah Chapelle Paleologo & Tara Wismayer

On 21 April 2021, the European Commission adopted the Corporate Sustainability Reporting Directive (CSRD), which entered into force in January 2023. This directive amends the Non-Financial Reporting Directive (NFRD) and significantly expands the scope and detail of sustainability reporting requirements for companies operating within the EU.

Status of CSRD transposition in Malta

As of May 2025, Malta has not yet published draft legislation to transpose the CSRD into national law. Despite this, Maltese companies that fall within the CSRD’s scope should proactively prepare for compliance, as the directive’s requirements will become applicable upon transposition.

Who must comply with the CSRD?

The CSRD applies to a broad range of companies, including:

• Large companies meeting at least two of the following criteria:
  • More than 250 employees
  • €40 million in net turnover
  • €20 million in total assets
• Listed small and medium-sized enterprises (SMEs), excluding micro-enterprises
• Insurance undertakings and credit institutions, regardless of their legal form
• Branches of non-EU companies with a net turnover of €40 million in the EU
• EU subsidiaries of non-EU parent companies generating over €150 million in the EU market

While non-listed SMEs and micro-enterprises are currently excluded, they may choose to adopt the CSRD standards voluntarily.

Compliance deadlines

The CSRD introduces a phased approach to compliance:

Reporting Year	Applicable Entities
2025	Companies already subject to the NFRD, reporting on the 2024 financial year
2026	Large companies not previously subject to the NFRD
2027	Listed SMEs, simple credit institutions, and captive insurance companies
2029	Non-EU companies with a net turnover exceeding €150 million in the EU

Note: The European Commission’s proposed Omnibus Simplification Package may delay the compliance deadlines for certain companies by two years.

Understanding the ESRS and Double Materiality Assessment (DMA)

Companies within the CSRD’s scope will be required to report sustainability information in accordance with the European Sustainability Reporting Standards (ESRS). These standards are grounded in the principle of double materiality, requiring companies to disclose:

1. Financial Materiality: How sustainability issues affect the company’s financial performance.
2. Impact Materiality: How the company’s activities impact society and the environment.

The ESRS comprises 12 standards:

• Cross-cutting Standards:
  • ESRS 1: General Requirements
  • ESRS 2: General Disclosures (mandatory for all companies under the CSRD)
• Topical Standards (subject to materiality assessment):
  • Climate Change
  • Pollution
  • Water and Marine Resources
  • Biodiversity and Ecosystems
  • Resource Use and Circular Economy
  • Own Workforce
  • Workers in the Value Chain
  • Affected Communities
  • Consumers and End-users
  • Business Conduct

Companies must conduct a Double Materiality Assessment (DMA) to determine which topical standards are relevant to their operations. Failure to report on material topics may result in non-compliance penalties.

Reporting format and assurance

All sustainability information must be prepared in a standardized digital format and submitted to the European Single Access Point (ESAP). Additionally, starting from the 2024 financial year, reported data will be subject to limited third-party assurance to ensure accuracy and reliability.

Penalties for Non-Compliance

Member States are required to establish effective, proportionate, and dissuasive penalties for non-compliance with the CSRD. Potential sanctions include:

1. Public statements identifying the non-compliant entity
2. Orders requiring the entity to cease the infringing conduct
3. Financial penalties

The Corporate Sustainability Due Diligence Directive (CS3D)

The CS3D complements the CSRD by imposing due diligence obligations on companies regarding human rights and environmental impacts across their operations and value chains. While both directives are part of the EU’s broader sustainability framework, compliance with one does not automatically ensure compliance with the other.

Under the CS3D, companies must identify, prevent, and mitigate adverse human rights and environmental impacts. The directive applies to:

• EU companies with over 1,000 employees and €450 million in net turnover
• Non-EU companies with €450 million in net turnover within the EU
• Franchise or licensing networks meeting specific thresholds

In Malta, the CS3D is expected to be transposed into national law by July 2026, with compliance requirements phased in starting from 2027.

The Omnibus Simplification Package

Proposed in February 2025, the Omnibus Simplification Package aims to streamline sustainability reporting requirements under the CSRD and CS3D. Key proposed changes include:

1. Scope Reduction: Limiting CSRD applicability to companies with over 1,000 employees and either €50 million in turnover or €25 million in assets.
2. Extended Deadlines: Delaying compliance deadlines for certain companies by two years.
3. Simplified Standards: Reducing the number of required data points and clarifying provisions within the ESRS.
4. Assurance Requirements: Removing the possibility of transitioning from limited to reasonable assurance requirements.
5. Sector-Specific Standards: Eliminating the Commission’s authority to adopt sector-specific standards.

These proposed changes are subject to approval and may impact the reporting obligations of companies currently preparing for CSRD compliance.

Conclusion

Although Malta has not yet transposed the CSRD into national law, companies operating within its jurisdiction should proactively prepare for compliance. Familiarizing themselves with the CSRD, ESRS, and associated reporting requirements will ensure readiness upon transposition. Further updates will be provided as more information becomes available.