Corporate sustainability reporting directive update

• Irish CSRD regulations effective as of 6 July 2024.
  
  
• Regulations incorporated in the Companies Act 2014 by way of amendment.
  
  
• Large company CSRD filing obligations apply for all financial years on or after 1 Jan 2025.

The deadline for member states of the European Union to adopt the European Union Corporate Sustainability Reporting Directive – Directive (EU) 2022/2464 ("EU CSRD") was 6 July 2024 and as a result Ireland has taken the necessary action to adopt EU CSRD by passing the European Union (Corporate Sustainability Reporting) Regulations 2024 (the "Irish CSRD Regulations") on 6 July 2024. 

The Irish CSRD Regulations serve to align with the EU CSRD by amending the Irish Companies Act 2014 (as amended) (the "CA 2014") and notably creating a new Part 28 (Sustainability Reporting) ("Part 28") to the CA 2014 to transpose EU CSRD into Irish law.

Overview of reporting requirement 

Part 28 requires that the directors of an in-scope company shall, for each relevant financial year, include in a clearly identifiable dedicated section of the directors’ report containing information necessary to understand:

- the company’s impacts on sustainability matters, and

- how the sustainability matters affect the company’s development, performance and position.

Part 28 requires that a copy of the directors’ report in a prescribed single electronic format is   included in any group directors’ report and annexed to the in-scope company's annual return in accordance with the European Sustainability Reporting Standards ("ESRS"). Furthermore, a copy of the auditor's assurance report on the sustainability reporting in the directors’ report must be annexed to the annual return and under section 347of the CA 2014 (as amended by the Irish CSRD Regulations), the information required under the Irish CSRD Regulations, must also be included in the Annual Report.

Scope

The range of companies that are within the scope of Part 28 were discussed at our lunch and learn in April 2024 [click here for link] and of the in-scope companies those most relevant to existing Irish SPVs established pursuant to large financial transactions are defined as "large companies" in Section 280H of the CA 2014. 

For the purposes of Part 28, "Large companies" captures companies which exceed the limits of at least two or more of the following criteria:

- balance sheet total: €25 million;
- net turnover: €50 million;
- average number of employees: 250.

Large Companies reporting obligations apply for all financial years commencing on or after 1 January 2025 meaning the first sustainability report by a Large company will be filed in 2026 as part of its 2025 financial statements. 

Thereafter, the relevant sustainability information will need to be reported on an annual basis in a dedicated sustainability statement contained in each in-scope Irish company's management report.

Penalties

The Irish CSRD Regulations do not themselves contain specific offences for non-compliance with the requirement to include a sustainability report in a company's management report, rather, the pre-existing offences for failing to submit an annual return or providing incomplete information in an annual return, as set out in the CA 2014, will apply to Part 28.

In this respect where a company fails to comply with the Section 325 and 347 of the CA 2014 which specifies the reporting requirements, that company and any officer of it who is in default is guilty of a Category 3 offence.

Additional section 406 of the CA 2014 provides that, if a person in any annual return, financial statement or other document required by or for the purposes of Part 6 of the CA 2014 intentionally makes a false statement in relation to any material contained in the particular document that person shall be guilty of a Category 2 offence. 

Conclusion

For entities such as Irish SPVs that previously were not subject to any sustainability reporting requirements, the new requirements transposed into Irish law by the Irish CSRD Regulations represent a significant change and a substantial amount of work in order to ensure compliance.
In order to achieve compliance with all applicable reporting requirements, in-scope companies will need to ensure that they have systems and practices in place to collect all relevant data prior to the relevant reporting deadline. 
If you require further advice in relation to ensuring compliance with the Irish CSRD Regulations or understanding the implications of failure to comply, please do not hesitate to contact your usual Walkers adviser or any of the co-authors of this update.