Neil Smith (pictured), Strategic Director at reporting specialists Kōan, explains why non-listed companies in the EU need to act quickly to upgrade their ESG reporting efforts if they’re to survive the tidal wave that is the Corporate Sustainability Reporting Directive (CSRD) coming their way in January 2025. 
We’re less than a year away from the arrival of the EU’s Corporate Sustainability Reporting Directive (CSRD). January 2024 will kick off a five-year process that, by the end, will expand the number of EU-operating businesses legally required to disclose environmental, social, and governance information (ESG) from around 12,000 to more than 50,000.
CSRD will require these companies to publish a not-inconsequential 1144 (and counting) data points in an annual report, covering environmental impacts, sustainability-related risk, human rights, and social standards. These data points were set out in the first draft of the CSRD’s European Sustainability Reporting Standards (ESRS) – the framework that describes exactly what must feature in a report to meet CSRD requirements – back in November.

At its core, CSRD is a mission to create uniformity. The European Financial Reporting Advisory Group (EFRAG), the EU-financed private group responsible for developing ESRS, designed them to pull together the current patchwork of national and international reporting frameworks, plug the gaps, and create a common set of standards for companies to follow more easily. 

As Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, explained during a 2022 CSRD debate, uniformity enables comparability. In the simplest terms, investors will be able to check the ESG data of one company against another and make balanced decisions on where they can make the greenest investments. It’ll deliver a complete picture of corporate sustainability for the first time – one that enables the hand of the market to tilt the right companies forward and drive us all towards that goal of carbon neutrality by 2050. 

We’ll have to judge how coherent that plan actually is once CSRD comes into force, but one thing’s for sure – the impact of CSRD will not be felt uniformly. It’s being phased in, with different companies coming into scope at different times depending on their size, wealth, and status. Some are going to have a better time of it than others. 

Not all sustainability reports are created equal

The first group to come into scope will be big public interest organisations – listed companies, banks, insurers, for example – with more than 500 employees. They’ll fall under CSRD from January 2024 and must publish a report that meets ESRS a year later. 

Fortunately, for many of them, ESRS will be an upgrade on the work they’re already doing to meet the Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework, implemented in 2014. They’ll be building on what they already have rather than starting from scratch. 

The biggest challenge awaits those who are starting cold. Come January 2025, listed and, crucially, non-listed companies that meet two of three criteria are suddenly in scope: a net turnover of more than €40 million, balance sheet assets greater than €20 million, and more than 250 employees. 

Here’s the thing. This will be the first time the EU has obliged private companies to report on ESG data. For some, this means reworking what they have to meet EU standards. For others, it might be the company’s first time locating and tracking sustainability data full stop – for a report that their public interest counterparts have spent a decade perfecting. 

Think of it like your local amateur football club being thrown into the Champions League and realising every single upgrade they need to make – all with half a pre-season’s notice. For them, CSRD will come at them hard and fast. It’s time to start getting their house in order. 

Early(ish) adopters

The situation is as dramatic as it sounds – even when you remember these private companies are not scrappy underdogs going up against bigger outfits. They’re billion-euro companies, with more than adequate resources, who in reality should have seen this coming.

Depending on who you ask, the expansion and formalisation of reporting regulations have been on the cards for decades. Stakeholder concern and political pressure prompted companies to start publishing ESG data as far back as the 90s. Voluntary standards have been available since the Global Reporting Initiative (GRI) was formed in 1997. A level of obligation has since been introduced by various stock markets around the world and by the NFRD in Europe. CSRD simply finishes the job. 

That journey is undoubtedly why a large chunk of private companies based in Europe have been putting processes and people in place to gather data and raise their overall reporting maturity. 

And it’s going to give them the edge on CSRD. 


They’re the type of privately-owned company that has published sustainability or non-financial reports in line with GRI standards. Examples from 2021 include energy giants Vitol Holding BV (revenue of $279 billion in 2021) in the Netherlands, department store chain El Cortes Ingles (€12.51) in Spain, coffee kings Tchibo (€3.25bn) in Germany and Lavazza (€ 2.3bn) in Italy, and chocolatier Ferrero (€12.7bn) in Italy. The GRI collaborated with EFRAG in developing ESRS to ensure interoperability between the two standards – so these companies will have access to some of the information required by ESRS, making the leap more manageable. 

Some private companies are also structuring their reporting around a materiality assessment – a feature of almost every major set of ESG standards – which gives them a platform to build on as they try and catch up with listed companies. Vitol Holdings, Ferrero and El Cortes Ingles included a section on materiality that defined their stakeholders and/or explained their assessment process – a sign of reporting maturity. Other companies have the right idea, but fail in the execution. For example, Tchibo works with an assessment that, although revised, was originally carried out in 2012 – meaning the issues they consider to be most material are a decade old and cannot accurately reflect the post-pandemic world their stakeholders live in. 

This example helps explain why private companies – even the ones trying to improve their reporting maturity – have so much ground to make up. Without an obligation to report, private companies rely on their own self-discipline to report well and, naturally, things fall down. Materiality assessments are left to collect dust and data gaps are left unplugged when other responsibilities, financial targets, and external factors get in the way. It’s worth remembering internal sustainability departments – if they’re even standalone teams – can be small and lack the voice to crack the reporting whip. Again, the companies with a grip on materiality have a slight edge – particularly given every CSRD-covered company will have to reevaluate their processes and deliver a double-materiality assessment. If a company has carried out a recent materiality assessment, set up some processes, planted the seed inside their company culture that ESG is a crucial business concern, then they have done some of the heavy internal lifting already. 

Added benefits

More consistent in the reports published by private companies is the commitment to editorial quality. There are some good examples here. Vitol, El Cortes Ingles, and Lavazza produced reports with a logical structure and an explanation of reporting principles or methodology, while Lavazza and Vitol used case studies and interviews to ground the data in real life. Striking the right tone has also clearly occurred to many of the report writers (or teams of report writers) – the kind of sweeping statements and jarring positivity that are the hallmark of an immature report are absent in more CSRD-ready reports. 

Critics might say it’s style over substance, but storytelling is important – so long as it doesn’t stray into distraction – in an age where employees need to feel they can buy into their employers’ worldview. According to a global 2021 IBM study, more than 71% of respondents said they were more likely to accept a job from a socially conscious organisation, while 69% said the same about companies they consider to be environmentally sustainable. That same year, Deloitte discovered almost half of Gen-Z had made career choices based on personal ethics. 

Considering that most companies worldwide – 87% according to a recent McKinsey study – have a skills gap, or will soon have one, demands like these can’t go unanswered by private companies when employees, armed with their range of sought-after skills, hold that kind of leverage. The simplest way to get them onside is by deftly telling them what your ESG credentials actually are.

The end of old-fashioned CSR

Though these trends are encouraging and give these private companies a starting point, they still have mountains to climb to be ESRS-compliant. It’s still a leap from GRI to the new standards. Scratch the surface, and they’ll realise there are new concepts to get their head around, a greater quantity of data to provide, and the need for their work to be assured by a third party – as Ferrero, El Cortes Ingles, Lavazza, and already Mercadona do – all of which requires more time, effort, and resource. 

And then there’s the group at the back. The companies who, at least publicly, appear to have no non-financial reporting foothold to speak of. These companies have revenues in the billions and headcounts in the thousands, and will eventually be in scope for CSRD, but they did not publish a non-financial report in 2021. From the outside, it’s hard to know why, given the political, societal, and economic tidal wave that’s been steadily building for decades. Perhaps they’re doing a lot of good work behind the scenes to be ready. Maybe their definitions of “good old CSR” – charity drives and fun runs – haven’t been updated. Potentially they’ve never heard of ESRS. But they will have soon. 

What we do know is companies that are not yet planning for their reporting future are putting their operations at risk – and that’s before member states have confirmed what “effective, proportionate and dissuasive” penalties await companies that don’t adhere to CSRD. Their partnerships are at risk, as ESRS will push companies to report on the material impact of their value chain – and private companies who can’t provide the correct data to their partners run the risk of souring relations by threatening their partners’ licences to operate.  

There are more financial dangers, as banks tie some revolving credit facilities to sustainability markers, and financial support may become in the long term harder to access without proving a commitment to sustainability. And not all of these companies are family-owned institutions, unlikely to change hands. They’re owned by private equity groups who, without the evidence to prove the ESG standards inside their company, are overlooking ways to catch the eyes of increasingly discerning buyers or meet stock market thresholds. 

It makes for a challenging situation for those companies with minimal experience or processes in place. In some good news, EFRAG have agreed to a request from McGuinness to hold off on work on a set of an additional sector-specific level of ESRS and prioritise helping companies get their head around the first set of standards. If McGuiness, EFRAG and the EU want to create uniformity in sustainability reporting, it’s pretty clear which companies should be at the front of the line for support.