Draft law transposing the CSRD

On 28 November 2024, the Chamber of Representatives approved the draft law on the implementation of the Corporate Sustainability Reporting Directive (“CSRD”). The CSRD imposes detailed requirements on companies for reporting on their environmental impact, social responsibility, and governance practices. With this approval, Belgium is taking an important step towards stricter reporting obligations and placing greater emphasis on sustainable business practices. Entry into force is expected in early 2025. The rules will enter into force in phases.

What is this about?

With the implementation of the CSRD, large companies will be required to include and disclose sustainability information in their annual report. This reporting must comply with European sustainability reporting standards and includes both information on the impact of the company on sustainability issues (ESG) and the influence of these issues on the development, performance and financial position of the company.

A statutory auditor or company auditor must evaluate this sustainability report (so-called “assurance”). The auditor evaluates the sustainability information according to audits and documentation requirements so that third parties can be offered limited assurance that the information is accurate and complete.

Why is this new obligation important?

Reporting information on social and environmental issues is not new. For several years now, the Companies and Associations Code has contained rules regarding the disclosure of non-financial and diversity information by certain large companies and groups. These rules were previously introduced through the Non-Financial Reporting Directive (NFRD), the rules of which have now been updated and significantly expanded in the CSRD.

For example, the scope of the legislation is being extended to include:

• All companies which qualify as large companies;
• All companies listed on a regulated market, unless they are micro-enterprises;

Exempt companies

However, this obligation does not apply to all companies. Only the following categories of companies will (in the long term) have to comply with the reporting requirements:

• Listed companies in the European Union. This includes not only large companies but also SMEs, as well as applying to non-EU companies which are listed on European stock exchanges.
• Large companies which exceed at least two thresholds:
• A balance sheet total of EUR 25,000,000
• A net turnover of EUR 50,000,000
• An average of 250 employees during the financial year
• for small and medium-sized listed companies, which may include and disclose simplified sustainability information in their annual report;
• from fiscal year 2028, for non-European companies when they are economically active in the European Union through a European subsidiary or branch and have a net turnover of more than 150 million euros in the European Union (for each of the last two consecutive years).

Non-listed SMEs, micro-enterprises and non-profit organisations are excluded from the scope of application (for the time being), but they should take it into account in their business operations.

Impact on your business?

Initially, the CSRD will take effect in stages, with large companies leading the way in 2025. Medium-sized companies will follow the year after that and SMEs have a period of grace until 2027 for their first reporting.

Although medium-sized companies and SMEs are not yet directly covered by the CSRD for now, they will be affected by the new reporting requirements which will (normally) take effect in 2025.

Indeed, large companies, which are covered by the CSRD, will ask their suppliers and customers – including SMEs – for information on sustainability issues in order to meet their own reporting requirements. For SMEs, this means that they may have to deal with requests to provide insight into their energy consumption, CO₂ emissions, working conditions, or the use of sustainable materials.

Answering these questions can be complex and often requires time and effort, especially for SMEs that may not have the internal expertise or systems for detailed sustainability reporting.

Voluntary disclosure of sustainability information

Certain companies that are not required to disclose sustainability information may still choose to do so voluntarily for various reasons. EFRAG will develop an informal standard for sustainability reporting for this purpose.

Our PKF BOFIDI Legal experts will be happy to help you

The reporting obligations under the CSRD will inevitably come into force in Belgium soon, so it is crucial for companies to prepare for the new law now.

Do you have any questions about the transposition of the CSRD or its consequences for your company? Please do not hesitate to contact us. Our PKF BOFIDI Legal experts will be happy to help you with all your questions about sustainability.

In addition, our colleagues at PKF BOFIDI Consulting are ready to support you with the shaping, implementation and follow-up of your sustainability strategy.

This article was written by Flor Vertommen, who specialises in corporate law and M&A.