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New EU Measures Reduce the Application of the CSRD

The European Commission has redefined company and group size criteria in the EU. The measure will have a significant impact on the application of the EU’s new sustainability reporting framework. Corporate Governance and ESG partner, Emer Shelly considers the changes and their impact on impending reporting obligations under the Corporate Sustainability Reporting Directive.

The European Commission (EC) has formally adopted changes to the criteria by which company and group sizes are defined in the EU. The impact of those changes includes a substantial reduction in the number of companies which fall within the scope of the Corporate Sustainability Reporting Directive (CSRD).

Changes to size criteria

The classification of companies or groups as “micro”, “small”, “medium”, or “large” in the EU is based on meeting two out of three size criteria set down in the Accounting Directive. These are:

  • Number of employees
  • Balance sheet total, and
  • Net turnover

The EC recently carried out a review of the criteria in light of the impact of significant inflation throughout the past two years. The purpose of its review was to consider whether the thresholds resulted in disproportionate administrative and reporting burdens on certain companies. Following the completion of its review and a subsequent public consultation process, the EC has now formally approved increases in the balance sheet and net turnover thresholds as set out in the following table. The employee headcount threshold will remain unchanged.



Current Thresholds *

Proposed New Thresholds *


Balance Sheet Total

≤ €350,000

≤ €450,000

Net Turnover

≤ €700,000

≤ €900,000

No. of Employees

≤ 10

≤ 10


Balance Sheet Total

≤ €4,000,000

≤ €5,000,000

Net Turnover

≤ €8,000,000

≤ €10,000,000

No. of Employees

≤ 50

≤ 50


Balance Sheet Total

≤ €20,000,000

≤ €25,000,000

Net Turnover

≤ €40,000,000

≤ €50,000,000

No. of Employees

≤ 250

≤ 250


Balance Sheet Total

> €20,000,000

> €25,000,000

Net Turnover

> €40,000,000

> €50,000,000

No. of Employees

> 250

> 250

* Any two of three criteria

Impact on the CSRD

One major impact of the changes to the size criteria is to substantially reduce the number of companies within the scope of the CSRD. The CSRD, which is currently being transposed into the national law of all EU Member States, will impose extensive sustainability reporting obligations on all large companies, large groups and EU-listed small and medium-sized companies over the next number of years. The increase in the thresholds by which those categories of companies and groups are defined will exclude a significant number of the approximately 50,000 companies to which the CSRD would otherwise apply.

Reaction to the changes

Reaction to the changes to the size criteria is likely to be mixed. Many will argue that the changes are fair and proportionate measures which are necessary to relieve the significant time and cost burden on companies who, arising from inflation, have found themselves unexpectedly subject to the CSRD. On the other hand, some will argue that the narrowing of the CSRD’s application will hamper the ultimate achievement of Europe’s climate objectives. One of the key ambitions of the CSRD is to assist in directing capital flows into more sustainable businesses. The new changes will inevitably reduce the availability of reliable sustainability information to financial institutions and investors who need that information to meet their own sustainability reporting obligations and for due diligence purposes in lending and investment decision-making.

Next steps

The changes to the size criteria were adopted by the EC by way of Delegated Directive on 17 October 2023. That Delegated Directive will enter into force three days following its impending publication in the Official Journal of the European Union. Member States will then have a period of 12 months to make the consequential changes to their national laws. The new criteria must apply for financial years beginning on or after 1 January 2024, or 1 January 2023 if any Member State chooses to apply them earlier.

The changes will give breathing room to companies which have been facing the considerable challenge of preparing for CSRD reporting but will now find themselves outside its scope. At the same time, any excluded company on a growth trajectory may become subject to the CSRD in the future if it meets the new criteria. Separately, stakeholder demand for reliable sustainability information from all companies, regardless of size, will continue to increase, particularly those within the value chain of larger businesses that remain subject to the CSRD. Therefore, it remains advisable for any company outside the scope of the CSRD to continue to review its sustainability priorities, reporting strategies and data collection systems and practices to ensure it will be able to respond to future reporting obligations and expectations.

For more information and expert advice on complying with CSRD reporting obligations, contact a member of our ESG or Corporate Governance teams.

People Also Ask

Which companies does the CSRD apply to?

The CSRD applies to large EU undertakings, listed SMEs in the EU and third country undertakings generating an annual net turnover of €150 million in the EU at a consolidated level and with a branch or subsidiary in the EU that meets certain criteria and thresholds.

Is the CSRD in force?

The CSRD entered into force on 5 January 2023. EU Member States have until July 2024 to transpose it into their national laws.

What is a large company?

A large company is a company that meets at least two of the following criteria:

  • Balance sheet total exceeding €20 million
  • Net turnover exceeding €40 million
  • Average number of employees exceeding 250

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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