CSRD: Implications for Listed SMEs

The way in which CSRD has been implemented in Ireland has accelerated compliance timelines for SMEs which have transferable securities admitted to trading on a regulated market. This stems from the treatment of listed SMEs as large companies under Irish company law. As a result, in-scope SMEs will be subjected to reporting obligations from 2025 and the SME opt-out until 2028 is eliminated. With CSRD bringing increased operational complexity, early preparation is essential, including for in-scope SPVs. Our Debt Capital Markets & Listing team examines the timeline and scope of CSRD in Ireland, and looks at key considerations amid ongoing uncertainty for listed SMEs.

The Corporate Sustainability Reporting Directive, or ‘CSRD’, is an EU Directive designed to increase ESG transparency and promote sustainability. It replaces the Non-Financial Reporting Directive (NFRD) and will ultimately apply to a significantly larger group of in-scope entities. The CSRD’s core purpose is to standardise and improve the quality of sustainability reporting across Europe, helping investors, stakeholders, and the public assess companies' ESG credentials more effectively.

Under the CSRD, in-scope companies will be required to prepare a sustainability report covering, amongst other things, the company’s impacts on sustainability matters and how sustainability matters affect the company’s development, performance and position. This article looks at recent developments that may impact Irish SPVs.

Implementation in Ireland

Ireland transposed the CSRD into national law via the European Union (Corporate Sustainability Reporting) Regulations 2024, which came into force on 6 July 2024. These regulations implement the CSRD by integrating the framework into Irish company law. While the regulations largely track the directive’s framework, some apparent anomalies have been identified, which have caused concern amongst some market participants. There remains uncertainty as to the intended timeline and scope applicable to certain Irish companies, particularly listed SMEs.

Intended timeline

The commencement of sustainability reporting obligations for in-scope Irish companies can be summarised as follows:

Listed SME / large company anomaly

A company is a ‘large company’ if it exceeds at least 2 of the following:

• Balance sheet greater than €25 million
• Turnover greater than €50 million, and
• Employees greater than 250

The Irish framework currently contemplates reporting obligations applying from 1 January 2026 to small and medium companies which have transferable securities admitted to trading on a regulated market (listed SMEs). However, under Irish law, a listed SME is deemed to be a large company. The effect of this is to bring forward the commencement of a listed SME’s CSRD obligations from 1 January 2026 to 1 January 2025 and to rule out its ability to avail of the opt-out until 1 January 2028. It also results in the listed SME being subject to the full reporting obligations, rather than the more limited requirements imposed on in-scope SMEs.

Market response

Market participants have expressed concern at this apparent expansion of CSRD’s scope in Ireland, as well as the acceleration of the commencement for certain companies. While market participants and law firms will continue to engage with the relevant government departments and ministers, for now there remains some ambiguity in the application of CSRD in Ireland.

A recent update to the Department of Enterprise, Trade and Employment’s FAQs on the CSRD confirms the classification of listed SMEs as large companies in the context of CSRD. This update implies that this treatment is intentional and there has been no indication that any clarification or modification of the regulations is imminent.

Conclusion

The CSRD and its transposition in Ireland is complex and merits close scrutiny by in-scope parties. In addition, certain companies, particularly listed SMEs, face ongoing uncertainty as to the application and commencement of the regulations.

While engagement with the relevant government department continues, it is important that all in-scope companies understand how and when CSRD will impact their business activities. With more companies impacted, greater reporting detail required, and mandatory auditing, early engagement is crucial to properly prepare and implement the necessary systems and procedures.

Please get in touch with our ESG or Debt Capital Markets & Listing teams to discuss how we can help your organisation in scoping and understanding its obligations under the Regulations.

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