On December 10, 2024, Law 5164 - Government Gazette 102/12.12.2024 was adopted by majority vote, incorporating the CSRD Directive to enhance the transparency and reliability of sustainability information disclosed by businesses. Specifically, the new law introduces the obligation to submit and publish a sustainability report, replacing the previous process of submitting non-financial statements. The application of Law 5164 specifically concerns:

• Large public interest entities and parent companies of large public interest groups with more than 500 employees: effective from the financial year starting on January 1, 2024.

• Large entities and parent companies of large groups outside the aforementioned category: effective from January 1, 2025.

• Small and medium-sized public interest entities, as well as affiliated insurance and reinsurance companies: effective from January 1, 2026.

• Subsidiary companies whose parent company is based outside the EU: effective from the financial year starting on January 1, 2028, provided that the total turnover within EU countries of the group headquartered outside the EU exceeds €150 million.

It is noteworthy that regarding public interest entities, the following are also included:

1. Public Limited Companies owned by the Greek State, regardless of the percentage of the State's participation in the share capital and the subsidiaries of the Hellenic Corporation of Assets and Participations that do not have shares listed on the stock exchange. This also includes investment firms, collective investment undertakings, management companies and microfinance institutions.

2. Subsidiary companies established in Greece that qualify as public interest entities, but whose ultimate parent company is governed by the law of a third country, which are required to publish a sustainability report. The same applies to branches of businesses governed by the law of a third country (not part of a group or ultimately owned by an entity established under third-country law).

The new law amends Law 4548/2018, expanding the obligation to disclose a Sustainability Report. This obligation now extends beyond large companies to include small and medium-sized public interest companies and non-EU companies with subsidiaries engaging in significant business activity within the EU. Specifically, it applies to companies whose revenues within the EU—either at the group level or individually—exceed €150 million for two consecutive years.

Additionally, amendments are introduced in Law 3556/2007 concerning listed companies, stipulating that the Management Report must now include sustainability information, in accordance with the new European Sustainability Reporting Standards (ESRS).

We therefore observe that the CSRD introduces stricter reporting requirements and legal obligations for businesses, incorporating the following key innovations:

• Expanded Scope: Compliance now extends beyond large listed companies to include many unlisted companies with significant economic impact.

• Double Materiality Principle: Businesses must report both the impact of their activities on the environment and society and the impact of sustainability issues on their financial performance.

• Mandatory Sustainability Reporting under the ESRS: The standards set specific criteria for providing reliable and comparable data.

• Obligation for External Assurance: Sustainability reports are subject to external audit by independent auditors or certification bodies, as stipulated in Article 26 of Law 5164/2024.

Regarding the content and submission obligations of the Sustainability Report, it replaces the submission of non-financial statements and must be prepared in accordance with the European ESRS standards of EFRAG. In case of deviation, businesses must provide justification ("Comply or Explain") for the first three years of implementation.

The report must include information regarding:

• The impacts of the company on sustainability issues and how these affect its position.

• The business model and resilience strategy against environmental and social risks.

• Action plans, investments and sustainability financing goals.

• The value chain, business relationships and due diligence processes.

• Governance issues related to sustainability and incentive policies for management.

Sustainability reports must be published in the General Commercial Registry (GEMI) and Board members bear responsibility for the accuracy and compliance of the reported data.

Subsequently, regarding the audit and sanctions for non-compliance, sustainability reports are subject to independent assurance by statutory auditors or independent assurance providers, under the same conditions and responsibilities applicable to financial audits. The Hellenic Accounting and Auditing Standards Oversight Board (ELTE) is the competent authority for the supervision of auditors, while the National Accreditation System oversees independent assurance providers.

In case of non-compliance, strict penalties apply:

• Imprisonment of up to 3 years and fines ranging from €5,000 to €50,000 for Board members.

• Fines from €10,000 to €100,000 for auditors issuing false opinions.

• Disciplinary sanctions, including fines of up to €500,000 and a prohibition from practicing for up to 3 years.

Therefore, in order for businesses to avoid facing the consequences of non-compliance, they must adopt a compliance strategy, which includes:

• Understanding the legal framework and ESRS standards, along with training executives and members of administrative, management and supervisory bodies.

• Assessing the company’s current state to evaluate its level of preparedness and identify potential gaps.

• Establishing a dedicated compliance team responsible for coordinating and preparing the sustainability report.

• Engaging top management to identify material issues, risks and opportunities related to the company's strategy.

• Developing effective communication processes to ensure smooth data collection and analysis.

• Evaluating available resources and tools, including potential external support from specialized consultants.

• Selecting an independent auditor early on, who will oversee the sustainability report and ensure regulatory compliance.

To sum up, the incorporation of the CSRD Directive into the Greek legal framework constitutes a significant step towards transparency and responsible corporate governance. Timely preparation will enable businesses to meet their new obligations, avoid sanctions and leverage the opportunities that enhanced transparency offers for sustainable development.

For more information on the incorporation of the CSRD Directive into Greek law, click here, here and here 

For more details on the CSRD Directive, click here.
For more information on the European ESRS standards by EFRAG, click here.