Recital (7)

Article 19a(1) of Directive 2013/34/EU requires large undertakings, and small and medium-sized undertakings, except micro undertakings, whose securities are admitted to trading on a regulated market in the Union, to prepare and publish sustainability reporting at individual level. The report entitled The future of European competitiveness identified the sustainability reporting framework as a major source of regulatory burden, concluding in that respect that there was a need to better consider the size of companies affected by regulation. To reduce the reporting burden on undertakings and to achieve the objectives of reporting in a more proportionate way, the obligation to prepare and publish sustainability reporting at individual level should be limited to undertakings with a net turnover exceeding EUR 450000000 and an average of more than 1000 employees during the financial year, as defined in the national measures transposing Directive 2013/34/EU. That more targeted scope, which should also apply as regards groups and issuers, will ensure that the burden of mandatory sustainability reporting is limited to the largest undertakings, groups and issuers. Such undertakings, groups and issuers are the most consequential in terms of environmental, social and governance (ESG) impacts. At the same time, they are the most able to absorb the costs associated with ESG reporting. Undertakings, groups and issuers below the specified thresholds remain free to carry out voluntary sustainability reporting, a possibility that is significantly facilitated by the sustainability reporting standards for voluntary use introduced by this Directive.