Which companies should submit ESG reports in Denmark?

Which companies should submit ESG reports in Denmark?

In this blog, we will discuss which companies should submit ESG reports in Denmark.

ESG is about a company’s impact on the environment, society, and how they are managed.

Companies can share reports on “Environmental, Social, and Governance”.

We call these reports for “ESG reports”.

Some companies will be required to submit ESG reports from 2024.

Others will follow in 2025 and 2026.

Smaller and medium sized companies will not be required to submit ESG reports, for the time being at least.

However, small and medium sized companies might indirectly have to report on their ESG to their large clients and suppliers, if these are governed by ESG requirements, and if they need data from their supply chain to finalise their ESG reports.

So the ESG requirement can easily pass down through the supply chain.

We think, this is a situation that will be quite common for many of our clients.

So it make sense for all companies to at least consider how and if ESG reporting requirements will affect their business, whether being a small, medium or large company.

For larger companies, especially, with the growing importance of corporate sustainability and transparency, understanding the mandatory ESG reporting requirements in Denmark is important to ensure compliance and also to capitalise on the new opportunities presented by comprehensive ESG disclosure.

Denmark has established legal frameworks and guidelines to regulate ESG reporting, ensuring consistency, accuracy, and comparability of information disclosed by companies.

These requirements are designed to provide stakeholders with meaningful insights into a company’s environmental impact, social initiatives, and governance practices.

Threshold and deadline for 2024 ESG reporting in Denmark

From 2024, PIEs (Public Interest Entities) and larger companies listed on Nasdaq Copenhagen (the stock exchange in Denmark) with more than 500 employees, as well as banks, mortgage and insurance companies, are required to submit ESG reporting in Denmark.

The deadline to submit the ESG report for 2024 will be in 2025.

Threshold and deadline for 2025 ESG reporting in Denmark

For 2025 the list of companies that will have to report ESG will expand to also include smaller companies with more than 250 employees and/or 40 million EUR in revenue or more and/or a balancesum of 20 million EUR or more.

The deadline to submit the ESG report for 2025 will be in 2026.

Threshold and deadline for 2026 ESG reporting in Denmark

For 2026 the list of companies that will have to report ESG will expand even further to also include smaller public traded companies and medium sized companies.

However the details are not yet fully established.

The deadline to submit the ESG report for 2026 will be in 2027.

The Interplay of CSRD and ESRS on ESG reporting

The Corporate Sustainability Reporting Directive (CSRD) is the EU directive that requires the large companies to report on ESG.

The European Sustainability Reporting Standards (ESRS) is the standardising of the ESG reporting.

ESG reporting components

The key ESG reporting components outlined in the Danish Financial Statements Act and the guidelines we have from the Danish Business Authority are:

Environmental Components

1. Environmental Policies and Management Systems: Companies governed by the ESG rules must disclose their policies, strategies, and management systems for addressing environmental issues, such as climate change, resource efficiency, and biodiversity conservation;
2. Greenhouse Gas Emissions and Climate Change Impacts: Reporting on direct and indirect greenhouse gas emissions, energy consumption, and measures taken to mitigate and adapt to climate change impacts;
3. Energy Consumption and Efficiency Measures: Disclosures on energy usage, energy efficiency initiatives, and the transition towards renewable energy sources;
4. Water Usage and Waste Management: Information on water consumption, water management strategies, waste generation, and waste reduction/recycling programs;
5. Biodiversity and Habitat Protection: Assessments of the company’s impacts on biodiversity, habitats, and ecosystems, along with conservation efforts and restoration initiatives;
6. Compliance with Environmental Regulations: Ensuring compliance with relevant environmental laws, regulations, and industry standards, including any incidents of non-compliance and associated fines or penalties.

Social Components

1. Labour Practices and Decent Work Conditions: Reporting on employment policies, labour relations, fair wages, working hours, and adherence to international labour standards;
2. Occupational Health and Safety: Disclosures on workplace safety measures, accident prevention, and employee well-being programs;
3. Employee Training and Development: Information on employee training and skill development initiatives, promoting continuous learning and career growth opportunities;
4. Diversity, Inclusion, and Non-discrimination: Policies and measures to promote diversity, equal opportunities, and prevent discrimination based on factors such as gender, age, ethnicity, or disability;
5. Human Rights Assessments and Due Diligence: Evaluations of human rights impacts throughout the company’s operations and supply chain, including due diligence processes and remediation mechanisms;
6. Product Responsibility and Customer Satisfaction: Ensuring product safety, responsible marketing practices, customer privacy protection, and mechanisms for addressing customer complaints and feedback;
7. Community Engagement and Development Programs: Endeavours like philanthropic initiatives, volunteer programs, stakeholder partnerships, and the social impact of company activities to support local communities, contribute to economic development, and address societal challenges in the areas where the company operates.

Governance Components

1. Corporate Governance Structures and Policies: Disclosures on the company’s governance framework, board composition, independence, and decision-making processes;
2. Risk Management Processes: Comprehensive assessment of ESG-related risks, including climate risks, social risks, and governance risks, along with mitigation strategies;
3. Business Ethics and Anti-Corruption Measures: Policies and procedures to promote ethical business conduct, prevent bribery and corruption, and ensure compliance with relevant laws and regulations;
4. Stakeholder Engagement and Materiality Assessment: Processes for identifying and engaging with key stakeholders, determining material ESG topics, and addressing stakeholder concerns;
5. Executive Compensation and Alignment with Sustainability Goals: Linking executive remuneration to the achievement of sustainability objectives and performance targets.

Voluntary ESG Reporting

Benefits of voluntary ESG reporting for non-mandatory companies

While ESG reporting is mandatory for large companies and public interest entities in Denmark (PIEs), smaller businesses and non-PIEs can still reap significant benefits by voluntarily disclosing their environmental, social, and governance performance.

While voluntary ESG reporting may require additional effort and resources, by embracing transparency and proactively reporting on your sustainability efforts, you:

1. Improve transparency and reputation. Demonstrate your company’s commitment to responsible business practices, enhancing your brand reputation and credibility among stakeholders;
2. Attract ethical investors and customers. Increasingly, investors and consumers are prioritising companies that align with their values and prioritise sustainability. Voluntary ESG reporting can position your business as an attractive choice for these discerning audiences;
3. Identify risks and opportunities. The process of ESG reporting requires a comprehensive assessment of your company’s environmental, social, and governance risks and opportunities, enabling you to proactively address potential issues and capitalise on emerging trends.

Guidelines for voluntary ESG reporting

Recognised frameworks (e.g., GRI, SASB, TCFD)

Companies have the opportunity to voluntarily engage in ESG reporting beyond mandatory requirements.

Several recognised frameworks, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD), provide guidance and standards for ESG reporting.

1. Global Reporting Initiative (GRI): The GRI framework is one of the most widely recognised and adopted standards for ESG reporting globally. It provides comprehensive guidelines for companies to disclose their economic, environmental, and social impacts, enabling stakeholders to assess performance and make informed decisions;
2. Sustainability Accounting Standards Board (SASB): SASB offers industry-specific standards for ESG reporting, focusing on material issues relevant to financial performance. By aligning with SASB standards, companies can provide investors with industry-specific metrics and insights into ESG risks and opportunities;
3. Task Force on Climate-related Financial Disclosures (TCFD): TCFD provides recommendations for disclosing climate-related financial risks and opportunities. By integrating TCFD’s recommendations into their reporting practices, companies can enhance transparency and resilience in the face of climate-related challenges.

Best practices for data collection and reporting

The following best practices encompass a set of guidelines and principles for thorough gathering, analysing, and disclosing relevant ESG information in a standardised and consistent manner.

1. Comprehensive Data Gathering: Adopting best practices for data collection involves systematically gathering information on environmental, social, and governance (ESG) factors relevant to the company’s operations;
2. Alignment with Reporting Frameworks: Companies can enhance the credibility and comparability of their ESG disclosures by aligning with internationally recognised reporting frameworks. These frameworks provide guidelines for disclosing ESG information in a standardised and consistent manner;
3. Stakeholder Engagement: Engaging with stakeholders is essential for identifying material ESG issues and gathering relevant data. Companies can leverage stakeholder feedback to prioritise ESG initiatives and improve the quality and relevance of their reporting;
4. Transparency and Materiality: Transparency is key to effective ESG reporting, as it enables stakeholders to assess the company’s sustainability performance and make informed decisions. Companies should focus on disclosing material ESG issues that have a significant impact on their business and stakeholders, rather than providing excessive or irrelevant information.




Other Considerations




Tips for Effective ESG Reporting

Environment, Social, and Governance (ESG) reporting in Denmark can be a discouraging task, especially for companies facing new requirements and expectations from stakeholders.

To help you effectively navigate and unlock the benefits of ESG reporting, we’ve compiled a list of practical tips.

1. Understand regulatory requirements. Familiarise yourself with the regulatory requirements for ESG reporting in Denmark, including any industry-specific guidelines or standards that may apply to your company;
2. Set clear objectives. Define clear objectives for your ESG reporting efforts, including what information you want to disclose, who your key stakeholders are, and how you plan to use the data to drive business value;
3. Integrate ESG into business strategy. Embed ESG considerations into your overall business strategy and decision-making processes to ensure alignment with corporate goals and objectives;
4. Engage stakeholders. Engage with stakeholders, including investors, customers, employees, and community members, to understand their ESG priorities and expectations, and incorporate their feedback into your reporting process;
5. Collect relevant data. Collect and analyse relevant ESG data to assess your company’s performance across environmental, social, and governance dimensions, and identify areas for improvement;
6. Use standardised reporting frameworks. Consider using internationally recognised reporting frameworks to ensure consistency and comparability of your ESG disclosures;
7. Be transparent and honest. Practice transparency and honesty in your ESG reporting by providing accurate, reliable, and relevant information, and disclosing both strengths and weaknesses in your performance;
8. Demonstrate progress and impact. Showcase your company’s progress and impact on ESG issues over time, highlighting achievements, initiatives, and measurable outcomes;
9. Seek independent verification. Consider seeking independent verification or assurance of your ESG reporting to enhance credibility and demonstrate your commitment to accuracy and integrity;
10. Continuously improve. Treat ESG reporting as an ongoing process of continuous improvement, regularly reviewing and updating your reporting practices to reflect changes in your business operations, stakeholder expectations, and regulatory requirements.




Challenges in ESG reporting

While ESG reporting presents numerous opportunities for your business, it’s important to acknowledge the potential challenges that you may encounter along the way.




Data collection and reporting challenges

Incorporating ESG considerations into your company’s decision-making processes and daily operations may require a cultural shift and organisational changes. Aligning your business strategies, policies, and processes with ESG principles can be a complex undertaking, especially if your company has traditionally focused solely on financial performance.




Integrating ESG reporting into existing business practices

Integrating ESG reporting into existing business practices poses another significant challenge. Many businesses struggle to embed ESG considerations into their day-to-day operations, decision-making processes, and strategic planning. Without clear integration into existing frameworks, ESG reporting may be perceived as a separate and disconnected exercise, limiting its effectiveness in driving sustainable business practices and value creation.




Addressing stakeholder expectations and concerns

As ESG reporting becomes more mainstream, stakeholders such as investors, customers, and regulatory bodies will increasingly scrutinise your company’s disclosures. Addressing their expectations, concerns, and questions regarding your ESG performance can be challenging, especially if your company is just starting its sustainability journey.




While these challenges may seem intimidating, it’s important to remember that ESG reporting is not just a compliance exercise but a strategic opportunity to enhance your company’s valuation, reputation, and long-term competitiveness.

Acknowledging and proactively addressing these challenges can help you position your business for success in the evolving landscape of sustainable and responsible business practices.




Overcoming Challenges

1. Invest in data management systems. Invest in robust data management systems and technologies to streamline data collection, analysis, and reporting processes. Implement standardised data collection protocols and tools to ensure consistency and reliability of ESG data;
2. Align ESG with business strategy. Integrate ESG considerations into your company’s overarching business strategy and operations to ensure alignment with corporate goals and objectives. Embed ESG criteria into performance metrics, incentive structures, and decision-making frameworks to incentivise sustainable behaviour and drive accountability;
3. Engage stakeholders proactively. Proactively engage with stakeholders to understand their expectations, concerns, and priorities regarding ESG reporting. Foster open and transparent communication channels to build trust, solicit feedback, and address stakeholder concerns effectively;
4. Collaborate with industry peers. Collaborate with industry peers, trade associations, and ESG experts to share best practices, exchange knowledge, and collectively address common challenges related to ESG reporting. Participate in industry initiatives and working groups to develop standardised frameworks and methodologies for ESG data collection and reporting.




Benefits of ESG reporting for businesses in Denmark

Implementing ESG reporting can have several benefits that not only contribute to a more sustainable potential but also drive long-term growth and value creation for your organisation.

Additionally, Denmark continues to prioritise corporate sustainability and accountability by understanding the benefits of ESG reporting, which has become progressively more important for companies on the lookout for progress in their business environment.

Here are the key benefits of ESG reporting for businesses in Denmark:

1. To strengthen company reputation and brand image: ESG reporting can help companies strengthen their reputation and brand appeal among consumers, investors, and other stakeholders;
2. To enhance company’s access to capital and investor confidence: Comprehensive ESG reporting can boost investor confidence because many investors today consider ESG factors in their investment decisions, as they see them as indicators of effective risk management and long-term value creation;
3. To improve company risk management: ESG reporting requires companies to systematically assess and manage environmental, social, and governance risks, which can help mitigate potential regulatory, operational, and reputational risks;
4. To develop company’s competitive advantage in talent acquisition and retention: Companies with strong ESG performance and transparency tend to be more attractive employers, helping them recruit and retain top talent who prioritise working for socially and environmentally responsible organisations;
5. To operate efficiently and cost savings: By measuring and managing environmental impacts like energy use, waste, and resource consumption, through ESG reporting, companies can identify opportunities for operational efficiencies and cost savings;
6. To regulate company compliance: With increasing ESG reporting regulations in Denmark, companies can ensure compliance and avoid potential penalties through comprehensive reporting.




Our recommendation

In this blog, we’ve explored the landscape of Environment, Social, and Governance (ESG) reporting in Denmark, shedding light on the legal requirements and criteria that determine which companies must disclose their non-financial performance.

We’ve covered the thresholds for large companies, the specific mandate for public interest entities (PIEs), and the potential benefits of voluntary ESG reporting for smaller and medium sized businesses.

As we’ve discussed, ESG reporting is more than just a compliance exercise – it’s a strategic imperative for businesses in Denmark seeking to enhance their reputation, attract ethical investors and customers, identify risks and opportunities, and ultimately increase their company’s valuation.

In today’s conscious business environment, stakeholders are increasingly prioritising sustainability, transparency, and responsible business practices.

If you have questions relating to your ESG reporting, always feel free to contact us here at Dania Accounting.




(This blog was updated last time: 15.9.2024)




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