Whether you run a two-entity scale-up or a sprawling multinational, sooner or later someone will ask, “Do we have to report ESG data for the whole group, or can we keep it to each legal entity?”
The question is more than a technical footnote: it determines data-collection scope, audit cost, and even your cost of capital. And you’re not alone, many mid-market businesses are currently wrestling with the very same dilemma as the EU rule-book shifts beneath their feet.
This guide unpacks how to choose between consolidated ESG reporting and entity-level sustainability disclosures - two paths that shape your ESG strategy, audit burden, and stakeholder communication.
The “old” world: CSRD assumed consolidation
Under the Corporate Sustainability Reporting Directive (CSRD) that entered into force in 2023, group parents that met the size tests had to publish a consolidated sustainability statement covering all subsidiaries.
Article 29a of the amended Accounting Directive makes this explicit, carving out only narrow exemptions when the group is itself included in a higher-level report. Advisory notes from large law- and audit-firms quickly translated that into practice guidance: “If you’re in scope of CSRD, you publish one group-level ESG report.”
For a while, that clarity meant most ESG teams simply mirrored the statutory-consolidation perimeter used for financial accounts in their ESG reports and sustainability disclosures.
After the Omnibus: a patchwork of voluntary paths
Fast-forward to 2025 and the Omnibus proposal, part of the EU’s Bureaucracy-Reduction Package, has flipped the conversation. The draft text cuts back sector-specific ESRS (European Sustainability Reporting Standards), limits value-chain look-through, and explicitly signals that non-CSRD companies may stick to voluntary ESG reporting. At the same time, the Commission has lifted the size-thresholds for “large” and “medium” undertakings by 25%, pulling thousands of SMEs out of the mandatory net.
Read more about the key changes from the Omnibus proposal in our CSRD guide.
EFRAG anticipated that vacuum: in December 2024 it delivered the VSME standard - a slimmed-down sustainability framework designed for unlisted micro, small, and medium enterprises falling below the new CSRD thresholds. For companies hovering well below the line, VSME is rapidly becoming the go-to ESG framework. But the VSME standard is silent on where you draw the boundary, leaving boards to choose between entity-level ESG reports and consolidated sustainability reports, often without legal compulsion either way.
Stakeholder-first: pick the perimeter that answers their question
When someone opens your ESG report, they rarely do it for curiosity’s sake. They’re looking for data to help answer, “Do I invest, lend, buy, regulate or work here?”
Different stakeholder groups therefore care about different slices of the business:
- Investors & analysts — want decision-ready, comparable non-financial disclosures that show total exposure and ESG performance across the group. Fragmented data makes benchmarking difficult and can even appear as green-hushing.
- Banks & other lenders — under the EBA’s Loan-Origination Guidelines, must price risk “at borrower level.” They require entity-specific ESG data that matches the legal counterparty they finance.
- Customers & end-consumers — experience your brand, not your legal structure. They look for a single, group-level ESG narrative.
- Employees & local communities — care about local impact. Site-specific ESG reporting builds trust and engagement.
With those differing lenses in mind, the choice of perimeter becomes a strategic communications decision:
Entity-level ESG reports
When it delights stakeholders:
- Bank loans, project finance or green bonds are raised per legal entity
- Subsidiaries operate in distinct sectors with very different ESG risk profiles
- Local regulators or communities demand site-level transparency
Pros:
- Pin-pointed risk assessment boosts credit pricing & insurance terms
- Isolates high-risk operations from group-average KPIs
- Easier to roll-up into a consolidated sustainability statement later
Cons:
- More ESG reports to prepare and assure
- Can confuse external stakeholders unfamiliar with your legal structure
Consolidated ESG reporting
When it delights stakeholders:
- Core business is homogeneous across entities
- Brand communication and investor relations happen at group level
- Equity investors prefer comparability with peer group on a consolidated basis
Pros:
- One holistic sustainability narrative
- Simplifies reporting for equity analysts and end-users
- Lower marginal cost than producing many stand-alone reports
Cons:
- May obscure high-emission hotspots at the entity level
- Lenders and regulators may still demand granular ESG data
Rule of thumb: start where your primary stakeholder lives. If your credit rating and funding terms hinge on bank relationships, prioritize entity-level ESG reporting. If brand perception or index inclusion is your key value driver, lead with a consolidated ESG report.
Practical takeaway: build from the bottom up
If you suspect you’ll need both views, start bottom-up: build robust entity-level ESG datasets first, then roll them up. Consolidated ESG reporting is seamless when you trust the underlying data. The reverse, breaking apart a group ESG report after the fact, is painful and risks inconsistent audit trails.
That’s why at Karomia, we advise clients to either:
- Publish a single consolidated ESG report, or
- Begin with entity-specific ESG reports and consolidate when needed.
Either way, let your key stakeholders guide the perimeter.
