Executive Summary
Malta’s Corporate Sustainability Reporting Regulations, 2026 (L.N. 39 of 2026) transpose the EU’s Corporate Sustainability Reporting Directive (CSRD) into national law. This regulation provides clarity on who must report, what they must disclose, how they must present it (digital tagging/ESEF), and introduces independent assurance of sustainability information. The regulation identifies a phased approach for application, with large public‑interest entities (PIEs) above 500 employees being the first to initiate reporting, starting for financial years beginning 1 January 2026. Other large undertakings follow in 2027, and listed SMEs and certain financial entities in 2028. Third-country (non-EU) parent groups with substantial EU turnover are also brought into scope from 2028.
1. Legal Basis and Purpose
What is the Legal Basis for this Regulation?
The Corporate Sustainability Reporting Regulation, 2026 (L.N. 39 of 2026) is issued under the authority of the Companies Act (Cap. 386) by the Minister responsible for the registration of commercial partnerships, establishing their firm legal foundation within Malta’s corporate regulatory framework.
What is the purpose of this Regulation?
Their primary purpose is to transpose and implement Directive (EU) 2022/2464 (the Corporate Sustainability Reporting Directive – CSRD), which modernises the EU’s Accounting, Audit and Transparency regimes to ensure that companies provide consistent, high-quality, decision-useful and independently assured sustainability information.
When will this Regulation come into force?
The Regulation enters into force in a phased manner, with different categories of undertakings becoming subject to the sustainability reporting requirements over three consecutive financial years. From financial years starting on or after 1 January 2026, the obligations apply to large public‑interest entities exceeding an average of 500 employees, as well as public‑interest entity parent undertakings of large groups that exceed the same employee threshold on a consolidated basis. From financial years starting on or after 1 January 2027, the requirements extend to all other large undertakings and to parent undertakings of large groups not already captured in the first phase. Finally, from financial years starting on or after 1 January 2028, the scope broadens to include listed small and medium-sized undertakings, small and non‑complex institutions (where they qualify as large or listed SMEs), and captive insurance and captive reinsurance undertakings that are either large undertakings or listed SMEs.
2. Who Is In-Scope (& Who Is Not)
Who does the Sustainability Reporting Regulation apply to? Which are the companies in-scope?
In scope are large undertakings, as defined in the Companies Act, which typically exceed at least two of the following three criteria: a €20 million balance‑sheet total, €40 million net turnover, and an average of more than 250 employees (standard thresholds under Part I of the Third Schedule to the Act). In addition, the Regulation applies to medium-sized and small undertakings that are listed public‑interest entities (PIEs), regardless of whether they meet large‑undertaking criteria, reflecting the requirement for companies accessing public markets to provide transparent and decision-useful sustainability information. By contrast, very small undertakings that do not exceed at least two of the following thresholds—€450,000 balance‑sheet total, €900,000 net turnover, and 10 employees—are expressly excluded from the Regulation.
Which companies fall out-of-scope of the Corporate Sustainability Reporting Regulation?
The Sustainability Reporting Regulation excludes several categories of entities from its scope. These include the Central Bank of Malta, the Malta Development Bank, Alternative Investment Funds (AIFs), and Undertakings for Collective Investment in Transferable Securities (UCITS), all of which are carved out due to their specialised regulatory frameworks. In addition, very small undertakings are out‑of‑scope where, on their balance sheet date, they do not exceed at least two of the following thresholds: a €450,000 balance‑sheet total, €900,000 net turnover, and an average of 10 employees during the financial year. Entities that fall below these limits are therefore exempt from the sustainability reporting requirements. If you’re still unsure, ARQ Group’s ESG Advisory team can advise you on the best way forward for your company.
3. When You Need to Start: Phased Timelines
What is the timeline for implementation?
ARQ Group, through expert ESG Advisors, builds a timeline and readiness plan tailored to your entity type and group structure, aligning projects, controls, and resources to your first in‑scope year.
4. What You Must Disclose (Core Content)
What should entities be reporting on?
Undertakings must include a dedicated sustainability section in the directors’ report, delivering information that enables readers to understand (i) the undertaking’s impacts on sustainability matters, and (ii) how such matters affect the undertaking’s development, performance and position.
What should entities disclose about their strategy and business model?
Entities must report information that explains how their business model and strategy interact with sustainability matters. This includes how resilient the business model and strategy are to sustainability-related risks, the opportunities the undertaking identifies in relation to sustainability matters, the entity’s transition plans aligned to a 1.5°C climate pathway and climate neutrality by 2050 and also stakeholder interests. ARQ ESG Advisory translates these technical requirements into a practical disclosure blueprint, so your reporting is complete, decision‑useful, and compliant.
What targets and progress indicators must be disclosed?
Entities must set and disclose time‑bound sustainability targets, including the Absolute GHG reduction targets for 2030 and 2050 where relevant, a description of progress made toward achieving these targets and a statement on whether the environmental targets are built on conclusive scientific evidence.
What should entities disclose on their governance structures?
Reporting must include details on the governance structure supporting the sustainability oversight. This includes the Board’s role in overseeing sustainability matters, its expertise and accessibility to such expertise.
Which policies and due diligence procedures should be reported on?
The report must effectively outline the policies addressing environmental, social (including human rights) and governance matters, the due diligence processes applied to the entities own operations and across the value chain. Entities must also report on the actual or potential adverse impacts connected to these activities and the measures the entity is undertaking to identify, monitor, prevent, mitigate and ultimately remediate these impacts.
5. Value Chain Coverage and Practical Reliefs
Is information on the value chain needed when reporting aligned with the Corporate Sustainability Reporting Regulation?
Reports must cover own operations and the value chain. If information gaps exist during the first three years, undertakings must explain what information is missing, efforts to obtain it, and future plans to close gaps. In exceptional cases, sensitive information under negotiation may be omitted if disclosure would seriously prejudice the company’s commercial position, provided the report remains fair and balanced.
6. Reporting Standards and Digital Format
What is the format required for the Corporate Sustainability Reporting Regulation Reports?
Reporting must comply with EU sustainability reporting standards (ESRS) adopted by the European Commission. Reports must be prepared in ESEF/XHTML with digital mark‑up (including Taxonomy Article 8 disclosures). ARQ’s ESG Advisory team sets up the reporting workflow and tooling for ESEF/XHTML tagging, ensuring your files are technically compliant and publication‑ready.
7. Proportionality for Listed SMEs
Is there an element of proportionality when reporting aligned with the Corporate Sustainability Reporting Regulations?
Listed SMEs benefit from a proportionate reporting regime, allowing them to provide simplified sustainability disclosures focused on the essentials such as their business model and strategy, relevant policies, and other relevant information, as well as the respective disclosures. In addition, listed SMEs are granted a temporary opt‑out, permitting them to defer sustainability reporting for financial years beginning before 1 January 2028, provided they include in their directors’ report a clear statement explaining the basis for not providing the information during the deferral period.
8. Assurance: Independent Checks on Your Data
What level of assurance is required under the Corporate Sustainability Reporting Regulation?
Under L.N. 39 of 2026, entities must obtain limited assurance over their sustainability reporting in the initial years. This limited assurance must be conducted in line with assurance standards adopted by the European Commission. Until such EU standards are formally issued, auditors and audit firms must apply the assurance standards adopted under the Maltese Accountancy Profession Act and related regulations.
What is the group auditor’s responsibility under the Corporate Sustainability Reporting Regulation?
The Group Auditor is fully responsible for the consolidated assurance opinion, evaluation of component/third‑country auditors’ work, and documentation sufficient for regulatory review. The auditor is tasked with additional responsibilities as may be required, if documentation access is restricted.
Conclusion
L.N. 39 of 2026 recalibrates corporate reporting in Malta toward decision‑useful, comparable and assured sustainability information. Early mobilisation—Board oversight, robust ESRS alignment, value‑chain data systems, and an assurance‑ready control environment—will be key for achieving compliance efficiently and credibly. Whether you are a large PIE, a listed SME, a parent undertaking, or a Maltese subsidiary/branch of a third‑country group, ARQ ESG Advisory provides end‑to‑end regulatory alignment—strategy, data, governance, assurance‑readiness, and digital reporting—so you can meet L.N. 39 of 2026 with confidence and credibility.
Martina Cutajar
Senior ESG Advisor
An expert in ESG and sustainability, Martina draws on her background in biology and marine conservation to help organisations enhance governance, meet compliance requirements, and achieve sustainability goals. She delivers tailored strategies, training initiatives, and stakeholder consultations, supporting businesses in thriving within the dynamic regulatory and sustainability landscape.
