CSRD Reporting for Franchises: Who Reports What?

If you run or manage a franchise in Europe, you’ve probably heard about the Corporate Sustainability Reporting Directive (CSRD) — and wondered how it applies to you. Should the franchisor handle reporting for the whole network, or must franchisees file their own sustainability disclosures?

The answer depends on ownership, control, and scale. While CSRD rules are clear for large companies, they leave many small and growing franchise operators (SMEs) uncertain about where their responsibilities begin and end. This guide breaks it down simply.

1. Understanding Who the “Reporting Entity” Is

Under the CSRD Directive (EU 2022/2464), the reporting obligation lies with the legal entity — the company that owns the business operations and prepares annual financial statements.

That means:

• Franchisors (the brand owners or master licence holders) are responsible for reporting on sustainability impacts that occur within their corporate structure — such as head offices, training centres, and directly managed outlets.
• Franchisees, who operate as independent legal entities under a brand licence, are generally not directly covered by CSRD unless they meet the thresholds themselves (250+ employees, €40 million turnover, €20 million in assets).

However, franchisees may still need to provide sustainability data to their franchisor if it’s requested for group-level or supply chain reporting.

2. When Franchisors Must Consolidate Data

If a franchisor owns or controls part of the franchise network — for example, through joint ventures or majority-owned stores — those operations must be included in the franchisor’s consolidated CSRD report.

Key indicators of control include:

• Shared management or financial reporting
• Uniform operational systems
• Strategic oversight of local sites

In practice, many large European franchises (especially in hospitality or retail) will include sustainability data from both corporate and hybrid outlets, while independently owned franchisees contribute information voluntarily.

3. What Franchisees Need to Do

Even if not legally obliged to report, franchisees will likely be asked for sustainability data by their franchisor, investors, or lenders. Typical requests include:

• Energy and water use (utility bills)
• Waste and recycling volumes
• Employee data (headcount, training hours, turnover)
• Health and safety statistics

Franchisees can use the VSME Standard — the EU’s voluntary reporting framework for non-listed SMEs — to provide this data efficiently and consistently. It helps ensure information fits the format that franchisors (and auditors) expect, without unnecessary complexity.

4. Governance Matters: Defining Roles Clearly

Governance is often where franchise reporting fails. If reporting roles aren’t clearly defined, information can be inconsistent or incomplete.

A good franchise governance setup includes:

• A sustainability clause in franchise agreements
• Defined responsibilities for data submission
• Clear reporting timelines aligned with annual financial periods
• Shared tools or templates for ESG data collection

Franchisors should establish a simple sustainability policy and training for franchisees, so that reporting is part of everyday operations — not a last-minute scramble.

5. How to Avoid Duplication and Overlap

Franchises often worry about double reporting — for example, if both the franchisor and franchisee include the same store’s data. To avoid this:

• The franchisor reports only for stores it owns or directly operates.
• Franchisees report their own sites separately or share data upstream for group-level aggregation.
• Both sides should document how boundaries were defined in the sustainability statement.

This clarity protects everyone during external assurance (audit) and avoids compliance risks under the CSRD.

Frequently Asked Questions

Do small franchisees have to publish CSRD reports?

Not usually. Independent franchisees fall outside CSRD scope unless they exceed large-company thresholds. However, they may still be required to share sustainability information with the franchisor or their bank.

What if my franchisor is outside the EU?

If your franchisor operates from outside the EU but earns over €150 million in EU turnover, it will eventually need to publish a CSRD-equivalent report covering its EU network. In that case, EU-based franchisees will likely be asked to contribute local data.

Can one report cover all franchise locations?

Only if the franchisor owns and consolidates those operations. Otherwise, each franchisee remains responsible for its own local disclosures, even if they follow a shared template or brand-wide sustainability framework.

How can SMEs in franchise networks get started?

Use the VSME Standard’s Basic Module to collect energy, workforce, and governance data. It aligns with CSRD expectations but remains proportionate for small teams and single-site operators.

Key Terms

• CSRD: Corporate Sustainability Reporting Directive (EU 2022/2464)
• ESRS: European Sustainability Reporting Standards — mandatory for large companies under CSRD
• VSME: Voluntary Sustainability Reporting Standard for SMEs (EFRAG, 2024)
• Franchisor: The company that owns the brand and controls franchise operations
• Franchisee: An independent business licensed to operate under a franchisor’s brand
• Governance: How a company structures decision-making, responsibilities, and oversight

Conclusion: Shared Brand, Shared Responsibility

In the CSRD era, sustainability reporting for franchises isn’t just a legal formality — it’s about trust and transparency across the network.

Franchisors should lead by providing clear templates and policies; franchisees should respond with accurate, consistent data. The result is stronger governance, better brand reputation, and smoother compliance — without overburdening local operators.