CSRD Reporting for Franchises: Who Reports What?

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

The short answer: since the Omnibus I directive (in force 18 March 2026), CSRD applies only to companies with more than 1,000 employees and net turnover above €450 million. A large franchisor group may cross that line; an individual franchisee almost never does. What a franchisee faces instead is the request that trickles down: the in-scope franchisor, or its banks and large customers, asking for sustainability data. If you are unsure which side you sit on, see Is My Company Too Small for CSRD? This guide covers both roles.

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 covered by CSRD unless they meet the scope thresholds themselves: more than 1,000 employees and net turnover above €450 million. Scope is assessed per legal undertaking or group, so a large franchisor group can be in scope while individual franchisees are not.

However, franchisees may still be asked to provide sustainability data to their franchisor if it is requested for group-level or value-chain reporting.

2. When Franchisors Must Consolidate Data

If a franchisor that is in scope 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 (EFRAG’s voluntary reporting framework for non-listed SMEs) to provide this data efficiently and consistently. The VSME is not a CSRD filing; it is a voluntary template that helps information fit the format franchisors expect, without unnecessary complexity. The Basic Module covers the data points above.

There is also a legal ceiling on what can be asked. Since Omnibus I, an in-scope company cannot demand more sustainability data for CSRD purposes from a value-chain partner with fewer than 1,000 employees than the VSME covers. One VSME report can therefore answer the franchisor, the bank, and any large customer from the same set of answers; see how one VSME report answers every ESG request.

4. Governance Matters: Defining Roles Clearly

Governance is often where franchise reporting fails. If reporting roles are not 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 rather than a last-minute scramble.

5. How to Avoid Duplication and Overlap

Franchises often worry about double counting, for example if both the franchisor’s report and a franchisee’s own VSME report cover the same store. To avoid this:

• The franchisor consolidates only the stores it owns or directly operates; franchised outlets appear in its value-chain disclosures instead.
• Franchisees do not file anything under CSRD. They share data upstream, and any VSME report they produce is their own voluntary document.
• Both sides should record which sites sit inside which boundary, so numbers passed upstream are not counted twice.

This clarity protects the franchisor during external assurance (audit) and saves the franchisee from answering the same question twice in different formats.

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?

A non-EU parent comes into scope where it generates more than €450 million in EU net turnover and has an EU subsidiary or branch above the relevant size threshold (a branch above €200 million in turnover). Reporting for these groups is expected from around 2029 (covering financial year 2028). In that case, EU-based franchisees in the network may be asked to contribute local data.

Can one report cover all franchise locations?

Only if the franchisor owns and consolidates those operations. Independently owned outlets sit in the franchisor’s value chain instead, so their data appears through value-chain disclosures rather than consolidation. A franchisee that wants its own document can produce a voluntary VSME report, even when following a shared template or brand-wide framework.

How can a small franchisee get started?

Use the VSME Standard’s Basic Module to collect energy, workforce, and governance data. It matches what franchisors and banks can ask for under the value-chain cap, and it remains proportionate for small teams and single-site operators. See The VSME Basic Module Explained for what it covers.

Key Terms

• CSRD: Corporate Sustainability Reporting Directive (EU 2022/2464)
• ESRS: European Sustainability Reporting Standards, the standards used by companies in CSRD scope (ESRS 2 applies to all reporters, with topical standards reported where material)
• 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 is about trust and transparency across the network as much as legal compliance.

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

For franchisees starting from zero, free VSME report tools now generate a finished Basic Module report at no cost, which covers most of what a franchisor or bank can ask for.