Sónia Pereira | Process and Sustainability Consultant

Companies face a growing need to demonstrate their commitment to sustainability, whether due to legal impositions or pressure from the value chain. In this context, DNSH Reports and Sustainability Reports emerge as crucial tools not only for reporting actions being included but also for the selection, evaluation, and merit of investment projects. But how do they differ, and what impact might they have on Business Investment projects and even access to Community Funds such as Portugal 2030?

// DNSH Report (Do No Significant Harm)

The principle of “do no significant harm” to the environment, better known as DNSH, is one of the criteria that must be ensured for any company or economic activity to be classified as environmentally sustainable according to the objectives defined in the European Green Taxonomy.

Thus, DNSH reports arise to ensure that an investment project does not cause significant harm to any of the six environmental objectives established in Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council, of 18 June. These objectives are:

1. Climate change mitigation: Avoid significant greenhouse gas (GHG) emissions.
2. Climate change adaptation: Prevent negative impacts of the current and future climate on activities, people, nature, and assets.
3. The sustainable use and protection of water and marine resources: Ensure the good ecological status of water bodies and marine waters.
4. The transition to a circular economy: Promote efficiency in the use of materials and natural resources, reducing waste production and disposal.
5. Pollution prevention and control: Avoid significant increases in pollutants in the air, water, or soil.
6. The protection and restoration of biodiversity and ecosystems: Safeguard the resilience of ecosystems and the conservation status of habitats and species.

This report is mandatory within the scope of European funds, as acceptance of the DNSH principle is a condition for access to European financing.

Therefore, all projects intending to access European funding via Portugal 2030 must prepare a DNSH Report, ensuring that the investment respects the mentioned environmental objectives, thus promoting sustainable investment. Companies that violate at least one of the objectives will be obliged to return the funding received.

// Sustainability Report

The Sustainability Report demonstrates how a company addresses environmental, social, and governance (ESG) topics. According to Directive (EU) 2022/2464 (CSRD), of 14 December, this report is mandatory for large companies that meet at least two of the following criteria:

• More than 250 employees
• Turnover exceeding 40 million euros
• Balance sheet total exceeding 20 million euros

SMEs listed on regulated markets in the European Union are also subject to this obligation and, although it is not mandatory for other SMEs, there is a growing requirement for them to demonstrate sustainable practices by their value chain, which is obliged to report within the deadlines now updated by Directive (EU) 2025/794 of the European Parliament and of the Council, of 14 April 2025.

Similar to the Annual Report, the Sustainability Report is updated annually, addressing topics such as climate change, pollution, resource use, circular economy, working conditions, human rights, consumers, and business conduct. This report is eligible under the Incentive Systems for Qualification and Internationalisation, contributing positively to the merit of the projects.

In the context of the Support Line for Tourism Supply Qualification 2024 (LAQO), adherence to the Tourism 360º Companies Programme is an access condition, which requires filling out a platform with environmental, social, and governance information. Companies that demonstrate progress in performance metrics reported in the previous year's report benefit from an additional 10 percentage points on the premium.

To assist companies covered by the CSRD in sustainability reporting, there are Sustainability Reporting Standards, included in Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023, which define all topics that are mandatory to include in the Sustainability Report.

To assist SMEs not covered by the CSRD in sustainability reporting, the VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) was launched in December 2024, adjusting the Sustainability topics to report to the reality and size of these companies.

// Differences and Applications in Funding Projects

Although both reports address sustainability, they differ in their focus and application:

• DNSH Report: Focuses on ensuring that projects do not cause significant harm to environmental objectives, being essential for eligibility in incentive systems such as Productive Innovation.
• Sustainability Report: Offers a comprehensive view of the company's ESG practices, being mandatory for certain companies and valued in Qualification and Internationalisation incentive systems.

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Last update: 21 May 2025