ESG reporting obligations for businesses in the European Union

Reporting Obligations – Who Does It Apply To?

• Large Entities

The reporting obligation applies to all large entities, defined on the basis of balance sheet total, net sales revenue and the average number of employees during the financial year. These will therefore be entities which, as at the balance sheet date, exceed at least two of the following three criteria:

1. the balance sheet total is at least EUR 25,000,000;
2. net sales revenue is at least EUR 50,000,000; and

• the average number of employees during the financial year is 250.
• Public Interest Entities

This requirement also applies to public-interest entities, such as credit institutions and insurance undertakings, regardless of their size.

• Exemptions

Micro-entities and subsidiaries are exempt from the reporting obligation if their parent entity meets the reporting requirements.

• Small and Medium-sized Entities

Small and medium-sized entities whose securities are admitted to trading on a regulated market must commence reporting from the financial year beginning 1 January 2026, with the option to opt out of the requirements during a transitional period.

Obligations under the Directive

Disclosure of Sustainability Information

Companies are required to disclose material, comparable and reliable information on sustainability. This information must be publicly available and cover all material aspects of the company’s operations relating to ESG, i.e. environmental, social and human rights, as well as corporate governance.

Preparation of the Management Report

The management report must be prepared in accordance with specific requirements and contain the specifications adopted on the basis of applicable regulations.

Preparation of the Management Report

The management report is a key document which must be prepared in accordance with specific requirements and contain specifications adopted on the basis of applicable regulations. Here are the most important elements of this report:

Key Elements of the Management Report

• Business Model and Business Strategy
  • Description of the business model: An explanation of how the entity operates and generates value, taking into account aspects of sustainable development.
  • Business Strategy: Plans and actions aimed at ensuring long-term sustainability, including the integration of sustainability goals.
• Resilience to Risks
  • Assessment of sustainability-related risks: What ESG-related risks may affect the entity and how they are managed.
  • Climate change adaptation: Information on actions aimed at adapting to changing climate conditions.
• Sustainability Targets
  • Targets and progress: Established sustainability targets, including greenhouse gas emission reduction targets, and progress towards achieving them.
  • Financial and investment plans: Investments and financial activities supporting sustainable development goals.
• Stakeholder Engagement
  • Stakeholder dialogue: How the entity engages in dialogue with various stakeholder groups, including employees, customers, suppliers and local communities.
  • Impact on stakeholders: The impact of the organisation’s activities on various stakeholder groups.
• Sustainability Policies
  • Policies and procedures: A description of the policies and procedures implemented to manage sustainability issues.
  • Risk management: Internal control and risk management systems in the context of sustainability.
• Incentive and Control Systems
  • Incentive systems: Information on incentive systems for members of management and supervisory bodies regarding the achievement of sustainability objectives.

Electronic Reporting Format

Parent entities must prepare their consolidated management reports in electronic format and label their sustainability reporting.

Detailed Information in Reports

Entities must disclose information regarding their business strategy, the resilience of their business model to sustainability-related risks, and plans for the transition to a sustainable economy.

A description of the diversity policy applied to the entity’s governing bodies, with regard to gender and other aspects such as age, disability, education and professional experience.

Members of the entity’s administrative, management and supervisory bodies are responsible for preparing and publishing documents in accordance with the requirements of the Directive and international accounting standards.

Author

Agata Bączkowska

Adwokat, Senior Associate

She specializes in commercial and civil law. She has gained experience in Warsaw law firms providing comprehensive services to companies and a law firm specializing in labor law. She has extensive experience in corporate consulting. She has participated in mergers and acquisitions at every stage of the process, from pre-transaction legal examination to fulfillment of regulatory requirements related to the transformation process. She prepares and reviews contracts entered into by clients and advises in cases of…

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