The deadline for implementing the CSRD directive in Poland passed on July 6th this year. “However, the bill implementing the directive from April of this year is still under negotiation and it is not expected to be passed quickly. Meanwhile, the reporting obligations that the directive imposes are already raising questions about how they will function in practice,” says Katarzyna Jaroszyńska-Lewandowska, Senior Associate in Mergers and Acquisitions Practice and Capital Markets Law at the Warsaw office of Wolf Theiss.
The European Parliament and Council Directive (EU) 2022/2464 of December 14, 2022, amending Regulation (EU) No 537/2014 and Directives 2004/109/EC, 2006/43/EC, and 2013/34/EU with regard to corporate sustainability reporting (“CSRD Directive”), is part of the EU’s project of actions towards a greener economy and is one of the means of ecological transformation. The aim of the European Green Deal, as stated in the justification for the CSRD Directive, is, among others, to transform the EU into a “modern, resource-efficient and competitive economy” and to “decouple economic growth from the use of natural resources and ensure that all EU regions and citizens participate in a socially fair transformation toward a sustainable economic system.”
“For companies operating within the EU, this means a series of changes and requirements that, in the end, are designed to enable the achievement of climate neutrality by 2050”, emphasizes Julia Dolna, Associate at Wolf Theiss.
New Reporting
The draft amendment introduces an obligation to so-called ‘sustainability reporting’ to the Polish legal order. The term “sustainability issues” is based on the already functioning “sustainability factors”, i.e., environmental, social and employee matters, human rights, and anti-corruption and bribery, and in the CSRD Directive, it has been extended to include “environmental factors, social and human rights factors and social order factors.”
“Sustainability reporting will include a description of the company’s business model and plans, taking into account resilience to sustainability risks and opportunities arising for the company from this aspect of the business. The report should also include the company’s impact on sustainable development and how the strategy discussed has been implemented. The long-term EU objectives have not been forgotten – the information provided by the companies will have to show how their strategy takes into account the targeted transition to a sustainable economy, limiting global warming to 1.5°C and achieving climate neutrality by 2050,” says Katarzyna Jaroszyńska-Lewandowska from Wolf Theiss.
Companies will also be required to demonstrate consideration of problematic issues in their internal corporate governance, including showcasing internal regulations adopted in relation to sustainability issues, linked bonus systems, and the role that managers and members of supervisory bodies play in these aims.
The information will be presented in a separate part of the entity’s activity report from a short, medium and long-term perspective. The data should also include the so-called double materiality perspective, i.e., taking into account not only information about the impact of sustainability requirements on the company’s situation and strategy, but also the impact of the company’s activities on sustainability issues. The CSRD Directive introduces mandatory and common reporting standards (European Sustainability Reporting Standards, also known as ESRS), according to which sustainability reports are to be prepared.
The activity report, along with sustainability information, must be approved within 6 months from the balance sheet date (i.e., for companies whose financial year coincides with the calendar year – by June 30 of the following year), and then filed in the court register normally within 15 days of approval. Importantly, the bill implementing the CSRD Directive stipulates that activity reports should also be posted on the given entity’s website.
“A novelty resulting from the CSRD Directive, which is also included in the draft bill, is the need for attestation of sustainability reporting by certified auditors and the preparation of attestation reports, which will also be filed in the court register,” adds Julia Dolna.
Who and when will need to provide sustainability reporting?
According to the draft bill implementing the CSRD directive, the obligations related to sustainability reporting will primarily concern large entities, i.e., those that exceeded at least two of the following values: PLN 110 million for the total balance sheet assets at the end of the financial year, PLN 220 million for net sales revenues, or 250 average annual full-time staffing levels. Additionally, they will include the entities dominating large groups and small and medium-sized entities issuing securities admitted to trading on one of the EEA regulated markets. Small entities are those that are not micro-entities and have not exceeded at least two of the following values: PLN 33 million of total balance sheet assets at the end of the financial year, PLN 66 million of net sales revenue, and 50 average annual full-time staffing levels, and medium-sized entities are those that are not small and micro, and have not exceeded at least two of the values classifying them as large entities.
“The first ones to prepare the sustainability reporting will be those entities that have been reporting so far based on the NFRD directive regarding non-financial reporting. These entities will have to include sustainability information in the activity reports for 2024,” specifies Katarzyna Jaroszyńska-Lewandowska.
Meanwhile, the large entities and entities dominating a large group will have to include sustainability information beginning from the activity reports for 2025. As for small and medium-sized entities issuing securities – starting from the activity reports for 2026. It is worth mentioning, however, that for small and medium-sized issuers there is a possibility of exemption from the reporting obligation for the years 2026 and 2027, provided that the reasons for not preparing sustainability reporting are presented.
Why do we need this reporting?
The CSRD Directive aims to provide potential investors with access to information about the entity’s attitude towards sustainable development. In this way, individuals and entities interested in using their resources sustainably will be able to easily identify companies that share their ecological values.
It is also worth mentioning the sanctions provided for in the draft bill implementing the CSRD Directive.
“The directive itself does not contain provisions on penalties for non-compliance with sustainability reporting obligations, leaving this to the discretion of the member states. The draft of the Polish act anticipates a change to Article 79 of the Accounting Act, which typifies crimes relating to financial reporting, expanding this catalog to include crimes related to sustainability reporting,” points out Julia Dolna.
The delay in implementing the CSRD Directive in practice will mean that companies, which will report first, will have less time to prepare for the new obligations. It is worth, therefore, for these entities to undertake activities related to sustainability reporting now, based on ESRSs and the current content of the draft bill. It should be emphasized that ultimately market participants will need to meet the new requirements not only in terms of reporting but also adequately prepare internally for reporting through the inclusion in their corporate governance of mechanisms consistent with sustainability reporting.
Source: https://ceo.com.pl/polska-opoznia-wdrozenie-dyrektywy-csrd-spolki-czekaja-na-przepisy-34090
