The Corporate Sustainability Reporting Directive (CSRD) came into effect in Poland in 2024. Under the directive, all large entities and small and medium-sized listed companies will include information on ESG (environmental, social, human rights, and corporate governance) in their business reports. This information is based on common criteria aligned with the European Union's climate goals and sustainable development.
The regulations will be implemented gradually, according to the following schedule:
- From 1 January 2024 – large public interest companies (over 500 employees) already covered by the Non-Financial Reporting Directive must make the report available by 2025;
- From 1 January 2025 – large companies that are not currently subject to the Non-Financial Reporting Directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets) must make the reports available by 2026;
- From 1 January 2026 – small or medium-sized enterprises (SMEs) and other listed companies must make their reports available by 2027. SMEs can opt out of reporting by 2028.
The directive provides exemptions from reporting at the individual and/or consolidated level for subsidiaries if they have a parent company that will include them in its reporting. The exception is that this exemption will not be available to large listed companies. It is worth noting that the conditions for benefiting from this exemption depend on whether the parent company is an EU or non-EU country.
ESG issues can be divided into three main areas: environment, society and corporate governance.
In this article, we'll explore the field of corporate governance. It refers to the system of internal practices, control mechanisms, and procedures that a company implements to manage its operations, make effective decisions, and comply with the law.
Corporate governance essentially refers to a company's internal oversight system. It consists of procedures, standards, and control mechanisms implemented to ensure effective management. Its primary goal is to foster an environment of trust, transparency, and accountability, which are crucial for ensuring company stability and encouraging long-term investment. Within the context of the broader scope of ESG aspects, corporate governance can be divided into two main areas: corporate governance and business ethics.
The area of corporate governance covers issues such as the company's ownership structure, the composition of supervisory bodies, their independence and remuneration, the approach to risk management and internal control, the rights of, for example, shareholders and communication with them.
Business ethics, on the other hand, refers to the values, standards, and principles a company adopts to manage its operations responsibly, in accordance with applicable laws, regulations, and common norms. This includes, among others, issues such as counteracting corruption and reporting irregularities.
In Poland, corporate governance is considered to be the set of Best Practices for Companies Listed on the Warsaw Stock Exchange. However, corporate governance does not apply exclusively to listed companies. It is characteristic of all companies and may also be relevant to partnerships, civil partnerships, and larger businesses.
Corporate governance is simply defined as the set of principles and norms that govern relations between individual bodies, as well as within those bodies. These principles apply to the broadly understood management of a company.
The manual published by the Warsaw Stock Exchange, "ESG Reporting Guidelines. A Guide for WSE-Listed Companies," as described above, defines corporate governance as a system of controls and procedures designed to ensure proper management of a company. The quality of corporate governance is evidenced by factors such as a professional management team, the structure of the management and supervisory boards, and a well-organized management system.
Assessment of corporate governance principles
When assessing the corporate governance principles applied, the following should be done:
- assessment of experience and qualifications, as well as independence and rotation of individual members of the body and the entire body,
- assessment of the existence of privileges of any of the shareholders, members of the supervisory board or management board, or a privileged position of any of the bodies in relation to the content of the company's articles of association or, if such have been adopted, regulations,
- assessing the correctness of implementation and practical application of anti-corruption policies, rules for reporting violations and other internal regulations.
Assessing corporate governance principles will be a significant challenge, as it will involve assessing whether the entity possesses the appropriate information and documentation, substantively assessing the content of these documents, and assessing the scope and accuracy of their application and compliance. Therefore, the assessment will require not only the company's documentation itself, but above all, assessing whether the guidelines contained in the documentation are effective and adhered to.
The implementation of the CSRD Directive and the new obligations for Polish companies from 2024 will undoubtedly cause many difficulties, but it should be remembered that the key issue of implementing ESG is the effective application of these principles in practice and the implementation of procedures in the company's daily life so that the enterprise is managed properly.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of January 31, 2024
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