Today, we've prepared the final article in our series on ESG in real estate, in which we'd like to introduce you to the topic of reporting. This is an issue that should stem from implementing the actions and policies we discussed in previous articles, but will be subject to review, for example, when seeking financing. Therefore, it's crucial to analyze this topic for every company, not just those required to report.
Returning to the beginning, it is worth recalling that the Corporate Sustainability Reporting Directive (CSRD) was published on December 16, 2022, replacing the Non-Financial Reporting Directive (NFRD). The new directive will gradually cover additional businesses.
Initially – in 2024 – reporting obligations covered the largest entities such as: listed companies, banks, insurance companies, investment funds – i.e. public interest entities, as well as parent entities of the so-called "large group" that had more than 500 employees on the balance sheet date and met at least one of two financial criteria: the company's annual turnover exceeded over EUR 50 million in a given year or the company had assets (balance sheet total) worth over EUR 25 million.
From the beginning of 2025, the reporting obligation applies to all companies that meet at least two of the following three criteria: they employ more than 250 employees, their balance sheet total for the given financial year exceeds €25 million, or they generate net revenues exceeding €50 million. In 2025, the reporting obligation will also apply to smaller companies, as the requirement regarding the number of employees will change, reducing the number of employees from 500 to 250.
In 2026, ESG reporting will also cover listed small and medium-sized enterprises that meet two of the following three criteria on their balance sheet date: a balance sheet total of EUR 450,000, net sales revenue of EUR 900,000, and employ at least 10 people.
It should be emphasized that the provisions of the CSRD Directive do not cover so-called micro-enterprises, i.e. companies employing fewer than 10 employees.
Regarding the content of an ESG report, it should be developed based on unified standards specifying how companies should collect data documenting their impact on the environment, society, and organizational governance. The most common is the European Sustainability Reporting Standards (ESRS).
When preparing an ESG report, a business should first identify the most significant areas of its operations in terms of ESG indicators, including primarily verifying carbon dioxide emissions, water consumption, waste management, etc., and based on this, gather the necessary data about the organization. Next, the business should compare the collected data with the recommended ESG standards and, based on these guidelines, develop a strategy for further action. The final step is preparing and publishing the report. Our internal advisors can assist with this, and we encourage you to contact our firm.
Without a doubt, all entities, even those not subject to ESG obligations, will experience the impact of ESG on their business operations. Regardless of their size, businesses can expect that customers will increasingly emphasize socially and environmentally responsible business operations, including adherence to ESG standards throughout the supply chain.
Moreover, financing institutions will increasingly be guided by ESG requirements when assessing risk during the verification process for granting financing. For example, a Sustainability-Linked Loan is a loan for general or investment purposes in which the loan margin is linked to the achievement of the company's sustainable development goals in the areas of environmental, social, and corporate governance.
Moreover, investors will increasingly direct their funds towards companies demonstrating good ESG practices. Therefore, entrepreneurs who do not engage in these initiatives may find it difficult to raise capital.
In summary, we believe that in the near future, failing to adhere to ESG principles will simply no longer be profitable for businesses, and everyone will be forced to implement them. Therefore, if you would like more information about ESG today, please contact us.
The authors of the above text are our advisors from ESG Polska sp. z o. o.: attorney-at-law Kamil Dąbrowski and Michał Dzioba.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of January 20, 2025
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