Corporate sustainability reporting brings new obligations

On 24 April 2024, the Slovak Parliament approved the expected amendment to the Act on Accounting, the biggest changes of which mainly relates to the transformation of Directive 2022/2464 of the European Parliament and of the Council concerning reporting of information on corporate sustainability (hereinafter referred to as the CSRD Directive) into a local law. This law comes into effect on 1 June 2024.

Among other things, the amendment responded to the impact of inflation in recent periods and transformed into a local law another EU directive regulating the size criteria of companies, thereby relieving some companies of the administrative burden related to the preparation of the Sustainability Report. The size criteria for the purposes of the Sustainability Report shall be applied for the first time for the financial year ending 31 December 2023.

Where the information will be reported

The Sustainability report will be part of a separately identified section of the annual report, which will also include the auditor's opinion on assurance on sustainability reporting.

What information will be reported

In the Sustainability Report, which includes the information necessary to understand the impact of the entity on sustainability aspects, companies must include, inter alia, plans and targets for limiting global warming and achieving the objective of climate neutrality by 2050. When preparing a Sustainability Report, companies must adhere to sustainability reporting standards, the so-called ESRS standards.

Reporting periods and first reporting companies

The first reporting period for the first companies will start on 1 January 2024 and thus the first Sustainability Report will be prepared for 2024 year. The first companies which are required to prepare the Sustainability Report include banks other than Národná banka Slovenska, reinsurance companies, insurance companies except health insurance companies, issuers of securities meeting size criteria and exceeding 500 employees.

The next, more numerically significant group of companies that will prepare the Sustainability Report will be entities meeting at least two of the size criteria.

1. the total amount of assets exceeded EUR 25 million;
2. net turnover exceeded EUR 50 million;
3. the average number of employees converted during the financial year exceeds 250

For these companies, the first reporting period will start on 1 January 2025 and they will therefore prepare the Sustainability Report for the year 2025 for the first time.

Gradually, the obligations to prepare a Sustainability Report will be extended to other companies. Small and non-complex companies will benefit from simplified sustainability reporting.

Exemption from the preparation of the Sustainability Report

Subsidiaries have the option to opt out and not prepare a Sustainability Report if they are included in the consolidated Sustainability Report and the information obligation in the financial statements of the non-reporting company is met.

Subsidiaries may also benefit from an exemption if the consolidated Sustainability Report is prepared by a parent company outside the European Union, provided that the Report is prepared in accordance with the Sustainability Directive and ESRS standards.

The exemption from the obligation to report sustainability individually may also be applied by a public-interest entity, except for issuers of securities meeting the size criteria.

Audit of Sustainability Report

An entity that is required to report sustainability information must ensure that its reporting is subject to assurance by an auditor, which may be different from the auditor auditing the entity, but this audit may only be carried out by an auditor who is authorized to audit sustainability information. The sustainability report shall be subject to assurance from the first reporting period of this information.

Therefore, companies need to start preparing well in advance to successfully manage initial reporting on time.