Sustainability reporting (ESG)

Although the "green" issue is mentioned more and more often, the CSRD issue is only partially related to the "Green Deal" policy, which aims to be climate neutral by 2050. The requirements of the European Sustainability Standards (ESRS) are regulated by the Cross-cutting ESRS 1 and ESRS2 Standards, which can be divided into the three areas listed below, namely environmental, social, and business (ESG - Environmental, Social and Governance) areas, which are further divided into individual requirements:

Environmental Standards

· ESRS E1: Climate change

· ESRS E2: Pollution

· ESRS E3: Water and marine resources

· ESRS E4: Biodiversity and ecosystems

· ESRS E5: Resource use and circular economy

Social standards

· ESRS S1: Own workforce

· ESRS S2: Workers in the value chain

· ESRS S3: Affected communities

· ESRS S4: Consumer and end-users

Governance Standards

· ESRS G1: Business conduct

The essence of the technical creening criteria of the EU legislation regarding sustainability is the obligation to contribute to one of the sub-goals (ESRS E1 – E5), i.e. to mitigate the impact of the organization's activities on the environment either by reducing emissions of greenhouse gases causing global warming, or reducing the production of substances causing environmental pollution, damaging water resources, biodiversity and ecosystems, possibly improving the organization's involvement in the circular economy by saving precious primary resources. Another requirement is the prohibition to significantly damage the aforementioned natural resources and the environment and to comply with environmental protection measures.

The new obligation will gradually apply to all non-listed groups, large companies and listed medium and small companies, where the decisive criteria are as follows:

• 250 employees average

• 40 mil. EUR turnover

• 20 mil. EUR total assets

Exceeding two of these criteria characterizes a large company, the others are classified as medium, small and micro-enterprises where the decisive criteria are as follows:

The timetable for the involvement of other organizations to those already subject to the reporting obligation is given below:

• 2024 (report published in 2025) organizations already reporting under the original NFRD directive

• 2025 (report published in 2026) other large unlisted companies

• 2026 (report published in 2027) listed small and medium enterprises

• 2028 (report published in 2029) parent companies of groups based outside the EU but significantly active on the European market.

The ESRS E1 climate change target is related to the 1.5 °C model and refers to the transition to a climate-neutral economy with the aim of limiting the temperature increase to 1.5 °C compared to pre-industrial levels and is based on the Paris Agreement. Regulation EU 2020/852 of the EP and of the Council on the establishment of a framework for the facilitation of sustainable investments thus characterizes economic activities contributing to the mitigation of climate change, which is the first of the environmental objectives.

Since carbon dioxide emissions have the greatest effect on climate change, it is necessary to compile an greenhouse gases (GHG) inventory according to the exact requirements of technical criteria and to determine gradual goals and steps to reduce these emissions. In general, meeting ESRS 1 standard includes:

• GHG inventory

• Setting GHG reduction potential

• Setting the organization's decarbonization roadmaps and targets

• Transformation of business strategy

• Implementation of an environmentally friendly strategy.