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By Artur Rogozik, partner, and Michał Frąckowiak, senior associate at TGC Corporate Lawyers



On 5 January 2023, a new EU Directive came into force, obliging businesses to report non-financial information. The reports will be prepared in accordance with ESRS standards and will include data to verify how a company is meeting its sustainability policy. They will also enable decision-making, including by potential and existing investors.

Over recent years, ESG (environmental, social and governance factors) has gained importance with the changes in global policy trends or the development of ecologically and socially responsible investment. The term ESG covers the non-financial assessment criteria for evaluating how a business implements sustainability policies. These have been influencing European and national legislation – as well as investment decisions – for several years.


Examples of environmental factors include issues such as the firm’s approach to climate change mitigation, the use of energy, water and other resources, pollution and waste issues, as well as the impact of business activities on biodiversity and the environment.

An example of social factors includes issues related to gender equality (equal treatment and equal pay for all regardless of gender) and working conditions (including wages, working time, safety, employment flexibility or employee health and safety).

Governance issues, in turn, include the role of governing and supervisory bodies in an entity’s implementation of sustainability policies. Governance factors also include issues such as business ethics and corporate culture, including anti-corruption, anti-bribery and whistleblower protection.

ESG assessment criteria are non-financial criteria for the preparation of non-financial reports that form part of corporate’ management reports. By definition, these criteria are also intended to have an impact on the financial performance of entities. A poor assessment of an entity in terms of ESG criteria can be associated – with the increasing importance of ESG and public awareness of sustainability – with loss of revenue, lower profitability, difficulties in raising finance, or image problems.

ESG reporting –  key legislation

The most important acts providing the legal framework for ESG reporting include the ones listed below:

    • Directive 2014/95/EU of the European Parliament and of the European Council of 22 October 2014 amending Directive 2013/34/EU as regards the disclosure of non-financial and diversity information by certain large entities and groups – the NFRD
      • This directive was implemented into the Polish legal system by introducing Article 49 (b) into the Accounting Act. According to this article, the non-financial reporting obligation for so-called public interest entities in Poland has existed since 2017 and covers approximately 300 entities.
    • Directive (EU) 2022/2464 of the European Parliament and of the European Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/W E and Directive 2013/34/EU with regard to corporate sustainability reporting – CSRD
      • EU Member States should introduce the provisions necessary to implement this directive by 6 July 2024 (there are no Polish implementing regulations yet). The aim of the directive is primarily to harmonise non-financial criteria (including the reporting format), to make them more precise and to increase the level of control over the reported data. The CSRD additionally widens, starting from 2024, the circle of entities obliged to prepare non-financial reports taking into account the unified ESG criteria.
      • Under the CSRD Article 5, starting from 1 January 2024, the ESG reporting obligation (2024 report) will apply to large entities that are public interest entities (and parent entities of a large group), employing more than 500 persons and exceeding one of the criteria: balance sheet total of at least €20m or net sales revenues of at least €40m.
      • In the following year, the 2025 report, the obligation to report will apply to other large entities (and large group parent companies) with at least 250 employees and meeting the same criteria in terms of balance sheet total or sales (balance sheet total of more than €20m or net revenues of more than €40m).
      • The 2026 reports will be extended to small and medium-sized listed companies with more than 10 employees and a balance sheet total of €350,000 or net sales revenue of: €700,000 as well as other specific entities listed in the Directive fulfilling certain criteria (credit institutions, internal insurance and reinsurance companies).
      • The coming years will bring a broadening of the circle of entities to include those outside the European Union meeting the criteria set out in the Directive.
    • European Commission Delegated Regulation of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council with regard to sustainability reporting standards (ESRS standards).
      • This regulation lays the foundation for the harmonisation of ESG reporting criteria. Entities obliged to report after the implementation of the CSRD will be obliged to report according to the ESRS standards introduced by the aforementioned Regulation.

European Reporting Standards (ESRS)

The ESRS standards were developed by the European Financial Reporting Advisory Group (EFRAG) to standardise non-financial reporting. They address twelve areas, including:

  • Five areas of environmental factors: climate change (ESRS E1), pollution (ESRS E2), water and marine resources (ESRS E3), biodiversity and ecosystems (ESRS E4), resource use and the circular economy (ESRS E5)
  • Four areas of social factors: own employees (ESRS S1), employees in the value chain (ESRS S2), affected communities (ESRS S3), consumers and end users (ESRS S4)
  • One area from the governance (corporate governance) criteria: conduct of business (ESRS G1). In the introductory section, the ESRS standards include general reporting requirements (ESRS 1) and a general disclosure section (ESRS 2)

ESRS standards meet the following requirements. They:

  • ensure the quality of information reported;
  • do not impose a disproportionate administrative burden on entities
  • determine what information entities are to disclose on specific environmental factors, social and human rights factors and governance factors
  • specify forward-looking information, retrospective information and qualitative and quantitative information, as appropriate, to be reported by entities
  • take into account the difficulties that entities may encounter when collecting information from participants throughout the relevant value chain
  • may not specify disclosable information that would require entities to obtain information from SMEs in their value chain beyond that disclosed in accordance with the Sustainability Reporting Standards for SMEs


An example from the ESRS E1 area is the need for an entity to disclose, in accordance with this standard, its transformation plan for climate change mitigation. The purpose of the requirement to disclose the transformation plan is to provide an understanding of the entity’s past, present and future mitigation activities to ensure that the entity’s strategy and business model take into account the transition to a sustainable economy and the reduction of global warming by 1.5C in line with the Paris Agreement and the goal of achieving climate neutrality.

Deadline for implementing ESG reporting

The entities obliged to report ESG should implement appropriate procedures as soon as possible to prepare for reporting according to the unified ESRS standards. Companies that will not be formally subject to this obligation, as they do not meet the thresholds of the CSRD, must take into account the fact that they will also need to prepare ESG reports. In their case, this necessity may be enforced by business partners or by parent companies within the group, or it may arise when applying for bank financing.