Sustainability reporting: The Polish proposal for implementing the CSRD
A bill to implement the Corporate Sustainability Reporting Directive in Poland was published on 19 April 2024. The main implementation measure is the proposed new chapter 6c of the Accounting Act, entitled “Sustainability Reporting.”
Revised set of entities required to report
In view of the high inflation in recent years in the European Union, Commission Delegated Directive (EU) 2023/2775 of 17 October 2023 amending Directive 2013/34/EU as regards the adjustments of the size criteria for micro, small, medium-sized and large undertakings or groups raised the financial thresholds defining the different groups of undertakings subject to sustainability reporting by 25%. This has a direct bearing on which entities are required to prepare sustainability reporting. Some undertakings that would have been subject to this reporting obligation under the earlier financial thresholds will be excluded from this obligation altogether, or will move to a lower category of undertakings where they can benefit from simplifications or exemptions.
Starting in 2025 (report in 2026), the sustainability reporting obligation will be extended to large undertakings or dominant entities of a large group exceeding two or more of the following three thresholds:
- Total assets on the balance sheet at the end of the financial year of EUR 25 million (PLN 110 million)
- Net sales revenue of EUR 50 million (PLN 220 million)
- Average annual employment (full-time equivalent) of 250.
These are consolidated figures for the group (after eliminating intra-group cashflows; the unconsolidated figure for the balance sheet is PLN 132 million and for net sales revenue PLN 264 million).
Then, for 2026 (report in 2027), small and medium-sized public-interest entities will be required to prepare sustainability reporting. (A medium-sized entity is defined as exceeding two of three criteria: total assets of the balance sheet at the end of the financial year of PLN 33 million; net sales revenue of PLN 66 million; average annual FTE employment of 50. A small entity is one that is not a micro entity and at the same time does not exceed at least two of these three criteria.)
Schedule of reporting obligations
For 2024 (current year, report in 2025), sustainability reporting will be prepared by large public-interest entities with more than 500 employees, but also by large capital groups with more than 500 employees headed by public-interest entities. (In practice, most of these entities are already reporting based on existing regulations under the Nonfinancial Disclosure Reporting Directive.)
Another group which will be required to report for 2025 for the first time will be the remaining large entities and dominant entities of a large group.
Then, for 2026, small and medium-sized entities that are issuers of securities in the European Economic Area will report. Note! For 2026 and 2027, small and medium-sized issuers could claim a temporary exemption from the unconsolidated reporting requirement, upon providing the grounds for this decision (Art. 10(6) of the amending act).
Non-EU entities which are the ultimate parent of a group with EU subsidiaries or branches will have an indirect obligation to prepare consolidated sustainability reporting for years beginning 1 January 2028 (report in 2029) at the group level, if:
- They have a subsidiary or branch in the EU that is large subsidiary or a small or medium-sized public-interest subsidiary or branch, with net turnover of more than EUR 40 million in the previous financial year, or
- At the group or unconsolidated level, they generate turnover in the EU exceeding EUR 150 million for each of the preceding two consecutive financial years.
Publication obligations (and liability in this regard) have been imposed on EU subsidiaries or branches of such an ultimate parent entity with its registered office outside the EU.
Framework for reporting
Sustainability reporting is part of an entity’s (or group’s) management report, and thus will not be a separate document.
In sustainability reporting, companies should provide the information necessary to understand the entity’s impact on sustainability issues and the impact of sustainability issues on the entity’s performance and position—a notion known as “double materiality.” The Polish bill only sets the framework for the information subject to mandatory disclosure, reflecting the wording of Art. 19a and 29 CSRD.
Ultimately, sustainability reporting will present information in the short, medium and long term.
The proposal provides an exemption from providing value chain information during the first three financial years of preparation of sustainability reporting (Art. 10(7) of the amending act).
Exclusions and exemptions
Following the wording of the CSRD, the Polish proposal provides that a subsidiary may claim exemption from sustainability reporting if it is covered by the consolidated reporting by the group, headed by a parent entity from an EEA or third country.
The dominant company of the group will also be able to benefit from such an exemption if both it and its subsidiaries are covered by the consolidated reporting of the group of a higher-level parent from the EEA or a third country.
In each case, the possibility of claiming this exemption is subject to fulfilment of certain additional conditions set forth in the proposal.
A parent preparing consolidated reporting for the group is exempt from preparing its own unconsolidated reporting.
The exemption will not apply to large entities that are issuers of securities in the EEA.
The scope of information presented
Sustainability reporting will be prepared based on the European Sustainability Reporting Standards (ESRS). To determine the scope of reported data, the reporting company will have to conduct a double materiality assessment.
In the case of consolidated group reporting, the parent will have to disclose information on its subsidiaries subject to consolidated sustainability reporting which have exercised the option of exemption from unconsolidated reporting (or consolidated reporting by a lower-level parent in a large group). If there are material differences between the risks or impact of the group and the risks or impact of an individual entity covered by consolidated reporting, the parent will have to present the impact or risks specific to a given subsidiary.
Weronika Nalbert, adwokat, Julia Dębowska, Competition & Consumer Protection practice, ESG & Sustainability Team, Wardyński & Partners
