You must have heard at least once the acronym ESG (Environmental, Social and Governance), which has started to appear more and more frequently in various media in recent years and is currently being introduced into Czech legislation. It is a methodological framework through which the impact of a business on the environment (E), employees and society (S), as well as topics related to governance (G) are monitored.
In November 2022, the Corporate Sustainability Reporting Directive (CSRD), an amendment to the existing rules for non-financial reporting (NFRD), was approved by the European Parliament and came into force in early 2023. On 31 July 2023, the EU Sustainability Reporting Standards - ESRS (European Sustainability Reporting Directive) were published by the European Commission, to which companies must adapt their ESG reporting. The standards came into force on 1 January 2024 and are divided into twelve categories, which include general reporting principles, cross-cutting disclosure requirements and ten thematic standards for disclosure on ESG topics.
As early as this year, 2024, some Czech companies will be producing sustainability reporting (ESG), or a report on sustainable development, which will include information on waste management, working conditions of employees, product safety or carbon footprints and emissions. In the first phase, this information will be reported by the largest corporations in the Czech Republic (such as ČEZ, O2, Česká spořitelna, Škoda Auto or Kofola), which have previously been obliged to carry out sustainability reporting on the basis of the NFRD. Furthermore, for 2025, also large companies exceeding 2 of the 3 criteria (assets over CZK 500 million, turnover over CZK 1 billion, number of employees over 250) in two consecutive periods. In the coming years, this mandatory reporting will be gradually rolled out to other companies. The Sustainability Report will be part of the Companies' Annual Report and its verification will be the sole responsibility of the auditors.
The Chamber of Auditors of the Czech Republic has already started to implement sustainability auditing in accordance with the amendment to the Auditors Act into its education system. Existing auditors can already start their ESG training now, participate in mandatory ESG-related training topics and then demonstrate their knowledge by means of audit tests until 31 December 2025. From 1 January 2026, the rules for sustainability reporting and auditing will be an integral part of the CRA examination system for new auditors, and qualification will be conditional on 8 months of supervised ESG experience.
