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mailingLeitner Slovakia – New sustainability reporting obligations

Newsletter – 09.07.2024

New sustainability reporting obligations

In April, an important and long-awaited amendment to the Accounting Act was approved in the 12th session of Parliament, which, among other things, adopted EU sustainability reporting requirements (transposition of the CSRD – Corporate Sustainability Reporting Directive). The changes that companies will undergo aim to improve the quality, reliability as well as comparability of sustainability information reported. Based on this reporting, users (e.g. investors, current and future business partners) will be able to better assess the risks and opportunities of a company’s transition to a “green economy”. As the amendment is wide-ranging, let us bring you up to date on its most important points.

Although at first glance it might seem that the whole issue will concern only large companies, the opposite is true. In order to comply with the reporting requirements on sustainability information, large companies will need data from their subcontractors, who must prepare for the process of data collection or reporting as responsibly as large companies.

Sustainability information includes in particular:

  • A brief description of the business model including resilience, opportunities and plans related to sustainability aspects in accordance with e.g. Greendeal – limiting global warming, achieving climate neutrality
  • a description of the implementation of the strategy regarding the sustainability aspect
  • a description of the targets, including deadlines for reducing greenhouse gas emissions, a description of the progress made by the entity in achieving those targets, and a statement of whether the targets are based on scientific evidence
  • a description of the roles of the administrative, management and supervisory bodies regarding relation to sustainability aspects
  • information on the incentives offered by the entity to members of the administrative, management and supervisory bodies
  • a description of the due diligence process, a description of the main actual or potential adverse impacts related to the entity’s own activities and to its value chain, including its products, services, business relationships and supply chain, and a description of the measures taken to identify and monitor these impacts
  • a description of the main risks to the entity related to sustainability aspects, including a description of the entity’s main dependencies on sustainability aspects and how the entity manages these risks
  •  indicators relevant to the information disclosed.

The company is required to distinguish between short-, medium- and long-term information reported.

The amendment to the Accounting Act also introduces a change in the size criteria for the classification of entities. The new thresholds for classifying companies into size categories – as micro, small or large entities are as follows:

  • micro-entity: assets up to EUR 450 thousand, net turnover up to EUR 900 thousand, 10 employees (formerly assets EUR 350 thousand, turnover EUR 700 thousand)
  •  small entity: assets exceeding EUR 450 thousand, but less than EUR 5 million, net turnover exceeding EUR 900 thousand, but less than EUR 10 million, average number of employees more than 10 but less than 50 (originally the upper limits for assets were EUR 4 million, turnover EUR 8 million.)
  • large entity: assets exceeding EUR 5 million, net turnover exceeding than EUR 10 million, more than 50 employees (originally from EUR 4 million for assets and from EUR 8 million for turnover).

Reporting sustainability information

The amendments to the Accounting Act are extensive and introduce new obligations that will affect all companies (either directly as an obligation to report sustainability information or indirectly as part of the supply chain). If you therefore have any questions or uncertainties, our experts are on hand to help.

The approved amendments modify the company’s obligations in relation to sustainability information to be reported by selected entities in their annual report. The annual reports will be produced in a prescribed electronic format and must contain the information required by the EU Regulation (EU Taxonomy).

If a company is required to include sustainability information in its annual report, this information must be verified by an auditor who is specifically licensed to verify such information („ESG licence“). This may be the same auditor who also verifies the financial information or another auditor who only verifies the part relating to sustainability information. The verification must be carried out by a licensed auditor within one year after the end of the period to which it relates. The company will be obliged to keep the assurance report for 10 years following the year to which the verification relates.

Who will be obliged to report sustainability information?

The amendment has set out a timetable for the entities that will be subject to the new information reporting:

  • The obligation to disclose information already for the accounting period starting on 1 January 2024 applies to banks, insurance companies (except health insurance companies), reinsurance companies and trading companies that have issued securities admitted to trading on a regulated market within the EU. These entities are required to report sustainability information if they have exceeded two of the following three criteria in the two immediately preceding accounting periods: assets of EUR 25 million, net turnover of EUR 50 million and 250 employees. However, under a transitional provision to the amendment, the obligation to report in 2024 has been modified so that only entities with more than 500 employees are required to report in 2024.
  •  Companies that exceed two of the three criteria mentioned above (assets exceeding EUR 25 million, net turnover of EUR 50 million, 250 employees) for two accounting periods and have not issued securities will be obliged to report sustainability information in their annual report for the first time for the accounting period starting from 1 January 2025.
  •  From 2026, mandatory reporting will apply to listed SMEs, less complex credit institutions and captive reinsurance companies.

All information must be reported in line with the European Sustainability Reporting Standards (ESRS).

It is emphasised that information is reported not only on the company’s own activities but also on its value chain. Companies will thus have to collect selected information from their suppliers/customers and incorporate this in their reporting.

Exemption from the obligation

Attention should be drawn to the fact that Slovak subsidiaries will be able to benefit from an exemption from reporting sustainability information if their parent company discloses this information in its consolidated annual report. The Slovak subsidiary will have to include in its annual report a link to the website where the consolidated annual report of the parent company will be stored.

Fines and extension of the time limit for their imposition

In view of the new obligations and deadlines, the list of administrative offences will be extended by the amendment. The tax authority may impose a fine of up to 2 % of the total value of the company’s assets, up to a maximum of EUR 1 million, for failure to comply with the obligations related to the reporting of sustainability information.

The amendment will also significantly change the period during which the tax authority can impose fines on companies. This period will be extended from five to six years from the end of the accounting period in which the administrative offence was committed or to which the compliance relates.

Voluntary reporting as an advantage

Although the obligation to report sustainability information and address ESG issues applies only to large companies, voluntary reporting is more than welcome. The advantage for SMEs is that there is sufficient space to collect data, set up data collection systems, optimise them and assess risks and opportunities early to prepare for possible changes in their business. Last but not least, voluntary reporting provides businesses with a competitive advantage that may influence the decision of large enterprises to cooperate with smaller enterprises in the future. Equally, banks or potential investors will look at the extent to which companies are involved in the green economy and may prefer prepared companies to those that are not interested in ESG.

Our experts continue to educate themselves in this area and are available to bring you up-to-date with relevant information. Learn more about sustainability from our articles, joint meetings or our upcoming ESG Academy, which will help you grasp the topic of sustainability with practical examples and ideas.


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