{"id":529,"date":"2024-01-29T11:04:00","date_gmt":"2024-01-29T10:04:00","guid":{"rendered":"https:\/\/vraneseviclaw.com\/?p=529"},"modified":"2024-01-29T11:06:00","modified_gmt":"2024-01-29T10:06:00","slug":"esg-standards-in-2024-whats-happening","status":"publish","type":"post","link":"https:\/\/vraneseviclaw.com\/en\/esg-standards-in-2024-whats-happening\/","title":{"rendered":"ESG Standards in 2024 – What’s Happening?\u00a0"},"content":{"rendered":"

In the last few days, there have been frequent reports that companies in Serbia are required, as of February 1st, to report on non-financial data, in accordance with European Union directives, related to corporate governance, social responsibility, and environmental protection.<\/span>\u00a0<\/span><\/p>\n

Non-financial reporting is nothing new in the Republic of Serbia; amendments to the Accounting Law that came into force at the beginning of 2020 prescribe the obligation of non-financial reporting for large legal entities that are public interest entities and whose balance sheet date exceeds the criterion of an average number of 500 employees during the business year.<\/span>\u00a0<\/span><\/p>\n

By the opinion of the Ministry of Finance No. 011-00-00690\/2020 dated November 2, 2020, this obligation applies to the category of large and medium-sized legal entities. All public companies, or companies preparing to become public, have the obligation to prepare corporate governance reports – the legislator’s intention was to align this law with relevant EU regulations.<\/span>\u00a0<\/span><\/p>\n

Considering the new EU directives, the situation is changing, and companies will have to take into account ESG standards.<\/span>\u00a0<\/span><\/p>\n

What<\/span> are ESG <\/span>standards<\/span> and<\/span> ESG <\/span>reporting<\/span>?<\/span><\/span>\u00a0<\/span><\/h2>\n

ESG standards are a collective term for the impact of business on the environment, social environment, and corporate governance.<\/span>\u00a0<\/span><\/p>\n

The ESG concept consists of 3 components – Environmental, Social, and Governance<\/em>. The first element <\/span>(Environmental)<\/span><\/i> relates to the environment. The environment encompasses several parts, such as the use of natural resources, waste management, climate change, environmental pollution, and investment in renewable and green energy.<\/span>\u00a0<\/span><\/p>\n

The second component (<\/span>Social<\/span><\/i>) relates to the impact of business on the social environment and therefore includes elements such as occupational health and safety, product quality, supply chains, human resource development, data protection, and socially responsible behavior.<\/span>\u00a0<\/span><\/p>\n

The third component (<\/span>Governance<\/span><\/i>) encompasses corporate governance, namely transparency, compliance with competition rules in the market, as well as the business culture of the legal entity.<\/span>\u00a0<\/span><\/p>\n

ESG reporting involves the transparent presentation of data related to these three components and qualitative measurements of company performance with defined risks and strategies.<\/span>\u00a0<\/span><\/p>\n

In July 2023, the European Commission adopted ESRS standards (E<\/span>uropean Sustainability Reporting Standards<\/span><\/i>), and therefore ESG reporting will be mandatory for the 2024 financial year for business entities specified by the Non-Financial Reporting Directive (NFRD).<\/span>\u00a0<\/span><\/p>\n

What<\/span> is CSRD?<\/span><\/span>\u00a0<\/span><\/h2>\n

The<\/span> EU <\/span>Directive<\/span> on <\/span>Corporate<\/span> Sustainability<\/span> Reporting<\/span> (<\/span><\/span>Corporate<\/span> Sustainability<\/span> Reporting<\/span> Directive<\/span><\/em> – CSRD<\/span><\/span>) <\/span>came<\/span> into<\/span> force<\/span> on <\/span>January<\/span> 5, 2023, <\/span>thereby<\/span> obligating<\/span> over<\/span> 50,000 legal <\/span>entities<\/span> to <\/span>report<\/span> on ESG <\/span>standards<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\n\n

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CSRD <\/span>applies<\/span>, <\/span>under<\/span> certain<\/span> conditions<\/span>, to legal <\/span>entities<\/span> of<\/span> third<\/span> countries<\/span> that<\/span> have<\/span> subsidiaries<\/span>\u00a0<\/span>operating<\/span> within<\/span> the<\/span> EU <\/span>or<\/span> are <\/span>present<\/span> in <\/span>the<\/span> EU market.<\/span><\/span>\u00a0<\/span><\/em><\/p>\n<\/blockquote>\n<\/figure>\n

NFRD <\/span>vs<\/span>. CSRD?<\/span><\/span>\u00a0<\/span><\/h3>\n

The Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (CSRD) represent legal documents and guidelines for reporting on non-financial information.<\/span>\u00a0<\/span><\/p>\n

NFRD came into force in 2018 with two main objectives – to encourage corporate responsibility towards social and environmental issues and to provide transparent non-financial information for risk assessment and company valuation. This directive required companies to report on five key elements in their annual reports – environmental protection, respect for human rights, combating corruption, as well as gender, age, and professional diversity.<\/span>\u00a0<\/span><\/p>\n

NFRD applies to large public interest legal entities, i.e., public companies, banks, insurance companies, etc., which the home country designates as public interest entities provided they have more than 500 employees (as well as our Accounting Law). Some countries have adjusted and adopted the directive; for example, in Sweden, legal entities with more than 250 employees must comply with the directive.<\/span>\u00a0<\/span><\/p>\n

CSRD was created with the aim of expanding existing requirements – expanding the list of companies obliged to comply with the guidelines, including companies outside the EU, and introducing more precise reporting standards.<\/span>\u00a0<\/span><\/p>\n

What<\/span> does<\/span> CSRD <\/span>introduce<\/span>?<\/span><\/span>\u00a0<\/span><\/h3>\n

The<\/span> Corporate<\/span> Sustainability<\/span> Reporting<\/span> Directive<\/span> (CSRD) <\/span>introduces<\/span> several<\/span> key<\/span> innovations<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\n

Expanded<\/span> list <\/span>of<\/span> companies<\/span><\/span>\u00a0<\/span><\/h4>\n

CSRD significantly expands the list of companies required to comply with new rules. Over 50,000 legal entities now have the obligation of non-financial reporting, representing a significant increase compared to the previous directive.<\/span>\u00a0<\/span><\/p>\n

CSRD obligations apply to legal entities listed on EU regulated markets (with the exception of micro-enterprises) as well as to all companies based in the EU that meet at least two of the following three criteria:<\/span>\u00a0<\/span><\/p>\n