Changes in ESG Reporting: The Chamber of Deputies Approved Raising the Threshold for the First Wave of Reporting to 1,000 Employees

The Chamber of Deputies of the Czech Republic has approved an amendment that significantly changes the scope of companies required to publish a sustainability report under the European CSRD directive. Starting in 2025, the obligation in the first wave will apply only to companies with more than 1,000 employees.

The change is part of the Czech implementation of the European CSRD directive and is now heading to the Senate and subsequently to the President for signature. If the legislative process is completed as proposed, the obligation will affect significantly fewer companies than originally expected.

Who is now subject to the obligation?

The update will apply to accounting periods starting on January 1, 2025. Companies that had expected to publish a sustainability report for the year 2025 in 2026 will now be exempt from this obligation, provided they do not simultaneously meet all of the following conditions:

• has more than 1,000 employees

• is a business company, a savings or credit cooperative, or an insurance company (as a result, certain types of cooperatives or public-law entities are now newly excluded from the obligation),

• is a public interest entity

• and is a large accounting unit according to the Accounting Act.

Uncertainty at the European level persists

While legislation in the Czech Republic is becoming more precise, there is uncertainty at the European level. As part of the so-called Omnibus package, postponements or relaxations of certain ESG reporting requirements are being considered. The situation is now also being monitored by the European Ombudsman, who is addressing complaints from non-profit organizations regarding the actions of the European Commission.

ESG remains relevant even for smaller companies

Although many businesses will avoid the new obligations, the pressure for sustainability is not going away. Small and medium-sized enterprises continue to:

• faces the demands of its customers, banks, or partners in supply chains,

• will be assessed in terms of the environmental impact of their activities and their alignment with the EU Taxonomy,

• can make use of voluntary frameworks, such as the VSME standards, to enhance their competitiveness and ability to manage risks.

The calculation of the carbon footprint, an overview of supply chain impacts, or voluntary reporting can provide companies with an advantage not only in the eyes of their partners but also on the market in general.

The strategic approach to sustainability pays off

Even though the legal threshold is shifting, a meaningful approach to sustainability can be implemented immediately – clearly, effectively, and strategically. Companies that start with sustainability early are creating a better starting position for the future – whether in terms of regulation, reputation, or business performance.