What is an enterprise sustainability report in Bulgaria?

Find out what the sustainability report for companies from third countries, the consolidated report and the sustainability report of an enterprise are, what are the requirements for their preparation, what they contain and in what cases they are mandatory. Find out more about the European Sustainability Reporting Standards and the role of this report in transparency and compliance with EU environmental and social requirements.
updated on
16/11/2024
What is an enterprise sustainability report in Bulgaria?
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In the modern business environment, sustainable development and social responsibility are becoming increasingly important aspects of the activity of any enterprise. The question “What is an enterprise sustainability report and report?” is key for organizations and companies that want to align their activities with environmental, social and governance standards imposed on a global scale. Often clients ask: “What is a sustainability report and what are the reporting requirements in 2024?”, “How is a sustainability report drawn up under the Accounting Act?” or “What are the main criteria for accounting for the sustainability of enterprises?”

The sustainability report and report provide stakeholders (investors, customers, regulators) with information about the company's commitment to long-term sustainable development, including measures to minimize negative environmental impacts, resource management and social responsibility. The Law on Accounting in Bulgaria requires companies, especially those with public interest, to prepare such reports in order to ensure transparency in their activities and to show how their business model creates value not only for shareholders but also for society.

In this article, we will look at what the sustainability report and report include, how the information is structured in accordance with the Accounting Act, and what are the modern sustainability reporting requirements for 2024.

What is a “sustainability report” of an enterprise in Bulgaria?

A sustainability report is a document that provides detailed information about the social, environmental and economic impacts of an enterprise and the ways in which these factors affect its development, performance and condition. According to Art. 48 of the Accounting Act, the sustainability report includes data that are essential for understanding the sustainable development of the enterprise and its impacts on the environment, society and the economy. The report not only describes the current measures and results in this direction, but also contains the long-term strategies and objectives that the entity has set for achieving sustainable development in accordance with global standards and the Paris Agreement, which aims to limit global warming to 1.5°C.

The sustainability report shall include a brief description of the business model and strategy of the entity with regard to sustainability, and shall also address the adaptations of the business model to the risks associated with sustainability. The report also identifies opportunities for the entity related to these issues and plans to meet sustainable objectives, including financial and investment commitments. In this regard, enterprises that have activities related to coal, oil and gas must indicate their impact on the transition to a sustainable economy and towards achieving climate neutrality by 2050 (Art. 48 para. 2, para. 1).

One of the key parts of the sustainability report is the commitment to deadlines and targets set for reducing greenhouse gases, with targets clearly defined for at least 2030 and 2050. The report shall include a description of the progress made and evidence of the scientific soundness of the objectives where environmental factors are concerned (Article 48 (2), para. 2). This ensures that the report is objective and in line with the reality of climate challenges and scientific standards for sustainable development.

The sustainability report also covers the role of the entity's management and supervisory authorities, their knowledge and skills in sustainability management and possible incentive schemes for the executive team, which are related to the sustainability objectives (Art. 48 para. 2, para. 3-5). The inclusion of this information provides clarity on the extent to which the management of the enterprise is committed to sustainable development and whether there are mechanisms to stimulate achievements in this direction.

Particular attention shall be paid to the sustainability due diligence processes that an entity carries out to identify and control potential adverse impacts on its activities, value chain, products and services. The document also contains a description of the actions taken by the enterprise to prevent or mitigate these impacts, as well as an assessment of the effectiveness of these measures (Art. 48, para. 2, para. 6).

The main risks to the entity related to sustainability are also discussed in detail in the report, describing the dependencies and ways of managing these risks. The report also includes indicators that reflect information on the sustainability impacts of the entity, in accordance with the European Sustainability Reporting Standards (Article 48 (2) (7) and (8)).

Which companies need to prepare a sustainability report?

The sustainability report is mandatory for large enterprises and for small and medium-sized enterprises of public interest that meet the materiality criteria set out in the law. Also, small and medium-sized enterprises with a lower degree of complexity may limit their reporting to baseline information describing the business model, sustainability policies, main impacts and risks, and related indicators (Art. 48 para. 10). Small and medium-sized enterprises that are not in the public interest have the right to apply simplified sustainability reporting standards by choosing appropriate methodologies validated by the European Commission (Art. 48 para. 12).

Through the Sustainability Report, companies provide important information about their sustainability efforts, ensuring objectivity, commitment to environmental and social goals and transparency to stakeholders. This report is an essential element of public reporting and demonstrates how businesses in Bulgaria work for environmental protection, social well-being and economic sustainability, in accordance with modern European and global standards.

What is the Consolidated Sustainability Report?

The Consolidated Sustainability Report is a comprehensive document that is prepared by the parent company of a large group and summarizes the sustainability of the group as a whole. According to Art. 51 of the Accounting Act, the consolidated statement of sustainability must present information on the impact of the group on sustainability issues and how these issues affect the development, results and condition of the group. This report is necessary to ensure transparency and reliability of data relating to environmental, social and governance aspects at group level and not just for individual subsidiaries.

The main information in the consolidated report includes a description of the Group's business model and strategy with regard to sustainability. The document should present the flexibility of the group's business model and strategies towards risks related to sustainable development, as well as the opportunities for growth in the context of these issues. The Group should set out its plans and concrete actions that are compatible with the transition to a sustainable economy, with the aim of limiting global warming to 1.5°C and achieving climate neutrality by 2050 (Art. 51 para. 2, para. 1). For groups that are engaged in coal, oil and gas, it is mandatory to indicate the impact of these activities on sustainable development.

The Consolidated Sustainability Report also covers certain time-bound targets related to sustainability issues, such as targets to reduce greenhouse gas emissions for at least 2030 and 2050. The report should also describe the progress made by the group in relation to these objectives and whether the objectives are based on scientific evidence on environmental aspects (Art. 51 para. 2, para. 2). This ensures that the report provides objective and complete information on the Group's efforts towards environmental sustainability.

An important part of the consolidated report is the description of the role of the group's management and supervisory authorities on sustainability issues. This part requires explaining the competencies, skills and access of management bodies to expertise that allow them to effectively perform their functions for sustainable development (art. 51, para. 2, para. 3). The document should also indicate the existing policies of the sustainability group and, where available, sustainability-related incentive schemes offered to managers and members of supervisory authorities (Article 51 (2) (4)). 5).

The report also contains a description of the due diligence processes in relation to sustainability issues. This includes information on the main adverse impacts associated with the group's own activities and its value chain, as well as the actions taken to prevent or mitigate these impacts (Article 51, para. 2, item 2, para. 6). This part of the report is essential to provide information on the sustainable management of the value chain and the business as a whole.

The main risks to the group related to sustainability and how to manage them are also disclosed in the consolidated report. The document presents the indicators related to sustainability that allow assessment of the degree of impact and management of these risks, as well as information on subsidiaries included in the consolidation that are exempt from the obligation to maintain an annual or consolidated sustainability report (Article 51, para. 2, item 2, para. 7-9).

When is information not included in the consolidated report?

A parent may omit the inclusion of information relating to upcoming changes or issues under negotiation if this would seriously harm the group's trading position. However, it is important that this omission does not interfere with an objective understanding of the development and impact of the group's activities (art. 51, para. 7).

The Consolidated Sustainability Report is a key tool for summarizing the efforts and results of large groups towards sustainable development. It creates an objective picture of the group's environmental, social and governance commitments, ensuring transparency and awareness for external stakeholders.

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What is the sustainability report for companies from third countries?

The sustainability report for enterprises from third countries is a reporting document that is required by certain enterprises regulated by the legislation of countries outside the European Union (EU). According to Art. 52b of the Accounting Act, this report is prepared by subsidiaries of final parent enterprises established in third countries if they have a net sales revenue in the EU exceeding EUR 150 000 000 for each of the last two reporting periods. In addition, a sustainability statement is also required of the branches of these enterprises when their net sales revenue exceeds EUR 40,000,000 in the previous reporting period. The requirements of the report aim to ensure compliance with European standards of transparency and accountability, regardless of the country of origin of the final parent undertaking, seeking to establish uniform rules for sustainable development.

Content and standards for the preparation of the sustainability report for enterprises in third countries

The report on the sustainability of enterprises from third countries contains key elements necessary to assess the impact of the group on sustainable development. It includes information on a range of aspects such as descriptions of the group's business model and sustainability strategies, actions and financial plans to achieve climate neutrality and constraints on global warming. The report also includes a description of sustainability policies, the role of management and supervisory authorities, incentive schemes for governance and the main risks associated with sustainable development (Article 52b, para. 3). The report must be prepared in accordance with the European Sustainability Reporting Standards for third-country enterprises, and the use of equivalent standards recognised by the EU is also permissible (Article 52b (6) and (7)).

Features in the absence of information and audit control of the sustainability report

If the subsidiary or branch does not have all the information necessary to prepare the report after having requested it from the final parent undertaking, the report shall be prepared on the basis of the information available and shall include a declaration that the third-country entity has not provided all the necessary information (Article 52b, para. 8). In addition, the report is published together with a statement of assurance by a registered auditor, but where such an opinion is not provided by the third-country entity, the subsidiary or branch must include a statement of this omission (Article 52b (9) and (10)). This additional information provides transparency and maintains the standard of objectivity and credibility in sustainability reporting, regardless of the jurisdiction of the parent entity.

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Счетоводна Къща Елан Консултинг - счетоводни услуги в бургас, адвокат данъчно право и данъчен адвокат в България.