Navigating Sustainability Reporting: Your Guide to Energy and ESG Compliance in Retail

The CSRD (Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation) became fully effective in January 2024, extending the existing reporting standards set out in the NFRD (Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards the disclosure of non-financial and diversity information by certain large undertakings and groups). Under the CSRD, the first companies will be obliged to prepare compliant reports as early as 2025 for the period 1 January 2024 to 31 December 2024. 

Why is this important?

Starting from 1 January 2024, the first companies are obliged to collect data on sustainability issues from the areas of environmental protection, social affairs and corporate governance. The first reports including data for 2024 will be published in 2025. The obligation to publish reports will gradually be extended to new groups of entities. 

In the following years, the reports are to be externally audited and analysed by rating agencies, which will assign sustainability ratings to entities based on their disclosures. In addition, although some entities will be obliged to make disclosures directly in later years, they may be obliged to do so indirectly already by functioning in the supply and value chains of larger entities.

It is worth emphasising that, although businesses are not obliged to make their disclosures favourable to them, they are obliged to make their disclosures factually correct. In addition, specific strategies for actions taken for sustainable development and improvement of the factors disclosed within the framework of the objectives and policies adopted should be indicated. 

Although the detailed scope of sectoral disclosures is still to be finalised, there are already almost 1,200 disclosure points (so-called ESRS data points) within the general disclosures applicable to all entities. 

Market experience shows that both the sustainability transition and the preparation for reporting itself can be a time-consuming and resource-intensive process, especially for businesses without prior experience in reporting to already existing, non-mandatory standards such as GRI or SASB.

Energy in the context of non-financial reporting obligations

Regardless of the sector of activity, energy-related criteria will play a significant role in terms of the amount and type of disclosures within the environmental section of non-financial reports. 

Each business publishing an ESG report will be obliged, inter alia, to make detailed disclosures on:

• the amount of energy consumed and its origin (with details of the amount of energy produced from coal, fossil fuels, oil, gas, nuclear and RES),
• its nodal footprint, emissions (both Scope 1, 3 and 2, i.e. indirect emissions related to the energy used),
• its own energy production (distinguishing between RES and other sources).

In addition to the figures, reporters will be required to indicate the sustainability criteria targets and policies adopted. 

The Polish perspective

Assuming that businesses will want to remain competitive in meeting sustainability criteria and strive for the most favourable ESG compliance rating, it seems inevitable to move away from fossil fuels to more environmentally neutral energy sources: renewable energy and nuclear energy. However, given the current share of low-carbon sources in the Polish energy mix, it does not seem possible for Poland to fully meet the ambitious climate targets set out in EU policies in the coming years. Thus, it may not be possible for many companies to achieve the highest ratings.

Given the new ESG reporting obligations, it should be assumed that companies wishing to present favourable data for themselves will be forced to invest in new RES generation sources or to purchase green energy from the market under the PPA formula. With still limited prospects for increasing transmission capacity (which is connected with the construction of new generation sources), it seems likely that interest in available capacities generated from RES installations will grow significantly.  

The next few years should see a sharp increase in investment in small "on-site" RES installations and the need for further investment in larger RES generation sources. However, this is dependent on the modernisation of the transmission network and the restart of the issuing of grid connection approvals for energy producers. 

Major challenges

To meet the needs of businesses wishing to achieve the goals of a transition towards sustainable business, it is crucial to identify market-specific issues. Although the requirements for making sustainability disclosures in ESG reports based on the European Sustainability Reporting Standards (so-called ESRS) are the same for all companies (EFRAG Sector Specific ESRS), the relevance of individual criteria may vary from region to region.

We expect that the following areas may become relevant for entrepreneurs in different EU regions:

• the availability of 'green energy' in the national energy mix;
• environmental risks and the maritime economy;
• challenges in the working environment, including in relation to forms of employment, whistleblowing risks, migrant work and immigration law;
• use of resources (goods and services) from outside the EU.

The above list should, of course, be regarded as illustrative. Should you have any questions or would like to find out more about the opportunities and risks associated with ESG and non-financial reporting, please do not hesitate to contact us.

Find out more about the launch of public consultations on mandatory and voluntary non-financial reporting standards for SMEs in our summary, here.