ESG Implementation in the Czech Republic: Key Insights into Sustainability Reporting

Czech Republic

In compliance with their Environmental, Social, and Governance (ESG) responsibilities, the first group of obliged Czech companies are now subject to the extended obligation to draw up a “sustainability report” as part of their annual reports for the 2024 accounting period. With a focus on areas such as environment, social responsibility, employee and human rights, governance, and anti-corruption measures, the sustainability report serves as a key tool for conveying essential information about the organisation’s impact on the critical aspects of sustainability.

Obliged companies

As part of the implementation of the Corporate Sustainability Reporting Directive (CSRD) into Czech law, ESG reporting obligations are being introduced gradually, based on company size.

Starting in 2024, companies categorised as entities of public interest, those meeting the criteria of a large accounting unit irrespective of their status as entities of public interest, and which have more than 500 employees, are required to produce a sustainability report. This includes banks, insurance companies, companies listed on the European regulated market, and other large entities.

It is expected that the scope of companies subject to ESG reporting obligations will be further extended to include:

  • by 2025, companies meeting two out of these three criteria: (i) a minimum turnover of CZK 1 billion; (ii) over 250 employees; and (iii) assets exceeding CZK 500m; and
  • by 2026, small and medium-sized enterprises (SMEs) listed on the stock exchange.

The sustainability report

The sustainability report will constitute an integral chapter of the annual report. The report should outline, in particular, the company’s:

  • business model and strategy;
  • time-bound sustainability goals;
  • internal policies and measures adopted in relation to sustainability;
  • sustainability-related incentives offered to and responsibilities divided between corporate bodies;
  • actual or potential risks associated with its operational activities, value and supply chain, products and services, business relations and what measures were adopted to manage, prevent, mitigate, remedy or eliminate such risks.

The report should clearly indicate which information is presented from a short, medium or long-term perspective and, in any case, should adhere to the European Sustainability Reporting Standards (ESRS).

The emphasis put on sustainability reporting underscores the growing significance of ESG issues.

For more information on the ESG reporting obligations of Czech companies, please contact your CMS client partner or local CMS experts: Lukáš Janíček, Lukáš Reichmann, and Huyen Vu Novotná.