On 18 December 2024, an amendment to the Slovenian Companies Act (Zakon o gospodarskih družbah or ZGD-1M) came into force, introducing several new obligations for companies, which include additional reporting requirements and mandatory standards to ensure gender balance in the management and supervisory bodies of companies. ZGD-1M officially transposes the EU’s Corporate Sustainability Reporting Directive (CSRD) into Slovenian law. The following article highlights the amended non-financial (i.e. sustainability) reporting obligations that are now required.
The ZGD-1M sets out relevant timelines, scope, reporting and audit requitements for companies operating in the Slovenian market by applying a double materiality approach.
Scope
The scope of sustainability reporting has significantly expanded compared to the previous rules.
As a result of the amendments, sustainability reporting and disclosure include the following:
| Large EU companies | Small and Medium Entities (SMEs) | Non-EU Companies |
|---|
| Public interest entities, an EU entity or an EU subsidiary of a non-EU entity that exceed at least two of the following criteria: | Listed entities (whose securities are traded on a regulated market) that meet at least two of the following criteria: | Entities generating at least EUR 150 million net turnover in the EU and with at least one: |
| a. more than 250 employees on average during the financial year. | a. an average of 50 to 250 employees during the financial year. | a. branch generating at least EUR 40 million net turnover in the EU; or |
| b. a net turnover exceeding EUR 50 million. | b. A net turnover between EUR 10 million and EUR 50 million. | b. subsidiary in the EU (large entity or listed SMEs). |
| c. A balance sheet total exceeding EUR 25 million. | c. A balance sheet total between EUR 5 million and EUR 25 million. | |
Reporting requirements
The sustainability report must be included in the annual report and should provide all necessary information to understand:
- the impact that the company has on sustainability matters; and
- how sustainability matters affect the company’s development, performance and position.
This information is necessary to identify material sustainability impact, risks and opportunities through a double-materiality assessment. Additionally, companies must disclose all information required under Regulation (EU) 2020/852 of the European Council and of the Council (i.e. the Taxonomy Regulation).
Therefore, companies must address the sustainability aspects of their business model and strategy, including chronologically defined targets, the roles and expertise of management and supervisory body members vis-à-vis sustainability, internal sustainability policies and incentive schemes. The companies must also describe due diligence processes and key risks and indicators that are used for sustainability disclosures.
Sustainability data should be provided in accordance with the rules set out under Regulation (EU) 2023/2772 (European Sustainability Reporting Standards Regulation or ESRS). The ESRS offers detailed guidelines covering cross-sectoral, thematic, and sector-specific standards on areas such as climate change, resource use, biodiversity, and social responsibility. It mandates companies to evaluate both their impact on the environment and the influence of sustainability issues on their financial health.
Simplified sustainability reports, however, can be provided by SMEs, small and non-complex institutions, captive insurance undertakings and reinsurance companies. These reports may include only a brief description of a business model and strategy, company’s policies, key risks and indicators for the sustainability disclosures. Additionally, SMEs may be exempt from sustainability reporting for financial years starting before 1 January 2028 by explaining their reasoning in the management report.
Audit requirements
The annual reports of large and medium-sized companies must also be audited. According to the ZGD-1M, along with the annual report a certified auditor licensed to provide audit services in Slovenia must audit the sustainability report and the information it provides. Nevertheless, the sustainability report can also be examined by an auditor other that the auditor reviewing the other parts of the annual report.
Timeline
The sustainability reporting requirements must be implemented for the financial year beginning:
| Financial year | Entity | Reports due |
|---|
| January 2024 | large public interest companies (with over 500 employees) | In 2025 |
|---|
| January 2025 | for large companies (that are not public interest companies) | In 2026 |
|---|
| January 2026 | for all other relevant companies (i.e. SMEs, small and non-complex institutions, captive insurance undertakings and reinsurance companies) | In 2027 (SMEs can opt out until 2028) |
|---|
Penalties
ZGD-1M also establishes penalties for non-compliance, imposing fines on companies and responsible persons who fail to meet sustainability reporting obligations. Specifically, large companies may face fines ranging from EUR 6,000 to EUR 30,000, medium-sized companies from EUR 4,000 to EUR 20,000, and small companies from EUR 1,000 to EUR 10,000. Additionally, responsible individuals within the company may be fined between EUR 300 and EUR 2,500.
Summary
Compared to previous non-financial reporting obligations, the latest amendment to the Slovenian Companies Act significantly broadens the scope of reporting entities and the range and content of the information to be reported. It also strengthens the control of auditors over reporting content. The sustainability reports will now replace non-financial declarations, offering a more comprehensive format since these reports will be produced in a single electronic format based on ESRS sustainability reporting standards.
In conclusion, we believe these amendments are a positive development since they will enhance the comparability of information across different economic entities. Companies, however, must first carefully consider the key indicators that are most relevant to their business model. Materiality assessment is crucial in the sustainability reporting process, determining the most significant sustainability factors for a company. Understanding these concepts is essential because they shape the reporting framework and guide companies in accurately and effectively collecting and reporting the necessary data.
For more information on ZGD-1M and how it could affect your Slovenia-based business, contact your CMS client partner or these CMS experts.
Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. We do this to optimise the mix of channels to provide you with our content. Details concerning the tools in use are in our Privacy Notice.