As the world marches steadily towards sustainability, Bulgaria is poised for significant change with the introduction of the European Union’s Corporate Sustainability Reporting Directive (CSRD), often referred to as the Green Directive. This groundbreaking legislation sets new standards for environmental, social, and governance (ESG) reporting and will impact businesses across the EU, including those in Bulgaria. In this article, we will delve into how the Green Directive will affect Bulgarian companies, the scale of funds involved, and who stands to benefit from this transformative shift towards sustainability.

What is the EU Green Directive and its significance?

The EU’s Green Directive, officially known as the Corporate Sustainability Reporting Directive (CSRD), compels organizations to disclose sustainability information on environmental and social aspects while operating on the concept of “double materiality.” In contrast to its predecessor, the Non-Financial Reporting Directive (NFRD), the CSRD extends and strengthens reporting requirements. It mandates the inclusion of social and governance metrics alongside environmental performance indicators, with a focus on areas such as employee health, human rights, anti-corruption measures, and diversity in management. Additionally, the CSRD requires both public disclosure of non-financial information and independent auditing, emphasizing the need for credible data to support claims related to ESG metrics and sustainability performance. 

The CSRD creates a comprehensive and standardized reporting framework, drawing on international references like the Task Force on Climate-related Financial Disclosures (TCFD), the Carbon Disclosure Project (CDP), and the EU taxonomy. The EU taxonomy is instrumental in driving investments in sustainable activities, addressing over 93% of greenhouse gas emissions in the EU. Failure to comply with the new reporting framework will result in significant fines, underscoring the EU’s commitment to robust ESG reporting.

Who Must Report under the EU Green Directive? 

Approximately 50,000 organizations are expected to participate in CSRD’s reporting requirements once it is completely rolled out in 2024, including 500 of the largest Bulgarian companies. Smaller EU companies will start reporting two years later. The CSRD has specific rules for reporting, depending on the size and type of the company. It covers large European companies with many assets, high income, or a big workforce (250 or more employees). It also includes companies listed on EU stock markets and EU subsidiaries of non-EU parent companies; even smaller EU SMEs must follow these rules. However, really tiny companies with fewer than 10 employees or very low income don’t have to report. Non-European companies making a lot of money in the EU (EUR 150 million or more) and having at least one EU location will need to report starting in 2028.

Funds Allocated and Who Benefits

The European Commission recognizes the challenges and costs associated with implementing ESG practices under the Green Directive. To address this, a program called “Sustainable Transition to Agile and Green Enterprises” (STAGE) has been introduced and co-financed by the European Commission. The STAGE program offers financial support to Bulgarian small and medium-sized enterprises (SMEs) in the industrial sector striving for sustainable development.

Bulgarian companies joining the STAGE network and completing the initial pre-assessment phase can apply for financial support of up to €50,000. This financial support, coupled with financial advice to attract private investment, is aimed at easing the economic challenges companies may face during their transition to sustainable practices. Furthermore, each Bulgarian company registered on the platform will be connected to a trusted sustainability advisor, ensuring they have the necessary guidance to navigate the path towards a more environmentally and socially responsible business model. They assist companies in this transition. With their product design, green production management, renewable energy, and financial analysis, the STAGE project presents opportunities to contribute their knowledge. 

Summary 

The European Union’s Green Directive, or the CSRD, is a game-changer in the world of sustainability reporting. As it comes into full effect, it will have a profound impact on businesses, investors, and the accounting industry. By embracing the principles and guidelines outlined in the CSRD, businesses can align with regulatory requirements and contribute to a brighter, more sustainable future. Accountants and auditors, in turn, will play a pivotal role in guiding businesses through this transformative journey towards a more sustainable and responsible corporate landscape. 

If you have a business and you want to ensure a smooth transition towards sustainability under the Green Directive, don’t hesitate to reach out to our experts at TGS Bulgaria. We have the knowledge and experience to guide your business through this transformative journey. Contact our experts today to get started on your path to sustainability. Contact us here to learn more.