On February 4, 2025, the Budget and Finance Committee of the National Assembly approved amendments to the Accounting Act, postponing the first mandatory ESG reporting by one year. This means that the obligated companies will have to submit their first sustainability reports in 2026 for the reporting year 2025.
What is ESG and Why Does It Matter?
ESG (Environmental, Social, and Governance) is a framework that assesses a company’s impact on the environment, society, and corporate governance. The goal is to increase transparency and corporate responsibility by providing more detailed information on sustainable business practices.
At the European level, these requirements are regulated by Directive (EU) 2022/2464 (CSRD – Corporate Sustainability Reporting Directive), which Bulgaria transposed into national legislation in 2024. Under the new rules, large enterprises are required to include a sustainability report as part of their annual financial report, which must be published in the Commercial Register.
What Does the ESG Report Include?
The sustainability report contains non-financial information related to:
- The impact of the company’s activities on the environment (e.g., carbon footprint, waste management, use of natural resources);
- Social factors (working conditions, employee rights, diversity, and inclusion);
- Governance factors (ethics, anti-corruption measures, corporate governance structure).
Companies must use the European Sustainability Reporting Standards (ESRS) and report on multiple indicators, including sector-specific ones.
Who Will Be Obligated to Submit ESG Reports?
- Small and medium-sized enterprises that are entities of public interest – for example, enterprises whose transferable securities are admitted to trading on a regulated market, credit institutions, insurers, investment intermediaries, etc.;
- Large enterprises;
- Parent companies – they prepare a consolidated sustainability report containing information on the corporate group’s impact on sustainability matters;
- Subsidiaries or branches of a parent company governed by the legislation of a third country, provided they meet the criteria specified by law.
What Does the Postponement Mean for Businesses?
Initially, companies were required to submit their first ESG reports in 2025 for the reporting year 2024. Now, this deadline has been extended – the first mandatory ESG reports will be prepared in 2026 for the reporting year 2025.
The main arguments for the postponement are:
- Reducing administrative burdens – The European Commission is preparing changes that may ease the reporting requirements;
- More time for preparation – Companies will have additional time to establish processes for collecting and analyzing the necessary data;
- Cost optimization – Businesses will be able to allocate their resources more efficiently instead of investing in reporting systems that may not align with future European standards.
What Are the Next Steps?
Although the first mandatory ESG reporting has been postponed, companies should use this extra time wisely. This includes:
- Developing internal mechanisms for collecting ESG data;
- Familiarizing themselves with the European Sustainability Reporting Standards (ESRS);
- Preparing for independent audits of ESG reports.
Future legislative changes may introduce even stricter requirements. Therefore, early planning and adaptation are crucial for ensuring compliance with ESG regulations and maintaining a competitive advantage in the international market.
