Ukrainian companies will be required to report on sustainable development

On June 25, the Cabinet of Ministers of Ukraine approved a draft amendment to the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”, which proposes to introduce mandatory reporting on sustainable development for certain categories of enterprises.

According to the government’s press service, this is an important step towards European integration and increasing business transparency.

Key changes and innovations:

1. Introduction of mandatory reporting on sustainable development. For the first time, at the legislative level, it is envisaged to compile, submit and publish reporting on sustainable development for certain categories of enterprises. Such reporting will contain information on the company’s impact on the environment, social issues, labor relations, human rights, anti-corruption activities, as well as how these issues affect the activities of the enterprise.

Information on sustainable development will be submitted according to European standards (ESRS) as a separate section of the management report. Submission will be in a single electronic format according to taxonomy, which will simplify analysis and access to information.

Sustainability reporting is expected to be submitted together with financial reporting and is an integral part of it.

The new reporting applies to:

• large enterprises and parent companies of large groups;
• medium-sized and small enterprises whose securities are admitted to trading on a regulated capital market.

The new rules will be implemented in stages:

• Large enterprises and parent companies of a large group with more than 500 employees will report in 2028.
• Other large enterprises and parent companies of a large group – in 2029.
• Medium-sized and small enterprises with securities listed on the stock exchange – in 2030.

The introduction of sustainability reporting will create a level playing field for Ukrainian and European companies in international markets, will facilitate investment attraction and increase competitiveness, and will also contribute to the fulfillment of obligations under the Association Agreement.

2. Updating the criteria for determining the categories of enterprises. The criteria for determining micro, small, medium and large enterprises have been updated taking into account inflation and the recommendations of the European Commission. This will reduce the administrative burden and avoid unjustified inclusion of enterprises in categories with stricter requirements.

3. Introduction of international standards. State-owned enterprises and companies where more than 50% of the shares are owned by the state are required to keep records and report in accordance with International Financial Reporting Standards (IFRS), as well as to prepare a management report. This will increase the transparency and accountability of the public sector and simplify access to international capital markets.