In the Republic of Serbia, the obligation of ESG reporting was introduced by the new Law on Accounting (“Official Gazette of RS”, No. 73/2019 and 44/2021 – other law) within the obligation of non-financial reporting. Subjects of this obligation are:

• large legal entities that are public-interest companies:
  • (1) large legal entities classified in accordance with the law regulating accounting;
  • (2) legal entities that are considered public companies in accordance with the law governing the capital market;
  • (3) all legal entities that the Government, on the proposal of the competent ministry, declares to be legal entities of public interest for the Republic of Serbia, regardless of their size, and
• which on the balance sheet date exceed the criterion of an average number of 500 employees during the business year.

For these legal entities, a mandatory part of the annual business report is a non-financial report, which contains information necessary for understanding the development, business results and position of the legal entity, as well as the results of its activities related to environmental protection, social and personnel issues, respect for human rights, the fight against corruption and bribery, including:

1) a brief description of the business model of the legal entity;

2) a description of the legal entity’s policies in relation to those issues, including the procedures for the basic analysis that is carried out;

3) the results of those measures;

4) basic risks related to those issues related to the business of the legal entity, including, when relevant and necessary, its business relationships, products or services that may cause negative results in those areas, as well as the way the legal entity manages those risks;

5) non-financial key performance indicators important for a specific business.

If the legal entity does not implement measures related to one or more issues, it shall state the reasons for their non-implementation in the non-financial report.

Provisions related to the obligation of ESG reporting, contained in the Accounting Law, were aligned with Directive (EU) 2014/95/ on non-financial reporting (NFRD), i.e. they were not aligned with Directive (EU) 2022/2464 on reporting on corporate sustainability (CSRD). Since, in the meantime, Omnibus 1 Directive (EU) 2026/470 limited the scope of application of CSRD to companies that on the balance sheet date exceed a net turnover of 450,000,000 euros and an average number of employees of 1000 during the financial year, in the Republic of Serbia are currently in force stricter rules regarding the circle of mandatory ESG reporting legal entities.

                                                                       Voluntary sustainability reporting

However, business entities outside this circle of mandatory reporting legal entities also have interests in voluntarily drawing up and publishing their ESG reports. The reasons for voluntary reporting are multiple:

• response to separate requests for sustainability information from individual contracting parties, suppliers and other business partners in the value chain,
• providing sustainability information that meets the data requirements of financial institutions and investors, thereby facilitating access to financing,
• better understanding and monitoring of own performance in the area of ​​sustainability, thereby improving resilience and competitiveness,
• improving governance and applying due diligence in sustainability matters, identifying and managing risks, including, where relevant, environmental and social aspects such as pollution and workforce health and safety,
• contributing to a more sustainable and inclusive economy.

Regarding voluntary reporting, on the basis of the Omnibus 1 Directive (EU) 2026/470, the European Commission will determine corresponding standards aim to facilitate the voluntary drawing up and disclosure of sustainability information by companies that are not subject to mandatory reporting, as well as to limit the information that can be required from such companies in the value chain in accordance with this directive.

               The relevance of EU legislation on ESG sustainability reporting for business entities in the Republic of Serbia

Rules of EU legislation can be relevant for business entities in the Republic of Serbia from several aspects.

1. Obligation to to draw up and publish a sustainability report also applies to a subsidiary undertaking established in the territory of a Member State, whose ultimate parent undertaking is governed by the law of a third country, as well as to branch located in the territory of a Member State, and which is a branch of an undertaking governed by the law of a third country, if

• subsidiary undertaking on its balance sheet date, exceed a net turnover of EUR 200 000 000 in the preceding financial year, i.e., where the branch generated a net turnover exceeding EUR 200 000 000 in the preceding financial year, and
• the third-country undertaking, at its group level, or, if not applicable, the individual level, generated a net turnover in the Union exceeding EUR 450 000 000 for each of the last two consecutive financial years.

2. The reporting obligation in accordance with CSRD comprises information about an undertaking’s own operations and about its value chain, including its products and services, its business relationships and its supply chain. Therefore, the Omnibus 1 Directive introduces the category “protected undertaking” as an undertaking that does not exceed, on its balance sheet date, an average number of 1 000 employees during the preceding financial year, but is in the value chain of a reporting undertaking. Reporting undertakings that report the necessary value chain information can request information from protected undertakings for the purpose of sustainability reporting, as required by this Directive, and to the extent determined in the voluntary reporting standards. Accordingly, protected undertakings have the right to decline to provide information exceeding the information specified in the voluntary standards in response to a request made for the purpose of sustainability reporting as required by this Directive.

3. Parent undertakings of a large group, subject to mandatory sustainability reporting, have to include in the consolidated management report information necessary to understand the group’s impacts on sustainability matters, as well as the impacts of one or more of its subsidiary undertakings. If a parent undertaking, established in the territory of a Member State, is subject to mandatory sustainability reporting, then also its subsidiary undertaking, established in the territory of a third country, has to provide the information required by this Directive, in order to draw up the consolidated sustainability report.