Due to the fact that increasing tensions in the maritime industry are arising, ESG reporting in this publication will be thoroughly analyzed, concerning regulations regarding corporate reporting on sustainable development. It is worth noting that in practice, this issue may concern any entrepreneur conducting transactions within the EU. The argument for introducing changes regarding corporate reporting on sustainable development was the need to achieve the goals of the European Green Deal, the Action Plan on Financing Sustainable Growth, and the Paris Agreement. However, a detailed analysis of the introduced changes allows us to conclude that the above has become a pretext for much broader reporting, which in our opinion may pose a threat to the reporters themselves. This second layer of ESG reporting appears quite disturbing in the context of the ongoing problem of lack of regulation, including Big Data.

Several challenging issues arise from these regulations.

As indicated by the following regulations, ESG reporting could become a veritable burden for the maritime industry as soon as next year, given the industry's specificity of collaborating with numerous entities and institutions within the EU.

First and foremost, it should be noted that entities subject to these regulations will have relatively little time to prepare for this reporting.

It is also quite puzzling that precisely now, amidst numerous crises affecting, among others, the maritime industry, such extensive reporting of entrepreneurs is being introduced, which in our opinion, in many aspects, is unrelated to the broader issue of ecology and rather serves as a tool for obtaining very sensitive data from entrepreneurs that may not be adequately secured.

This data could become a catalyst for very effective economic intelligence and even for the acquisition of some businesses. While for many, the presented thesis may seem exaggerated, an analysis of the scope of reporting regulations prompts the question: who will store this data, how will it be secured, and how will it be further utilized?

It is also worth emphasizing once again that issues related to Big Data have not yet been regulated. One might get the impression that the directives analyzed in this article could serve as a perfect legal tool for obtaining certain information that was previously closely guarded by companies and will now be subject to ESG reporting, thereby becoming public and unsecured.

At this point, it is also essential to highlight a very significant aspect that may not be apparent to entrepreneurs. The directive creates a legal framework for individual member states, which are obliged to implement it in accordance with national and EU regulations, but as experience teaches, with certain differences. This may lead to a situation where ESG reporting in each member state will have its specific variations, which in turn may lead to many complications and additional costs for entrepreneurs in the maritime industry, whose businesses typically span several EU countries, not to mention excessive "business bureaucratization”.

Directive of the European Parliament and of the Council (EU) 2022/2464 of 14 December 2022.

The genesis of this legal act was the commitment made by the European Commission in the communication of 11 December 2019 entitled "European Green Deal," which concerned the review of the provisions of Directive 2013/34/EU of the European Parliament and of the Council on the disclosure of non-financial and diversity information. In reviewing these provisions, changes were indicated concerning the disclosure of non-financial information.

Directive 2014/95/EU introduced the requirement for entities to provide information on at least environmental, social, and employee matters, respect for human rights, anti-corruption, and bribery issues. With regard to these issues, Directive 2014/95/EU required entities to disclose information in the following reporting areas: business model, policy, including due diligence processes, the results of these policies, risk, and risk management, and key performance indicators related to the specific activity. It was also argued that for many stakeholders, the term "non-financial" is considered inaccurate, particularly because it incorrectly implies that such information is irrelevant financially.

Surprisingly broad scope of reporting

Another issue that has been highlighted is the disclosure of information regarding intangible assets other than intangible and legal assets included in the balance sheet. It was pointed out that information about intangible and legal assets and other intangible elements, including internally generated intangible assets, is reported inadequately, making it difficult to properly assess the development of the entity, its performance and situation, and to monitor investments. To enable investors to better understand the growing discrepancy between the book value of many entities and their market value, which can be observed in many sectors of the economy, all large entities and all entities whose securities are admitted to trading on a regulated market in the Union, except micro-entities, should be obliged to provide appropriate reporting on intangible assets. However, some information about intangible assets is an inherent part of issues related to sustainable development and should therefore be part of sustainability reporting.

For example, information about employees' skills, competencies, experience, and loyalty to the entity, as well as motivation to improve processes, goods, and services, is information about sustainable development related to social issues, which can also be considered information about intangible assets.

Similarly, information about the quality of relations between the entity and its stakeholders, including customers, suppliers, and communities affected by the entity's activities, is information about sustainable development relevant to social or management issues, which can also be considered information about intangible assets.

As clearly seen, the data subject to reporting goes far beyond issues related to transforming the European Union into a resource-efficient and competitive economy with zero net greenhouse gas emissions, as well as separating economic growth from the use of natural resources.

Changes in Directive 2013/34/EU

Directive 2022/2464 of the European Parliament and of the Council introduced significant changes to Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements, and related reports of certain types of undertakings. For the purposes of this article's topic, only the most significant changes will be described.

The first significant change is the introduction of additional definitions to Directive 2013/34/EU. The first of the introduced definitions is the definition of "sustainability-related matters," which means environmental, social, and human rights factors, as well as governance factors, including sustainability factors, in accordance with the definition in Article 2(24) of Regulation (EU) 2019/2088. Another definition included in Directive 2013/34/EU is that of "sustainability reporting." According to the newly added Article 2(18), this is the presentation of information on sustainability-related matters in accordance with Articles 19a, 29a, and 29d of Directive 2013/34/EU.

The last newly created definition to which attention should be drawn is the one referring to "key intangible assets," defined as non-physical assets that fundamentally determine the entity's business model and constitute a source of value creation for the entity. With these newly established definitions in mind, it is now necessary to closely examine what is actually subject to reporting. The information that must be included in sustainability reporting must contain:

1) a brief description of the entity's business model and business strategy, including:

-the resilience of the entity's business model and business strategy to risks related to sustainability-related matters;

-opportunities available to the entity in relation to sustainability-related matters;

-the entity's plans, including implementation actions and related financial and investment plans, to ensure that the entity's business model and business strategy address the transition to a sustainable economy and limit global warming to 1.5°C in accordance with the Paris Agreement based on the United Nations Framework Convention on Climate Change adopted on 12 December 2015 (hereinafter referred to as the "Paris Agreement") and with the aim of achieving climate neutrality by 2050, as specified in Regulation (EU) 2021/1119 of the European Parliament and of the Council (*), and, where applicable, the exposure of the entity to activities related to coal, oil, and gas;

-information on how the entity's business model and business strategy have taken into account the interests of the entity's stakeholders and the entity's impact on sustainability-related matters;

-information on how the entity's strategy has been implemented with respect to sustainability-related matters;

2) a description of time-bound and entity-established objectives regarding sustainability-related matters, including, where applicable, absolute emission reduction targets for at least 2030 and 2050, a description of the entity's progress towards achieving those objectives, and a statement whether the entity's objectives related to environmental factors are based on conclusive scientific evidence;

3) a description of the role of governing, managing, and supervisory bodies in relation to sustainability-related matters and their expertise and skills necessary to fulfill that role or access to such expertise and skills by such bodies;

4) a description of the entity's policies regarding sustainability-related matters;

5) information on the existence of incentive systems related to sustainability-related matters offered to members of governing, managing, and supervisory bodies;

6) a description of:

- the due diligence process implemented by the entity regarding sustainability-related matters and, where applicable, in accordance with Union requirements for conducting due diligence by entities;

- the most significant actual or potential adverse impacts associated with the entity's own operations and value chain, including its products and services, economic relationships, and supply chain, actions taken to identify and monitor these impacts, and any other adverse impacts that the entity is required to identify in accordance with other Union requirements to conduct due diligence by entities;

• any actions taken by the entity to prevent, mitigate, manage, or remediate actual or potential adverse impacts and the outcome of those actions;

7) a description of the main risks to the entity regarding sustainability-related matters, including a description of the main types of dependencies of the entity on those matters, and how the entity manages those risks.

The scope of information subject to reporting, as presented above, applies to large entities and small and medium-sized entities that are public interest entities whose securities are admitted to trading on a regulated market in the Union.

It should be noted that as an exception, small and medium-sized entities, small and non-listed institutions, internal insurance undertakings, and internal reinsurance undertakings may limit their sustainability reporting to the following information:

1. a brief description of the entity's business model and business strategy;

2) a description of the entity's policies regarding sustainability-related matters;

3) the most significant actual or potential adverse impacts of the entity's operations concerning sustainability-related matters and any actions taken to identify and monitor such actual or potential adverse impacts, prevent them, mitigate them, or remedy them;

4) the main risks to the entity concerning sustainability-related matters and how the entity manages these risks.

One might ask how these changes may directly affect Polish entrepreneurs? Well, the answer is straightforward. It will indeed affect even small businesses because upon the delivery of any product, a company covered by Directive 2013/34/EU will require, among other things, the aforementioned information.

Three stages

The regulations of the directive provide for a three-stage schedule for the application of new obligations by entities.

Firstly, the largest entities, which already report so-called non-financial information based on accounting law, will present information for the first time (for the financial year 2024). These are large public interest entities with more than 500 employees.

A year later, the remaining large entities will present their first reports.

Small and medium-sized listed companies will submit their first reports for the financial year 2026.

Summary

Analyzing the provisions of the CSRD directive mentioned above, it should be noted that the scope of information subject to reporting goes far beyond information related to the impact of the company on the natural environment. We are dealing here with the presentation of information that constitutes a trade secret, the business model, and business strategy. Such extensive data collection may, in the opinion of the authors of this study, be a field for far-reaching abuses and may prove to be highly dangerous for the parties involved in such a reporting model.

It should also be remembered and taken into account that the CSRD will now have to be implemented into Polish law. Poland, like other EU member states, will have 18 months to do so.

Mateusz Romowicz - Attorney at Law

Przemysław Niewiński - Lawyer