EU Simplifies ESG Reporting for Bulgarian Businesses

The European Union has launched a new set of simplified rules for Environmental, Social, and Governance (ESG) disclosure designed to lighten the compliance burden on businesses in member states, including Bulgaria. The reforms, part of the Omnibus simplification package, are meant to streamline reporting requirements without lessening effort on encouraging sustainability, transparency, and good corporate governance.

In a recent report by Sofia-based business insight firm SeeNext, ESG and Sustainability in Bulgaria: Walking the Talk on S&G Impact, the new regulations represent a change in the ESG dynamics of Bulgaria. While environmental objectives have so far led corporate actions, the social and governance metrics are now gaining momentum as the EU regulatory environment is in the process of being revolutionized.

The Omnibus package amends the Corporate Sustainability Reporting Directive (CSRD) by narrowing its scope. ESG reporting will be mandatory only for companies with over 1,000 employees under the new regime. The amendment is projected to lower the number of reporting companies by approximately 80 percent. Moreover, companies previously outside the scope of the directive have been provided with a two-year grace period to transition and come into line.

In order to further strengthen small and medium enterprises (SMEs), the updated package also consists of voluntary reporting requirements. Sector-linked European Sustainability Reporting Standards (ESRS) have been taken out, which allows less capacity-constrained companies to be less resource-hungry and cheaper for ESG reporting.

In spite of the differences in ESG practice in Bulgaria, some local companies have already moved to adapt to workplace well-being, diversity, and inclusion. The SeeNext report cites that Bulgaria surpasses the EU average in women leadership. Approximately 32 percent of Bulgarian companies have over 40 percent of women representatives holding high ranks.

Training and capacity building also play an important role in Bulgarian business ESG practices. While Bulgaria's low adult participation in lifelong learning in the EU, more than 40 percent of companies offer training in technical and expertise-level skills. Education emphasis is different from industry to industry. As for instance, large heavy industry and mining companies stress general education and local level community building, while ICT and telecommunication industries stress digital and STEM skill enhancement.

But the report also identifies a gap between ESG reporting by corporations and action. Matters like human rights conduct, anti-corruption policies, and enforcement policies tend to feature in reports without explicit proof of action. This necessitates increased verifiability and disclosure transparency.

One of the biggest issues for Bulgarian companies is a deficiency of ESG consciousness and clear guidelines for conformity. This can potentially result in "social washing," with companies exaggerating their social responsibility. While there are such issues, the new CSRD, as well as the CSDDD, social procurement policy, and reputational incentives, are prompting more organisations to adopt efficient ESG practices.

The system of simplified reporting is meant to benefit Bulgarian SMEs most of all, forcing them to establish their reputation, enhance stakeholder confidence, and make them more competitive in the EU and local markets. While as ESG considerations become increasingly integrated into investment decisions, regulatory compliance, and public reputation, forward-looking corporations will be better off in the long term.

The SeeNext report reflects that though the barriers remain, the new EU ESG framework provides a window of opportunity for Bulgaria to deepen its corporate sustainability culture. With more transparent rules, longer deadlines, and less pressure to disclose, firms stand greater opportunities to be aligned with EU-wide sustainability goals without facing disproportionate administrative obstacles.

Source:
SeeNext via SeeNews