In November, the draft Law on Corporate Sustainability Reporting was published in the Official Bulletin of the General Courts (BOE), marking a turning point in the reporting obligations of companies in Spain. This new legislation amends the Commercial Code, the Companies Act, and the Audit Law, introducing a unique European framework for the preparation of sustainability reports.
With its urgent processing, authorised by the Council of Ministers, this law strengthens Spain’s commitment to transparency and corporate sustainability. Therefore, we will explore in more detail what this new draft entails and how companies must respond.
What is a sustainability report?
A sustainability report collects information on environmental, social, and governance (ESG) aspects. This document must be approved by the Board of Directors and submitted alongside the annual accounts. In Spain, its oversight falls to the Mercantile Registry and, for listed companies, the National Securities Market Commission (CNMV).
The main objective is to ensure transparency and align business practices with the Sustainable Development Goals (SDGs), promoting responsible and sustainable management.
What does the change mean for Spanish companies?
Until now, the current regulation (Law 11/2018) governed Non-Financial Information States (EINF). However, this draft law introduces key updates:
- Unification of the European regulatory framework: Companies will need to present their sustainability reports under a single European standard, making it easier to compare across countries.
- Use of the XBRL electronic format: This format will allow for more efficient access and analysis of information by all stakeholders.
- Regulated independent verification: Like financial statements, sustainability reports will be subject to an audit supervised by the Institute of Accounting and Audit of Accounts (ICAC).
- Structural reform in auditing: The Registry of Auditors will now be called the Official Registry of Auditors of Accounts and Sustainability Information Verifiers, opening the door to new roles such as independent verifiers accredited by ENAC.
Who will it affect, and when?
The regulation sets a gradual timetable for compliance, with different entities subject to the requirements at various times:
- Large companies:
- Public interest companies with more than 500 employees: Starting January 1, 2024.
- Other large companies: Starting January 1, 2025.
- Listed SMEs: Excluding micro-companies and those in alternative markets, the obligation will start on January 1, 2026.
- Branches and subsidiaries of third-country companies: Those with a turnover in the EU exceeding €150 million must comply starting January 1, 2028.
Business Impact: Beyond Legal Compliance
This regulation not only strengthens the regulatory framework but also represents a strategic opportunity for businesses:
- Reputation and trust: By complying with European standards, companies gain credibility with investors and stakeholders.
- Improved risk management: Identifying areas for improvement in sustainability helps anticipate future challenges.
- Global competitiveness: Companies that integrate sustainability as a core principle will stand out in increasingly demanding markets.
The Challenge of Verification
A key aspect is the role of the independent verifier, responsible for ensuring the transparency and reliability of the data. This role will be vital in building stakeholder trust and ensuring regulatory compliance.
Therefore, this draft law positions Spain at the forefront of corporate transparency in Europe. For companies, this new regulation presents a significant effort in terms of data collection and analysis but also an opportunity to strengthen their commitment to sustainable development and differentiate themselves in a competitive environment.
At LEIALTA, we understand the challenges this transition brings, and our team of experts in sustainability and regulatory compliance is ready to help you comply with this new regulation and make the most of its strategic advantages.
For more information, don’t hesitate to contact us. We are here to guide you through every step of the process.
