Government Adopts Key Reforms in Financial and Sustainability Reporting to Align with EU Standards

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".

The key innovation is the introduction of mandatory sustainability reporting for certain categories of enterprises—a significant step toward EU integration and increasing business transparency.

Key Changes and Innovations:
1. Introduction of Mandatory Sustainability Reporting

For the first time at the legislative level, the preparation, submission, and publication of sustainability reports will be required for specific categories of enterprises. This reporting will include information about the company's impact on the environment, social issues, labor relations, human rights, anti-corruption activities, and how these aspects affect the company’s operations.

Sustainability information will be reported in accordance with European Sustainability Reporting Standards (ESRS) as a separate section of the management report. Submission will be done in a unified electronic format using taxonomy, which will facilitate information analysis and access.

Sustainability reports will be submitted together with financial statements and will be considered an integral part of them.

This new reporting requirement applies to:

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

The new rules will be introduced gradually:

• Large enterprises and parent companies of large groups with more than 500 employees — reporting in 2028;
• Other large enterprises and parent companies of large groups — reporting in 2029;
• Medium and small listed enterprises — reporting in 2030.

The introduction of sustainability reporting will level the playing field for Ukrainian and European companies in international markets, facilitate investment attraction, enhance competitiveness, and support the implementation of commitments under the Association Agreement.

2. Updated Criteria for Defining Enterprise Categories

The criteria for classifying micro, small, medium, and large enterprises have been updated to reflect inflation and European Commission recommendations. This will help reduce administrative burden and prevent companies from being unjustifiably placed into categories with stricter requirements.

3. Introduction of International Financial Reporting Standards for State-Owned Enterprises

State-owned enterprises and companies with more than 50% state ownership will be required to maintain accounting and reporting in accordance with International Financial Reporting Standards (IFRS), and to prepare a management report. This will increase transparency and accountability in the public sector and simplify access to international capital markets.

The Draft Law was developed in accordance with the EU-Ukraine Association Agreement, aiming to implement provisions of Directive 2013/34/EU on annual financial statements, consolidated financial statements, and related reports of certain types of undertakings (taking into account Directive (EU) 2022/2464 on corporate sustainability reporting and Commission Delegated Directive (EU) 2023/2775 on adjusting size criteria for micro, small, medium, and large undertakings and groups).