Spain: The steps for preparation of the Preliminary Bill for the Sustainability Reporting Law are officially in motion

The public consultation period opened by the Ministry of Foreign Affairs and Digital Transformation to obtain the opinion of potentially affected parties and representative organizations on a few elements of the future law transposing the CSRD ended on March 4 (see here).

After presenting the issues sought to be resolved with the future sustainability reporting law (improve the sustainability information provided by companies, by fomenting its comparability, reliability and accessibility), the following goals are set:

• Extend the scope relating to the companies that will be required to disclose material sustainability information.
• Provide more exhaustive regulations on the contents of the sustainability report.
• Require preparation of the directors’ report in electronic format and label the sustainability information according to Regulation (EU) 2020/852 (known as the Taxonomy Regulation).
• Regulate the performance of verification work on sustainability information, the contents of the verification report, the legislation to be applied for this purpose and the supervision regime for verifiers.
• Write into Spanish law the new legislation introduced in Regulation (EU) No 537/2014, on audits of public-interest entities: among others, the inclusion of services relating to the preparation of sustainability information among the non-audit services that are prohibited for statutory auditors and members of their networks, the exclusion of fees billed for those services from computation of the limit set out in article 4 and leaving the obtaining of verification services for sustainability information outside the rules on approval by audit committees.

Multiple issues were submitted for public consultation, essentially relating to those for which the CSRD grants certain room for discretion to the member states.

In relation to the sustainability information companies will have to publish, the public were consulted as to the advisability or need for various measures:

• Allowing certain information not to be published where it may seriously harm the company’s commercial position.
• For the purpose of a Spanish subsidiary whose parent company is not domiciled in the EU being exempt from the obligation to disclose sustainability information, requiring that the consolidated sustainability report must be published in or translated to Spanish.
• Retaining the requirement to publish the directors’ report on the company’s website free of charge.
• Requiring subsidiaries or branches established in Spain whose parent companies are governed by the laws of third countries which are not EU member states to send information on the net revenues generated in Spain and in the EU by those parent companies from third countries.

In relation to the regulations on verification activities relating to the annual and consolidated sustainability information, the public were consulted in particular on the advisability or need for the following alternatives:

• For these activities to be able to be carried out by an independent provider of verification services or by an auditor other than the auditor of the company’s financial statements.
• For domestic legislation to be adopted regulating the verification work on sustainability information where this is not done by the European Commission.
• To require the sustainability verification report to be included as a separate section of the auditor’s report where that verification is carried out by the auditor of the financial statements.
• In relation to supervision of the verification activities relating to that information, the advisability or need to exempt the inspectors in charge of performing quality assurance in relation to the requirements for training and experience laid down by Directive 2006/43/EC transitionally, until December 31, 2025.

Regardless of which alternatives are finally chosen, the completion of that consultation period sets in motion work on transposing the corporate sustainability reporting directive, and compliance with it will be laid down on a staggered basis over the coming years, as we reported in our alerts in November and December 2022 (November alert and December alert).