This ESG Legal Update provides a snapshot of recent regulatory developments across Central and Eastern Europe and Central Asia, with input from Kinstellar's ESG Service Line members. Several cross-border trends emerge. The transposition of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D) remains ongoing in many jurisdictions, often delayed or adapted in response to recent EU-level changes. In parallel, regulators in multiple countries—such as Austria, the Czech Republic, Turkey, and Ukraine—are strengthening ESG risk management requirements in the financial sector.
There is also a clear push toward more robust environmental compliance and permitting regimes, with countries like Hungary and Slovakia introducing stricter enforcement rules. At the same time, national strategies are increasingly focused on climate and energy planning, supported by new green finance frameworks and policy instruments. This update reflects the shared expertise of Kinstellar's ESG practitioners across the region and aims to provide practical insight into evolving ESG obligations and opportunities.
Austria
Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) – transposition delayed
As of the end of Q2 2025, neither the Corporate Sustainability Reporting Directive (CSRD) nor the Corporate Sustainability Due Diligence Directive (CS3D) have been implemented in Austria. A national draft law for the transposition of the CSRD has been published and is currently awaiting approval by the Austrian parliament. The draft was issued on 27 March 2025, but its adoption timeline remains uncertain. Crucially, the current draft does not provide for any "goldplating" – i.e., it mirrors the minimum requirements of the directive without adding stricter national obligations. However, it is worth noting that the draft is based on the original version of the CSRD and does not yet reflect the updates introduced by the "Stop the Clock" amending directive, which deferred reporting deadlines and eased certain reporting obligations.
Austrian companies are therefore advised to monitor the legislative process closely, as further changes may be expected before final adoption.
Financial market authority enhances sustainability risk guidance
On 31 March 2025, the Austrian Financial Market Authority (Finanzmarktaufsicht – FMA) published a fully revised cross sectoral Guide for Managing Sustainability Risks, expanding on its 2020 version. The guide now places stronger emphasis on natural and biodiversity risks, transition planning, greenwashing, and climate-related litigation. This represents a clear signal that financial firms must integrate sustainability risks into core risk management frameworks and board-level oversight (see: https://www.fma.gv.at/wp-content/plugins/dw-fma/download.php?d=7275&nonce=cfe935c2493d74b4 – in German only).
Financial market authority demands clearer SFRD classification
On 30 May 2025, the Austrian FMA, together with Germany's BaFin and the Dutch AFM, submitted a joint letter to the European Commission calling for a fundamental overhaul of the Sustainable Finance Disclosure Regulation – SFDR (EU Regulation 2019/2088). Regulators propose replacing the current Article 8 and 9 product categories – "light green" and "dark green" products – with two clearer labels – "sustainable" and "transition" – and urged the introduction of binding minimum standards for ESG product classifications. They also advocated for stricter naming rules to combat greenwashing and better alignment with related EU frameworks such as MiFID II and the Insurance Distribution Directive.
Bulgaria
Amendments to the Energy from Renewable Sources Act ("ERSA")
The Bulgarian parliament has adopted amendments to the Energy from Renewable Sources Act ("ERSA"), effective from 10 June 2025, designed to:
- implement the requirements of Article 1(7) of Directive (EU) 2023/2413, addressing Articles 16, 16b, 16c, and 16d of Directive (EU) 2018/2001 on promoting renewable energy use;
- incorporate the provisions of Commission Delegated Directive (EU) 2024/1405 of 14 March 2024, which updates Annex IX of Directive (EU) 2018/2001 by adding new feedstocks under categories "A" and "B" for biofuel and biogas production; and
- streamline and shorten administrative procedures for permitting investment projects to build renewable energy facilities.
Integrated Energy and Climate Plan ("IECP")
Pursuant to Regulation (EU) 2018/1999 and the relevant national laws, Bulgaria has developed a draft updated Integrated Energy and Climate Plan (IECP) for the 2021–2030 period. This plan establishes national objectives across five key areas: decarbonization, energy efficiency, energy security, the internal energy market, and scientific research, innovation, and competitiveness.
The updated IECP has been published on the European Commission's website and incorporates a wide range of input gathered during preliminary consultations and engagements with the European Commission. It also reflects contributions resulting from discussions with various stakeholders, including representatives of the business community, non-governmental organizations, academia, and Bulgaria's neighbouring countries.
Currently, the updated IECP is undergoing an environmental assessment. Upon successful completion, the plan will be submitted to the Council of Ministers for approval.
Bill for the Amendment and Supplementation of the Clean Air Act
In April 2025, a bill proposing amendments and supplements to the Clean Air Act was published on the Bulgarian parliament's website. Among its key provisions, the bill addresses the issues identified in Infringement Procedure INFR(2020)2106. Specifically, it seeks to empower natural and legal persons directly impacted by exceedances of PM10 limit values, as well as by failures to implement timely and adequate measures to mitigate such exceedances. Furthermore, it enables environmental protection organizations to initiate legal proceedings before the Bulgarian courts. This includes the right to contest the purported compliance of a given air quality plan with Article 23(1) of the Air Quality Directive and to compel the public authorities to develop air quality plans that fully adhere to the requirements outlined via these provisions.
Draft Social Climate Plan of the Republic of Bulgaria ("SCP")
In June 2025 a draft Social Climate Plan ("SCP") was published on the government's public consultation portal. In accordance with Bulgaria's obligations under Regulation (EU) 2023/955, the SCP serves as a strategic framework encompassing structural measures, temporary income support mechanisms, and technical activities designed to ensure the effective and inclusive implementation of policies under ETS2 (European Union Emissions Trading System). The SCP is fully integrated with the national climate and energy framework, complementing the Integrated National Energy and Climate Plan, the Long-Term Renovation Strategy for the Building Stock, and the Territorial Just Transition Plans (TJTP). The public consultation period is scheduled to conclude on 20 July 2025.
Croatia
Revised Integrated National Energy and Climate Plan of the Republic of Croatia for the period 2021–2030 (NECP)
On March 26, 2025, the Croatian government adopted a revised Integrated National Energy and Climate Plan (NECP) for 2021–2030. The Ministry of Environmental Protection and Green Transition and the Ministry of Economy are jointly responsible for coordinating its implementation. The updated NECP, submitted to the European Commission on March 27, 2025, aligns Croatia's policies with the EU's "Fit for 55" package, aiming to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 and to achieve climate neutrality by 2050. Key 2030 targets include a 62% emissions cut in Emissions Trading System (ETS) sectors (vs. 2005), a 16.7% cut in non-ETS sectors, a 42.5% renewable energy share in gross final consumption, 24.6% renewables in transport, and defined limits for primary and final energy use. The NECP is Croatia's main implementing document for its long-term low-carbon strategy, revised in line with applicable EU climate legislation.
ESG Rating system for the Croatian Chamber of Economy (HGK)
The HGK ESG Rating is a platform that assesses a company's performance in environmental, social, and governance (ESG) areas. By completing an intuitive ESG questionnaire covering general and sector-specific sustainability aspects, companies receive an individual ESG rating, with the option for a detailed report comparing them to industry benchmarks and offering guidance for improvement. The HGK ESG Rating aligns with regulatory requirements, financial institutions' expectations, and industry best practices, helping companies understand their current sustainability performance and to identify opportunities for progress. The questionnaire is designed for large firms as well as SMEs, supporting compliance efforts, supply chain positioning, and communication with stakeholders. Five key benefits are: assessing ESG risks and performance, attracting investors and better financing conditions, tracking progress against EU requirements, benchmarking against peers, and boosting reputations with customers, employees, and partners.
Czech Republic
Corporate Sustainability Reporting Directive (CSRD) transposition
The transposition of the Corporate Sustainability Reporting Directive (CSRD) is being carried out via an amendment to the Accounting Act, among others. This transposes the second phase of obligations under the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) that have yet to be fully transposed into Czech law. The amendment was originally proposed as a transposition of the second and subsequent phases, as outlined in the CSRD timeline. However, Czech legislators decided to use the amendment to implement changes proposed by the EU Commission under the ESG omnibus package.
These amendments to the draft legislation principally incorporated the Stop-the-Clock Directive and other changes affecting companies, effectively anticipating the development of pending EU legislation. Of particular note is the change to the threshold for determining which companies are affected, which increases the employee count from 500 to 1,000. The amendment has been passed by the lower house of the Czech parliament and will now be debated in the Senate. It is not expected to be further challenged and is anticipated to signed into law in Q3 2025.
Corporate Sustainability Due Diligence Directive (CS3D) – transposition delayed
Following the introduction of the ESG omnibus package by the EU Commission and the passing of the Stop-the-Clock Directive, no formal changes to the transposition process have occurred in the Czech Republic. The Ministry of Justice, as the ministry responsible for the implementation of Directive (EU) 2024/1760 (CS3D), has indicated that further active work on the implementing legislation has effectively paused. Particularly in light of the postponement of the CS3D transposition deadline to 26 July 2027 and in light of the recent position by the Council and European Parliament regarding the extensive scope of amendments needed in the initial policy draft. Further detailed work would be viewed as premature at this stage of legislative drafting. Once the changes to the CS3D are further elaborated at the EU level, the ministry plans to initiate corresponding updates to the Czech government's Legislative Work Plan along with the necessary respective preparatory work.
Capital Requirements Directive VI (CRD VI) - ESG risks and CRD VI transposition
In March 2025, the Czech government submitted a proposal for amendments to acts governing the financial sector in order to transpose Directive (EU) 2024/1613 (CRD VI). The proposed legislation introduces several ESG-related obligations for financial institutions, including the requirement to integrate environmental, social, and governance (ESG) risks into internal strategies and risk management processes. Institutions will be required to assess current and foreseeable ESG impacts and prepare targeted ESG-related action plans, which must be approved at the management body level. It also establishes a new authorization regime for third-country firms offering "core banking services" in the EU. These entities will be required to establish licensed branches in the EU to continue operations, aiming to harmonize treatment and supervision of third-country institutions and to mitigate risks to financial stability.
The draft legislation has already been passed in the lower chamber of the Czech parliament and is now being debated in the Czech Senate.
EU Deforestation Regulation (EUDR) – Postponement and Risk Country Classification publication
The applicability of the EU Regulation on Deforestation-free products 2023/1115 (EUDR) has been officially postponed by one year, shifting the start date to 30 December 2025 and for SMEs to 30 June 2026. This follows feedback from industry and member states on the need for more time to implement the regulation effectively.
The Czech National Forestry Institute (NLI) initiated outreach through seminars held in June to help stakeholders prepare for compliance. Additionally, the EU Commission has published a classification of countries based on the risk of deforestation, which will influence due diligence requirements under EUDR. The Czech Republic has been classified as low risk and may therefore proceed in accordance with Article 13 of the EUDR, thereby applying "simplified due diligence".
Pay Transparency Directive – Upcoming Transposition
The Czech Ministry of Labour and Social Affairs has initiated preparatory steps for the implementation of Directive (EU) 2023/970 (the Equal Pay Transparency Directive), which mandates equal pay for equal work and increases employer obligations for transparency in pay structures. The directive is expected to be transposed into Czech law through amendments to the Labour Code and the Civil Procedures Code.
ETS2 – Delay Sought by 16 Member States Including the Czech Republic
A group of 16 EU Member States, including the Czech Republic and France, have proposed a deferral of the EU's new emissions trading system for buildings and road transport (ETS2), originally set to start in January 2027. The Czech proposal calls for implementation to be postponed until at least 2028. The Czech Republic has not yet incorporated ETS2 into national legislation and is advocating for safeguards against price volatility in emissions allowances. The proposal has received significant political support and is expected to be considered by the end of 2025.
ETS2 is expected to cover approximately 15% of EU emissions and would apply to fossil-based heating and fuel for road transport. Exemptions apply to renewable fuels such as wood pellets, biomethane, and biofuels.
Czech Climate Change Lawsuits
The Czech Republic's first ever climate-related lawsuit is soon to be reviewed by the Czech Constitutional Court. The claimants (the Klimatická ~aloba ČR association along with a number of individuals) challenged the Czech Supreme Administrative Court's dismissal of the case in November 2024. According to the claimants, the Czech Republic failed to adopt specific mitigation measures that would lead to a 55% reduction in greenhouse gas emissions by 2030 compared to 1990 levels. They also argue that the Czech Supreme Administrative Court incorrectly assessed interference with the constitutionally guaranteed rights of the complainants and failed to provide them with the necessary protections.
Separately, in May 2025, the Poslední generace association filed a lawsuit against the City of Prague for allegedly failing to establish sustainable conditions in strategic and spatial planning, seeking recourse against the consequences of this inaction. The claimants argue that the City of Prague failed to update its strategic plan in line with the 2030 Agenda (a United Nations global action plan), to take into account the Leipzig Charter on Sustainable European Cities, to integrate the action plan's measures into binding spatial planning documentation, and to implement effective monitoring and reporting mechanisms.
European Commission assesses the Czech National Energy and Climate Plan (NECP)
In May 2025, the European Commission issued an assessment of the Czech Republic's National Energy and Climate Plan. The Commission noted that the Czech target for renewable energy sources failed reach the necessary share to meet European targets. It also noted the absence of specific measures to support the acceleration of renewable energy source development and the development of so-called "energy communities". Contrary to the European Commission's recommendations, the Czech plan also does not contain specific measures to reduce fossil fuel consumption or to phase out fossil fuel subsidies; moreover, it also failed to specify measures to mobilise private investments, as well as to provide robust estimates of the respective investment needs.
To view the full article click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
