ESG in Ukraine: how to harmonise European sustainability standards

The European context: from declarations to digital transparency

Since 2019–2021, the development of the European Union’s regulatory framework for environmental, social and governance (ESG) reporting has become systemic. The instruments introduced by the EU — CSRD, ESRS, the Taxonomy Regulation, SFDR and CSDDD — form a single architecture of requirements for disclosing non-financial data, identifying “green” economic activities, responsible conduct in supply chains and transparent positioning of financial products.

This framework creates new requirements for business and at the same time opens up access to “green” finance. For Ukraine, which has chosen the path of European integration, adapting these standards is both a legal and an economic necessity: harmonisation makes it possible to increase investment attractiveness, accelerate the “green” transition and comply with partners’ trade and financial conditions.

What are CSRD, ESRS and the Taxonomy, and why do they matter?

Directive 2014/95/EU (NFRD) was the EU’s first comprehensive step towards regulating non-financial disclosures: it required large companies to publish information on environmental, social and governance matters. Although the NFRD had limited scope and gave member states considerable discretion in the detail of reporting, it laid the groundwork for a further shift in approach — from declarative statements to unified, machine-readable reporting standards. The CSRD effectively replaces the NFRD, broadening its scope and detailing its requirements.

CSRD (Corporate Sustainability Reporting Directive) is a fundamental overhaul of the approach:

• first, it significantly expands the range of companies required to report (including large companies and certain parent companies with operations in the EU, as well as non-EU companies with significant activity in the EU);
• second, it makes reporting under the uniform ESRS standards mandatory;
• third, the CSRD introduces a requirement for external assurance and for reports to be submitted in a digital standard (XBRL), paving the way for a single European access point for ESG information (ESAP).
• and third, the CSRD enshrines the concept of “double materiality”: companies must report both on their impacts on sustainability and on how sustainability factors affect their financial performance.

Key implications of the CSRD for business and regulators:

• unified data disclosure structures (ESRS);
• a materiality approach;
• mandatory external assurance (“limited” and “reasonable” levels of assurance);
• the digital XBRL format as a mandatory filing condition.

ESRS (European Sustainability Reporting Standards) set out in detail the information blocks to be disclosed: topical standards for E (Environment), S (Social) and G (Governance), as well as cross-cutting standards (ESRS 1, ESRS 2). ESRS define minimum requirements, metrics, calculation methods (for example, for Scope 1–3 emissions) and the specifics of reporting elements (IROs — impacts, risks and opportunities).

ESRS are built on a materiality approach: not all metrics are mandatory for all companies — a company must carry out a materiality assessment and report on material matters. For the implementation period, a sector-agnostic approach is provided, alongside the development of sector-specific standards. Another important element is the XBRL taxonomy for ESRS, which ensures machine readability and standardises the reporting format.

The EU Taxonomy is a classification system for determining what can be considered “environmentally sustainable”. The Taxonomy sets technical screening criteria for substantial contribution to objectives (for example, climate neutrality), DNSH (“do no significant harm”) criteria and minimum social safeguards.

In practice, companies need to collect and disclose the shares of turnover, CapEx and OpEx that meet the Taxonomy criteria. Tools such as the EU Taxonomy Compass/Calculator and the NACE→Taxonomy map make it much easier to identify relevant activities. The Taxonomy is an important basis for “green” finance, sovereign “green” bonds and public funding mechanisms.

The Sustainable Finance Disclosure Regulation (SFDR) sets disclosure rules for financial market participants — from funds to investment advisers. SFDR requires financial products to be classified by environmental criteria (Article 6/8/9) and to disclose the sustainability impacts of investment policies. This creates demand for high-quality ESG data from issuers and affects the cost of capital.

The Corporate Sustainability Due Diligence Directive introduces due diligence obligations for large companies: identifying, preventing and mitigating adverse impacts on human rights and the environment in supply chains. The CSDDD establishes liability mechanisms and requirements for internal policies and the transparency of companies’ actions.

Ukraine’s progress: first steps and initiatives

Ukraine is gradually moving closer to European ESG practice, and positive developments include:

• drafting amendments to the Law “On Accounting” that integrate elements of sustainability reporting;
• the work of the Green Transition Office (DiXi Group), which is developing methodologies for assessing electricity emissions (Grid Emission Factors);
• discussions on using the XBRL format for ESG reporting;
• pilot “green” project initiatives supported by international donors, including under the Ukraine Facility.

These steps lay the foundation for a national ESG architecture, but the process remains fragmented and requires strategic coordination between state institutions.

Key challenges: no law and no market for verifiers

Despite the progress made, the state, regulators and business still face serious barriers:

• there is no framework law on sustainability reporting that would define the range of entities, the format and liability;
• there is no system of independent verification of ESG reports, without which investor trust in the data will be limited;
• digital infrastructure for XBRL reporting and open data is insufficient;
• SMEs are poorly prepared due to a lack of resources and skills;
• there is no inter-agency coordination between the Ministry of Finance, the Ministry of Environment, the Ministry of Economy and the State Statistics Service.

Recommendations: a roadmap for ESG harmonisation in Ukraine

Based on its analysis, the NGO “Open Data Association” has developed a set of proposals for the state, business and the expert community:

1. Legislative changes

• Adopt a framework law on sustainability reporting that sets out the principles of double materiality, the XBRL format requirement and verification mechanisms.
• Include references to the ESRS standards in the law to avoid duplicating technical rules.
• Introduce a state system for accrediting verifiers according to international standards (ISAE 3000).

2. Institutional reforms

• Establish a National ESG Reporting Council to coordinate the implementation of CSRD/ESRS.
• Launch a digital reporting platform (XBRL/ESAP-UA) — a Ukrainian portal for machine-readable ESG report filing.
• Create a national register of verifiers with open access.

3. Support for business

• Introduce grant and advisory programmes to prepare SMEs for ESG reporting.
• Run pilot programmes in key sectors such as energy, infrastructure and agriculture.
• Create training courses for CFOs, auditors and analysts on implementing ESRS.

Benefits for Ukraine

Adapting ESG standards offers Ukraine a number of long-term benefits:

• attracting “green” capital from international investors;
• increasing the competitiveness of Ukrainian companies on the European market;
• strengthening business resilience to climate and social risks;
• digitalising the economy through the introduction of the XBRL format and integration with European databases.

Conclusions

An analysis of the main European ESG standards (CSRD/ESRS, the EU Taxonomy, SFDR, CSDDD) shows the systemic and dynamic nature of European regulation: it combines technical rigour (metrics, XBRL) with institutional instruments (verification, taxonomy) and strengthens the role of ESG in investor decisions. Ukraine has significant prerequisites for adapting these standards: there is existing expert work (research by the DiXi Group Green Transition Office), government initiatives on accounting reform and international support (the Ukraine Facility).

At the same time, successful implementation requires a state framework reform — adopting a law on sustainability reporting, establishing verification institutions, developing national digital infrastructure (an XBRL portal) and support programmes for business, especially SMEs.

[note] Implementing the proposed roadmap will allow Ukraine not only to move formally closer to the EU acquis, but also to gain practical benefits: increasing investment in “green” projects, improving risk management and strengthening economic resilience during post-war recovery. It is important that implementation proceeds gradually, takes national specifics into account and is accompanied by broad consultation with business and civil society.

[source] The material was prepared by the NGO “Open Data Association” based on the study “Adapting the EU ESG regulatory framework in Ukraine: a comprehensive analysis and strategic recommendations”, 2025.