The concept of sustainable development and ESG in the Ukrainian regulatory framework
Authors: Nazar Chernyavsky, Partner Sayenko Kharenko, Natalia Hutarevych, Senior Associate Sayenko Kharenko, Natalia Khmelovska, Associate Sayenko Kharenko
As the concept of ESG is gaining more and more attention in Ukrainian society and consequently in policy and regulation, it is helpful to determine at what stage of development the concept of ESG is currently in Ukrainian legislation.
The concept of sustainable development at the strategic level
In the previous publication, ESG as a tool for achieving sustainable development and strategic business goals, we concluded that the concepts of sustainable development and ESG are correlated, where “sustainable development” is a general vector concept for decision-making at the international, state and business management level.
Therefore, the vector of sustainable development is enshrined in Ukrainian legislation:
- The Sustainable Development Goals of Ukraine for the period up to 2030, approved in 2019, are the guidelines for developing draft forecast and programme documents and draft regulations to ensure a balance between the economic, social and environmental dimensions of Ukraine’s sustainable development.
- In 2023, the Government established an Interagency Working Group to ensure the achievement of the Sustainable Development Goals.
- Targets for achieving the Sustainable Development Goals for the period up to 2030 and indicators for their achievement, approved by the Government in 2024. These targets reflect all three areas of the ESG (Environmental, Social, Governance) concept at the national policy level. The declared objectives aim to integrate the principles of sustainable development into all areas of the state and business, supporting economic as well as environmental and social well-being. Therefore, the indicators for achieving the Sustainable Development Goals (SDGs) can informally be seen as practical tools for implementing the ESG concept in Ukraine.
- The National Economic Strategy for the period up to 2030, approved by the Government in 2021, also stipulates the need to consider the SDGs to achieve economic results.
- The Strategy for the Implementation of Sustainability Reporting by Enterprises, approved by the Government in 2024, defines an enterprise’s access to non-financial information as a key factor in ensuring sustainable development and increasing its investment attractiveness and competitiveness. The strategy envisages the introduction in Ukraine of the regulation on the preparation of reports on sustainable development according to European standards (ESRS) in 2025, its subsequent submission and publication.
Current reporting requirements
The Law of Ukraine “On Accounting and Financial Reporting in Ukraine” and the Procedure for Submission of Financial Statements oblige large enterprises (and allows other enterprises) to prepare and publish a management report. This document contains financial and non-financial information that describes the enterprise’s state and prospects and discloses its activities’ principal risks and uncertainties. However, this report is not part of the financial statements.
The Guidelines for Preparing a Management Report provide for the following:
- In the area of environmental aspects, it is recommended that information on the environmental impact of the company’s activities be provided, depending on the industry in which the company operates and the measures taken to protect the environment and reduce its environmental impact. Indicators characterising rational water use, waste management, greenhouse gas emissions, energy consumption, etc., should be disclosed.
- In the area of Social Aspects and Human Resources Policy, it is recommended to provide information on the total number of employees and the share of women in management positions; incentives (motivation) of employees, occupational health and safety; staff training and education; equal employment opportunities; respect for human rights; measures to combat corruption and bribery, etc.
- In the area of Corporate Governance, it is recommended to provide information on governing bodies, their composition and powers, corporate governance strategy; convening and holding general meetings of shareholders; shareholder structure and their ownership interests in the share capital; holders of securities with special control rights and description of these rights; company’s activities about transactions with own shares; main characteristics of the internal control system; dividend policy; prospects for development and improvement of corporate governance.
The State Ownership Policy also stipulates that enterprises with a controlling share of the state that prepare a management report should include in the management report non-financial information on the impact of the relevant enterprise on the environment, contribution to sustainable development, social protection of employees, prevention of corruption, as well as an assessment of the enterprise’s compliance with the principles and recommendations on corporate governance and management of state-owned enterprises approved by the OECD.
In the extractive sector, the Law of Ukraine “On Ensuring Transparency in the Extractive Industries” should be taken into account, which is aimed at fulfilling Ukraine’s international obligations in connection with its accession to the Extractive Industries Transparency Initiative (EITI), which aims to introduce a system of collection, disclosure and dissemination of information to ensure transparency and prevent corruption in the extractive industries. Thus, the Law provides for the preparation and submission of the EITI report, the report on payments received, the report on payments to the state and the consolidated report on payments to the state, as well as requirements for the content and timing of these reports, and is the implementation of the G-component of the ESG concept in Ukrainian legislation.
It should also be noted that the legislation establishes a number of specifics regarding the submission of reports, in particular, the possibility of submitting them within three months after the termination or cancellation of martial law.
Areas of the ESG concept in Ukrainian legislation
In addition to the regulations mentioned above, which are more related to reporting, Ukrainian legislation contains principles of activity in certain areas and requirements for enterprises’ activities, which are further divided into the relevant ESG areas. The following lists are not exhaustive and are intended to outline the main legislative acts containing certain aspects of the ESG agenda. In addition, Ukraine is a signatory to several international agreements that regulate certain aspects of ESG, which are not the subject of this analysis.
Environment (E):
- The Law “On the Basic Principles of the State Climate Policy” (for more details, see the publication Opportunities and Challenges Related to the Development of Climate Legislation).
- The Law “On the Basic Principles (Strategy) of the State Environmental Policy of Ukraine for the Period up to 2030”.
- The Law “On Environmental Protection” provides limits on the use of natural resources and pollutant discharges, as well as measures to encourage the rational use of natural resources.
- The Law “On Environmental Impact Assessment” obliges businesses to conduct environmental impact assessments of their operations or future projects with public involvement.
- The Law “On Waste Management” aims to reduce waste, maximise resource recovery, and ensure safety for people and the environment.
- The Law “On Integrated Prevention and Control of Industrial Pollution” provides, inter alia, for introducing an integrated environmental permit*.
- Legislation aimed at protecting specific areas of the environment: Subsoil Code of Ukraine, Water Code, Forest Code, Land Code, Laws of Ukraine “On the Nature Reserve Fund of Ukraine”, “On Land Protection”, “On Atmospheric Air Protection”, “On the Principles of Monitoring, Reporting and Verification of Greenhouse Gas Emissions”, “On Water Drainage and Wastewater Treatment”, etc.
- Energy efficiency legislation: The Laws of Ukraine “On Energy Efficiency”, “On Energy Efficiency of Buildings”, etc., the provisions of which contribute to a significant reduction in greenhouse gas emissions, which is directly in line with the environmental goals of the ESG concept.
- Legislation promoting alternative fossil fuels and energy sources: ‘The Law “On Alternative Fuels” and the Law “On Alternative Energy Sources”, as the transition to renewable energy sources allows reducing dependence on coal, oil and gas, which reduces emissions and pollution.
Social sphere (S):
In general, the social sphere in the dimension of the company’s activities is regulated by labour legislation governing employment, labour safety, equality, inclusiveness and social protection, namely:
- The Labour Code of Ukraine serves as the basis for the social aspects of the ESG concept, promoting social responsibility and sustainable business. The protection of employees’ rights and the assurance of safe and healthy working conditions in the Labour Code are consistent with the principles of social responsibility in ESG.
- The Law “On Employment of the Population” regulates employment and protection of citizens’ rights to work, including social protection guarantees in case of unemployment. It defines the legal, economic and organisational framework of the state policy in employment.
- The “Vacation Leave Law” guarantees the provision of vacation leave with job and salary retention and prohibits the replacement of vacation leave with monetary compensation, except in certain cases.
- The Law “On Pensions Provision” guarantees the provision of pensions to employees.
- Legislation on bodies and instruments to protect employees’ rights: The Law “On Trade Unions, Their Rights and Guarantees of Activity” and the Law “On Collective Bargaining Agreements and Contracts”.
- Legislation aimed at combating discrimination: The Laws of Ukraine “On Principles of Preventing and Combating Discrimination in Ukraine” and “On Ensuring Equal Rights and Opportunities for Women and Men”.
Governance (G):
In addition to the legal reporting requirements outlined above, there are other issues to consider in the area of Governance:
- Anti-corruption legislation: The Laws of Ukraine “On Prevention of Corruption”, “On the Principles of State Anti-Corruption Policy for 2021-2025”, “On Prevention and Counteraction to Legalisation (Laundering) of Proceeds of Crime, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction” regulate the integrity and transparency of companies and their management, which is key to the ESG pillar “Governance”.
- The Law “On Access to Public Information” obliges public companies to provide information on their activities, which correlates with the ESG principles of transparency and reporting on the company’s activities and management.
- Laws on specific types of enterprises: The Law “On Joint Stock Companies” and the Law “On Limited Liability Companies and Additional Liability Companies” set out requirements for transparency of management for stakeholders (shareholders, the public) to assess.
- Legislation containing governance requirements in specific areas: The Laws “On Capital Markets and Organised Commodity Markets” (includes requirements for corporate governance of professional participants in capital markets and organised commodity markets), “On Management of State-Owned Property”, and the State Property Policy(defines the specifics of management of state-owned enterprises).
Conclusions
Therefore, based on the above, we can conclude that, in general, the concept of sustainable development is reflected in Ukrainian legislation at the level of strategic documents with certain tools for further implementation of this vector. The term ESG is not used in Ukrainian legislation, and government agencies have no explanations for this concept by government agencies, but its components are declared in legislative acts. In addition, the principles set out in the framework laws should be considered, as they perform a guiding and coordinating function in aspects not directly regulated by law.
In general, companies should take into account the existing Ukrainian legislation in their long-term strategic planning, which contains several ESG requirements that can already be assessed and taken into account in the company’s activities, both ESG risks in case of non-compliance and Ukraine’s vector towards harmonisation of legislation with EU law in the field of sustainable development and ESG.
If you would like to discuss the issues raised in this paper in more detail, please contact the SK team.
Information contained in this legal alert is for general informational purposes only, does not constitute legal or other professional advice and should not be relied upon as a substitute for specific professional advice adapted to the specific circumstances.
* Enters into force on 08 August 2025.
