Carbon Audits in 2026: EU Compliance, Risks and Practical Preparation

26.3.2026 | ARROWS law firm

Carbon audits in 2026 are a business and legal necessity, not merely an option. EU emissions legislation is fully in force, and failure to comply may result in significant penalties. The path to minimizing risks lies in voluntary audits and setting up compliance processes. In this article, we explain why legal prevention is cheaper than dealing with penalties afterwards and how to prepare for it in practice.

In the image, we see a lawyer during a consultation regarding a carbon audit in 2026.

Why you can no longer do without a carbon audit
Prevention as a legal strategy
Risks and sanctions if you operate without an audit
Financial sanctions and fines
How to prepare for a voluntary audit: practical steps
Voluntary audits as a defence tool
Conclusion: Prevention pays off economically

Quick summary

The obligations are already here: From 2025, the gradual rollout of mandatory reporting under the CSRD Directive and related legislation is underway. Failure to comply with this obligation or providing false information is subject to sanctions.
Voluntary audits reduce legal risks: If you carry out an audit proactively, you will identify shortcomings in time. In the event of a later inspection, a proactive approach and remediation may be viewed as a mitigating circumstance.
Pay attention to the details: Emissions data is a complex matter. Scope 3 calculations, the supply chain and contractual arrangements for data require specialist legal and process know-how, which the experts at ARROWS advokátní kancelář provide.
Preventing financial loss: A properly set up audit and compliance system protects you against allegations of greenwashing, sanctions under the CSDDD Directive and liability of statutory bodies for due management.

Why you can no longer do without a carbon audit

Legislation is tightening. The European Union has fully implemented the Corporate Sustainability Reporting Directive (CSRD), which imposes an obligation on large companies and, gradually, also medium-sized companies to report sustainability information. At the same time, strict emissions limits apply in transport and industry.

The regulation sets targets for reducing CO₂ emissions from new vehicles with a view to zero emissions from 2035, which has a direct impact on corporate fleets. Regulation (EU) 2019/631 therefore significantly affects companies’ depreciation policies.

However, this is not just about formally filling in tables. Under applicable legislation and related standards, the data must be verifiable and substantiated. Regulators and auditors examine whether the reported figures match reality.

If you report “green data” but the reality is different, you expose yourself to the risk of sanctions for misleading consumers and unfair competition.

If you decide to wait, you risk a state or tax inspection at the least convenient time. Supervisory authorities are entitled to request supporting documents for the financial statements, including contracts with subcontractors and energy invoices.

Retroactive assessments of sanctions or fines for incorrect bookkeeping can be devastating for a company.

Prevention as a legal strategy

Companies that have carried out an internal audit voluntarily and started addressing identified shortcomings before proceedings are initiated have a better negotiating position. Under Czech administrative law, efforts to remedy harmful consequences and cooperation with the authority are taken as mitigating circumstances when determining the sanction. A proactive approach is therefore the best defence.

Does the legislation apply to your company?

Under the current wording of the CSRD transposition in Act No. 563/1991 Coll., on Accounting, the obligation applies to companies meeting at least two of the three criteria. These are more than 250 employees, net turnover exceeding EUR 50 million, or assets exceeding EUR 25 million.

However, even smaller companies are drawn into the game if they supply large corporations that will require emissions data. These thresholds were adjusted in response to inflation (Commission Delegated Directive (EU) 2023/2775).

The legislation therefore effectively impacts the entire supply chain. Customers may require data (Scope 3) under the threat of contract termination.

Risks and sanctions if you operate without an audit

Ignoring requirements for carbon footprint monitoring and ESG reporting brings specific legal and financial risks.

Financial sanctions and fines

Sanction mechanisms are set at several levels. Incorrect or missing sustainability reports may result in sanctions amounting to a percentage of total assets or turnover, depending on the severity of the offence.

For the largest companies, the CSDDD Directive introduces sanctions that may reach up to 5% of the company’s net worldwide turnover. Directive (EU) 2024/1760 (CSDDD) thus represents a significant financial risk.

Unsubstantiated environmental claims may lead to sanctions which, under the directive, must be effective, proportionate and dissuasive. They often amount to percentages of annual turnover and include confiscation of profits from the transaction.

Insufficient internal controls and greenwashing

Many companies commit unintentional greenwashing. For example, a company presents its products as “carbon neutral” based on the purchase of cheap offsets without having calculated its actual emissions.

Under the Directive on empowering consumers and the Green Claims Directive, such conduct is sanctionable. Common mistakes include the absence of supply-chain data (Scope 3) or the use of outdated emission factors.

Lawyers at ARROWS advokátní kancelář handle cases where companies face complaints from competitors or consumer organisations. The reason is often technical errors in data that have legal consequences.

Liability of statutory bodies

Members of statutory bodies have a duty to act with due managerial care. Ignoring climate risks and related legislation may be assessed as a breach of this duty, giving rise to personal liability for damage incurred by the company.

Table of risks and solutions with ARROWS

Risks and sanctions	How ARROWS can help (office@arws.cz)
Sanctions under the Accounting Act (CSRD): Fines for incorrect or missing reporting of non-financial information, reaching up to a percentage of assets/turnover.	Reporting legal framework: We will assess whether, and to what extent, the obligation applies to you.
Greenwashing (misleading claims): Marketing communications do not match the data, exposing you to sanctions from supervisory authorities and reputational damage.	Compliance review of marketing claims: We will review your public sustainability statements through the lens of the Green Claims Directive and the Consumer Protection Act.
Breach of contractual terms (Scope 3): Loss of a key customer due to failure to deliver data on the product’s carbon footprint.	Contracting: We will set up clauses in your contracts with suppliers so that you have a legal entitlement to obtain the data you need for your calculations.
Liability of statutory bodies: A damages claim against managing directors for neglecting ESG risks.	Management protection: We will set internal policies and a governance structure so that statutory bodies can demonstrate due managerial care under Czech law.

How to prepare for a voluntary audit: practical steps

If you want to use an audit as evidence of compliance, the process must be formally flawless.

Defining the audit boundaries (Organizational Boundaries)

You must determine which entities fall within the audit. Is it consolidated data for the entire group, or only for the Czech entity? From a legal perspective, it is crucial to determine who has operational or financial control over the emission sources (under the GHG Protocol methodology).

ARROWS, a Prague-based law firm, helps define this scope in line with your company structure.

Data collection – Scope 1, 2 and 3

Scope 1 includes direct emissions, Scope 2 indirect emissions from purchased energy, and Scope 3 indirect emissions across the entire value chain.

From a legal perspective, Scope 3 is the most difficult because you must obtain data from third parties. It is necessary to verify whether you have a contractual right to the data and whether suppliers are obliged to provide it.

This is where attorneys step in—reviewing supplier contracts and creating legal leverage to secure the provision of data.

Calculation, validation and methodology

The calculation must be carried out according to a recognised methodology such as the GHG Protocol or ISO 14064. Using the correct and up-to-date emission factors is key.

If you use software, you must understand its methodology. The company, not the software, bears legal responsibility for the outcome.

Documentation and audit trail

You must be able to retrospectively substantiate every figure—who entered the data and on the basis of which invoice. This “audit trail” is what inspectors focus on.

In Excel, data can easily be lost or overwritten. You need an internal control system, the setup of which we can help formalise through internal policies.

Verification (Assurance)

Under the CSRD, limited assurance verification is mandatory and is performed by a statutory auditor or another accredited provider. For voluntary audits, this verification increases the credibility of the report for banks and investors.

Voluntary audits as a defence tool

Having an audit prepared and processes in place is a major advantage in the event of an inspection. When determining the amount of a fine, administrative authorities take mitigating circumstances into account.

If a company demonstrates that it made maximum efforts to comply with regulations and had a compliance programme in place, it may avoid a sanction altogether. The error may then be seen as an individual excess rather than a systemic failure.

Our Prague-based legal team at ARROWS specialises in representing clients in administrative proceedings. If you have high-quality audit documentation in hand, our work on your defence is far more effective.

Conclusion: Prevention pays off economically

The cost of setting up processes and carrying out an audit typically ranges from tens to hundreds of thousands of Czech crowns. Fines for breaches of obligations can reach millions of Czech crowns, not to mention reputational damage and the loss of business partners.

Our attorneys in Prague at ARROWS provide comprehensive legal support in the ESG area. We combine legal expertise with tax-related know-how and regulatory insight.

Our portfolio includes hundreds of companies that we help navigate the complex world of European regulations.

What services ARROWS can provide

Legal analysis of obligations and identification of which directives apply to you.
Setting up supplier contracts and internal policies for data collection.
Compliance review of reports and prevention of greenwashing.
Representation before supervisory authorities or in the event of disputes.

We are insured for liability for damages up to CZK 400,000,000 . With us, you have the certainty of a strong partner.

Interested in legal support for your carbon audit? Email us at office@arws.cz.

FAQ

1. Is the audit a one-off matter?
No. CSRD reporting is a recurring annual obligation. The data collection system must operate continuously. A one-off audit quickly becomes outdated.

2. Do we have to report even if we are a small company?
If you are not directly subject to the obligation under the Czech Accounting Act, you will likely still have to report at the request of your banks (due to loans and green financing) or your key customers (due to their Scope 3).

3. What if the audit reveals inconsistencies in previous years?
We recommend consulting an attorney. It may be appropriate to use the mechanism of a supplementary tax return or voluntary disclosure of remediation, which minimises the risk of sanctions. The approach must be strategically thought through. Contact us at office@arws.cz.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the topic based on the legal status as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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