Corporate Sustainability Reporting Directive

On December 14, 2022, the European Parliament and the Council issued Directive 2022/2464, which is called the Corporate Sustainability Reporting Directive (CSRD): this legislation is a significant step forward in the execution of the strategy to harmonize sustainability reporting by entities operating in the European Union, a key element in the implementation of Social Entrepreneurship (Objective No. 8 of the Single Market Act).

The sustainability reporting requirement is radically innovated, determining stricter reporting criteria and requiring more specific report content, but most importantly, the number of companies subject to this requirement is greatly expanded.

 

If, in fact, under the previous directive on the subject (Directive 2014/95) only public interest entities that were large entities or parent companies of a large group were required to compile the Sustainability Report, with the new legislation the obligation will expand to all large entities and parent companies of large groups (both listed and unlisted), as well as SMEs, with the exception of microenterprises, that are also public interest entities. To better understand the impact of this regulatory provision, suffice it to say that in Italy there were about 200 companies subject to the obligation under the 2014 Directive, but with the full entry into force of the CSRD it will become several thousand.

 

Another important new feature imported by the 2022 directive is the renewed content of Sustainability Reporting, which is expanded to include information related to the internal administration of the entity, such as a description of the role of the administrative, management, and supervisory bodies with regard to sustainability issues, but also information on the relationships the entity has with the outside world, starting with the main negative impacts related to the company’s activities and its value chain, including its business relationships and supply chain. The latter prediction has caused concern among many agencies, who fear the difficulties that obtaining such information might entail.

The European Union therefore has taken these difficulties into account, providing for milder reporting criteria, if not outright partial exemptions from the obligation, in cases where obtaining value chain information would be too burdensome or even impossible. To know more about how this new legislation will affect Italian entities, however, we will have to wait for the issuance of a national decree adapting the Italian system.

In fact, the CSRD has not yet entered into force (this will take place between 2024 and 2026, at different times depending on the nature and size of the entity) precisely to allow companies to prepare the necessary measures to obtain the required information; until then, entities will have to continue to refer to the 2014 European Directive, and in particular in Italy to the implementing legislative decree 254/2016.

Bibliography

CRSD

Directive 2014/94