On August 30, 2024, the Italian Council of Ministers completed the transposition process of Directive 2022/2464/EU, known as the CSRD Directive (Corporate Sustainability Reporting Directive), concerning corporate sustainability reporting. This new regulatory framework represents a significant change for the European business world, introducing stricter and more detailed requirements for companies in terms of transparency and sustainability. Let’s take a closer look at what the CSRD entails, the new developments for companies in Italy, and the next steps the European Union is taking towards greater sustainability.
What is the CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is a European Union directive aimed at standardizing and improving companies’ sustainability reporting. It was introduced to replace the previous Non-Financial Reporting Directive (NFRD) of 2014, responding to the growing demand for transparency and reliability in the sustainability information provided by companies. While the NFRD applied to about 11,700 companies in the EU, the CSRD significantly expands the scope to about 50,000 companies, including listed SMEs.
The CSRD aims to:
Improve transparency: Companies are required to provide more detailed and comparable information on their environmental, social, and governance (ESG) impacts, allowing investors and other stakeholders to better assess sustainability-related risks and opportunities.
Standardize reporting: The CSRD introduces common reporting standards at the European level, developed by the European Financial Reporting Advisory Group (EFRAG), ensuring that sustainability information is comparable and reliable.
Integrate financial and non-financial reporting: Companies must include sustainability information in their management reports, with the same level of care and transparency as financial information.
Broaden the scope of companies affected: Not only large companies but also listed SMEs, small and non-complex credit institutions, and captive insurance companies will need to comply with these new requirements.
New Features of the Italian Legislative Decree
The legislative decree approved by the Italian Council of Ministers introduces some significant changes compared to the version proposed during the public consultation phase. Among the key new developments:
Recipients: Originally, the proposal stated that the sustainability reporting obligation applied to listed SMEs with 50 to 250 employees. However, in the final version of the decree, the range was extended to companies with 11 to 250 employees, encompassing a larger number of businesses.
Sanctions: Sanctions for violations related to sustainability reporting will be managed by Consob. For the first two years after the decree comes into force, a moderated sanctioning regime will be applied:
- Audit companies: fines not exceeding €125,000.
- Sustainability auditors: fines not exceeding €50,000.
Timeline
The implementation of the CSRD will follow a gradual schedule, progressively involving different categories of companies:
From January 1, 2024 (with data publication in 2025): the reporting obligation begins for companies already subject to the Non-Financial Reporting Directive (NFRD).
From January 1, 2025 (with publication in 2026): the obligation will extend to all other large companies not covered by the NFRD.
From January 1, 2026 (with publication in 2027): listed SMEs, small and non-complex credit institutions, and captive insurance companies must also comply.
From January 1, 2028 (with publication in 2029): the obligation will apply to branches and subsidiaries of non-EU companies that have generated, in the previous two years, net revenues exceeding €150 million in the EU, either at group or individual level.
Future Developments
The adoption of the CSRD is just one of many steps the European Union is taking to promote corporate sustainability. Among the future developments and initiatives in this direction:
Development of European Sustainability Reporting Standards (ESRS): EFRAG is developing specific standards to guide companies in reporting ESG data.
Revision of the EU Taxonomy: The CSRD integrates with the EU Taxonomy, a classification system that defines which economic activities can be considered sustainable.
Digitalization and accessibility of sustainability data: The EU aims to create a digital infrastructure that allows access to companies’ sustainability data, facilitating verification and analysis processes for investors and stakeholders.
Implementation of the European Green Deal: The CSRD is just one component of the broader European Green Deal, which aims to make Europe the first climate-neutral continent by 2050.
The transposition of the CSRD Directive in Italy represents a significant shift in how companies approach sustainability. The EU is setting a new global benchmark for corporate transparency, and companies face a major task in aligning with this new model.
What can be done now?
Our team is ready to meet the new challenges posed by these directives. Together with companies and the supply chain, we can start working towards chemical traceability, collecting and organizing product and environmental data through a tailored testing program. This enables the creation of complete and detailed reports that provide companies with active monitoring and supplier risk assessment.
To develop the best strategy for your needs, contact us using the form at the bottom of this page.
