With the aim of preparing and being ready for the arrival of the Corporate Sustainability Reporting Directive (CSRD) and its obligations, the first step is to understand what it is all about.
The Corporate Sustainability Reporting Directive (CSRD) came into force on 5 January 2023 and replaces the current Non-financial Information Disclosure Directive (NFRD) of 2014.
The text of the new Directive 2022/2464 was published on 16 December 2022 in the Official Journal of the European Union, following approval by the European Council on 28 November.
The Directive introduces more detailed reporting requirements and ensures that large companies and listed SMEs are required to provide information on sustainability issues, such as environmental rights, social rights, human rights and governance factors.
The directive introduces new rules for sustainability reporting and extends to a much wider audience of companies the obligation to disclose information on sustainability issues: from 11,800 current to about 50,000 future companies involved. New rules will apply to all large companies and to all companies listed on regulated markets, except for listed micro-enterprises. These companies are also responsible for assessing the information applicable to "subsidiary" companies. A better analysis of sustainability generates an advantage not only for the company and its investors, but for all actors of civil society, including individual citizens.
The directive is not directly applicable but each Member State of the European Union will have to transpose it into national law.
The CSRD was introduced to establish a common standard for corporate sustainability reporting across the Union, which is essentially the same as for financial reporting. The goal is to accelerate the transition to a more sustainable economy by increasing the responsibility of companies in terms of communication, through the tool of sustainability reporting, avoiding the possible proliferation of divergent rules. Financial markets need access to reliable, relevant and comparable environmental, social and governance information.
The Directive will be applied progressively as follows:
The size of an enterprise is determined by three criteria (the balance sheet total - total assets, the net turnover, and the number of employees) according to EU Directive 2013/34/EU - Comparable and clear company accounts throughout the European Union and D.Lgs. 18 August 2015, n. 139 - implementation of Directive 2013/34/EU.
To fall into a given size category, an undertaking must, in line with the requirements for the financial statements, meet at least two of the three criteria for two consecutive financial years: