The silent revolution of the CSRD directive

On January 1, a new one came into effect European directive which has attracted little attention but which could have very important effects on the finance. We are talking about the Corporate Sustainability Reporting Directive (CSRD)That it forces companies to publish detailed reports on their sustainability data. In Brussels’ intentions, the directive should “reduce greenwashing, strengthen the social economy of the EU market and lay the foundations for standards of transparency on sustainability worldwide”. The CSRD complements what is already provided for by another directive, the NFRD (Non-Financial Reporting Directive), which is unanimously perceived as insufficient.

The recipients of the new disclosure obligations

The new ones transparency obligations on sustainability will apply to all large companies, listed on the stock exchange or not, and – an absolute novelty – foreign companies that invoice more than 150 million euros inEuropean Union. Small and medium-sized businesses will also have to adapt to the new rules, but they will have more time to do so. According to data communicated by Brussels, the collection and sharing of information on sustainability will become the norm for almost 50,000 companies, almost five times as many as those covered by the current standards (11,700). In this regard, the rapporteur Pascal Durand said during the plenary debate: “Europe is demonstrating to the world that it is truly possible to guarantee that finance, in the strict sense of the term, does not govern the entire global economy”.

The stages envisaged by the CSRD are as follows. It will start on 1 January 2024 when themandatory for companies with more than 500 employees (already subject to the NFRD), which will have to publish the data by 2025. On 1 January 2025, however, it will be the turn of large companies not yet subject to the NFRD (with more than 250 employees and/or 40 million euros in turnover and/ o 20 million euros of total assets): for them the deadline for the publication of the data is set at 2026. Ultimately, SMEs and other listed companies will be involved for which the deadline has been set at 2027 (SMEs will however be able choose not to participate until 2028).

The evolution of the concept of sustainability

“This regulatory intervention is a historic milestone: from now on companies will have to publicly confront their responsibilities in terms of sustainability – he says Alexis Bienvenu, manager of La Financière de l’Echiquier – Since the Rio summit in 1992, the concept of sustainability has made its way into the public sphere although it has not yet been given a concrete, normative and widespread translation in the financial sphere. It is now a done deal, and also well done because the subject is dealt with in an exhaustive – and certainly complex – way from the point of view of “double materiality”. The expression not only refers to the impact of the environment and society on the activities of companies, known as “financial materiality” in a view focused on the risk that affects them, but it also connects with the impact of companies on the environment and on society, and therefore with their responsibility towards some aspects of life that are not merely economic. This is perhaps the most original point of the provision: recognizing the interdependence between ESG dimensions and companies, and not just the risk to which they are subjected by the environment”.

Scope 3 reporting

The CSRD requires the Scope 3 reporting, which includes the collection of information on sustainability along the supply chain. An approach that goes much deeper into the analysis of emissions: it is usually limited to what is directly issued by the company subject to the report. Verification by an independent assurance service provider is also required, who will evaluate the processes a business has in place for data collection. This, together with the need to digitize data, will require major investments in technology.