🌿 Introduction to the CSRD and Public Consultation by the MEF
The Italian Ministry of Economy and Finance (MEF), through its Treasury Department, has embarked on a significant initiative by opening a public consultation on the adoption of the European Corporate Sustainability Reporting Directive (CSRD).
This process reflects Italy's ambition to align with new European regulations aimed at enhancing transparency and the disclosure of information related to environmental, social, and governance (ESG) sustainability by businesses.
The primary goal of this directive is to strengthen s
ustainability reporting obligations, thus promoting greater awareness and commitment to sustainable business practices. The deadline for participation in the consultation is set for March 18, 2024, with the collected feedback to be publicly shared, ensuring transparency and inclusiveness in the directive's adoption process.
🔍 Details of the Decree and Scope of Application
The CSRD transposition decree, available for consultation, precisely outlines the supervisory responsibilities assigned to Consob and introduces key definitions to guide Italian businesses in applying the regulations.
Among the definitions provided, those related to "parent company," "subsidiary," "small and medium-sized enterprises" (SMEs), and "micro-enterprises" clearly delineate the directive's scope of application. Specifically, entities like the Bank of Italy and micro-enterprises are excluded, while insurance companies and credit institutions fully meet the applicability criteria.
This approach aims to calibrate the CSRD's implementation to reflect the specificities of the Italian business fabric, ensuring that the provisions are relevant and manageable for different categories of businesses.
📊 Insights on Reporting and Responsibility
The CSRD emphasizes the importance of individual and consolidated sustainability reporting, urging businesses to define clear ESG strategies, objectives, and policies. The articles of the decree explore various dimensions of this reporting, including the development of business strategies, identification of ESG objectives, management of sustainability-related incentives, and implementation of due diligence procedures on ESG risks.
It is crucial for businesses to adopt a holistic and integrated approach to sustainability management, considering not only internal impacts but also those on local communities and the environment.
Additionally, the decree establishes responsibilities and penalties for businesses that fail to comply with the directive's provisions, highlighting the importance of strictly adhering to reporting requirements to promote greater corporate accountability in the long term.
Which businesses are subject to the CSRD reporting requirements? Businesses subject to the CSRD include large enterprises and listed SMEs that must disclose sustainability information. The classification of businesses ranges from micro to medium and large enterprises, with specific criteria based on balance sheet total, net turnover, and number of employees. For instance, micro-enterprises have a balance sheet total not exceeding €350,000, a net turnover not exceeding €700,000, and no more than 10 employees. U.S. companies with a net turnover of more than €150 million in the EU in the last two financial years and at least one large subsidiary or listed in the EU's regulated markets are also subject to the CSRD requirements.
When will U.S. companies be subject to the CSRD? U.S. companies will be subject to the CSRD in four phases, starting in 2024 for large companies listed in an EU-regulated market with more than 500 employees. From 2025, all large listed U.S. companies will be included, and additional U.S. companies can come into scope if they have a large EU-based subsidiary. Companies with a non-calendar fiscal year, such as June 30, will need to report according to the CSRD for the fiscal period ending June 30, 2025 (i.e., reporting by the end of 2025).
What is EFRAG, and what is the nature and timing of the ESRS it is developing? EFRAG (European Financial Reporting Advisory Group) is an independent body tasked with developing the ESRS (European Sustainability Reporting Standards), which describe the information that businesses within the scope of the CSRD will be required to disclose. The first set of standards are sectorial and include twelve drafts of ESRS covering a wide range of sustainability issues. Each standard has its own disclosure requirements and data points, and all businesses must meet the general requirements of ESRS 1 and the general disclosure requirements of ESRS 2, regardless of materiality. Subsequently, a business must conduct a materiality assessment for the ten thematic standards to determine which are relevant to the business. Some disclosure requirements will remain voluntary regardless of the materiality assessment outcome.