Sustainability Reporting: New Obligations and Opportunities for Companies in the ESG Transition

With the publication in the Official Journal of Legislative Decree no. 125 of 6 September 2024, which took place on 10 September 2024, Italy implements the European Corporate Sustainability Reporting Directive (CSRD) 2022/2464/EU. This regulatory act, which will come into force on 25 September 2024, introduces the obligation of sustainability reporting for a wide range of companies operating in the national territory. With the aim of promoting transparency and responsibility of companies in the ESG (Environmental, Social and Governance) field.

What is sustainability reporting?

But what exactly is sustainability reporting? It is not simply a new bureaucratic requirement, but a real paradigm shift in corporate culture. Sustainability reporting (also called ESG reporting or sustainability reporting) includes all those reporting and reporting activities that illustrate the concrete commitment of companies in pursuing ESG objectives.

Through this process, companies measure, communicate and take responsibility (accountability) for their actions towards internal and external stakeholders. The goal is to provide a clear and transparent picture of the company's social and environmental impact, highlighting not only the progress made, but also the critical issues still to be addressed on the path towards truly sustainable development.

Sustainability reporting thus becomes a strategic tool for dialogue and building a relationship of trust with its stakeholders, demonstrating how the creation of economic value can and must go hand in hand with social well-being and environmental protection. And this regardless of the type of document actually drawn up by the company, in fact we also talk about sustainability reporting as a corporate reporting tool.

Since when is sustainability reporting mandatory?

The entry into force of the sustainability reporting obligation is not univocal, but follows a staggered calendar starting from 1 January 2024. The CSRD in fact provides for a gradual approach to allow companies to best adapt to the new provisions.

• From 1 January 2024 : the obligation concerns companies already subject to the Non-Financial Reporting Directive (NFRD). Specifically, this concerns:

  • Large enterprises constituting public interest entities with more than 500 employees.

  • Parent companies of a large group, classified as public interest entities, with more than 500 employees on a consolidated basis.

• From 1 January 2025 : the obligation extends to all large companies, i.e. those that exceed at least two of the following criteria:

  • Total assets: 20 million euros.

  • Net revenue: 40 million euros.

  • Average number of employees: 250.

• From 1 January 2026 : it is the turn of listed small and medium-sized enterprises (SMEs), with the exception of microenterprises.

• From 1 January 2028 : the obligation also applies to non-EU companies with an annual turnover exceeding 150 million euros in the EU and which have an operational headquarters or a branch in the European Union, classified as a large enterprise or listed SME, with a net turnover exceeding 40 million euros in the previous financial year.

  
  

Which companies are exempt from ESG reporting requirements?

Although the CSRD outlines a rather broad scope of application, it is important to underline that not all companies are required to prepare sustainability reporting. The decree provides for some exemptions, in particular for companies that fall into one of the following categories:

• Large companies and listed SMEs are exempted from the obligation to report individually if the information required is already an integral part of the consolidated sustainability report prepared by the parent company, provided that the latter complies with the reporting standards adopted by the European Commission.

• Microenterprises, even if listed on regulated Italian or European markets, are not subject to the obligation of sustainability reporting.

These are exceptions that aim to avoid excessive burdens for certain categories of companies, while maintaining the objective of promoting the culture of sustainability in the Italian business fabric.

How to publish sustainability reporting

Once the ESG report has been drawn up, in accordance with the provisions of the legislative decree, companies must make it public and easily accessible to all stakeholders. The publication must take place within the terms and in the manner provided for by Articles 2429 and 2435 of the Civil Code.

The preferred channel for the dissemination of sustainability reporting is the company website. In this dedicated section, companies must publish both individual and consolidated reporting, if applicable, together with the compliance attestation report. If a company does not have its own website, it is required to provide a paper copy of the documentation to anyone who requests it.

Individual Sustainability Reporting and Consolidated Sustainability Reporting: What are the differences?

The legislative decree implementing the CSRD introduces two types of sustainability reporting: individual and consolidated. Both reports aim to provide a complete and transparent overview of the company's commitment to ESG, but they are aimed at different recipients and have some peculiarities.

• Individual sustainability reporting is a document that illustrates the ESG performance of a single legal entity, focusing on the strategies, objectives, implementation methods and results obtained at the individual company level. This document is mainly aimed at stakeholders such as employees, suppliers, customers and the local community, interested in knowing the direct impact of the company on their reference context.

• Consolidated sustainability reporting , on the other hand, provides a comprehensive overview of the ESG performance of a group of companies controlled by a single parent company. In this case, the objective is to provide an overall view of the group's commitment to sustainability, considering the interconnections and synergies between the various corporate entities. Consolidated reporting is primarily aimed at investors, financial analysts and institutions, who need an overall assessment of the group's commitment from an ESG perspective.

  
  

The support of Italiano & Partners

The introduction of the sustainability reporting requirement represents a fundamental step in the journey towards a more equitable, inclusive and environmentally friendly economy. Companies are called upon to take on a leading role in this epochal transition, not only by adapting to the new regulatory obligations, but by fully seizing the opportunities that a truly sustainable business approach can offer.

Italiano & Partners , is at the side of companies to accompany them in this new challenge, offering support in drafting sustainability reporting and in identifying financing opportunities to realize their sustainable development projects.

Do you want more information on sustainability reporting and contributions for companies that invest in ESG? Contact us