CSRD: EU Directive and Sustainability Reporting in Italy

The EU has committed itself to achieving climate neutrality by 2050 and has taken structural measures within the Industrial Green Deal, an initiative that aims to promote sustainable economic development. In addition, the European Banking Authority (EBA) presented a roadmap for sustainable finance, which indicates a clear direction for the banking sector in integrating ESG criteria into their policies and practices. Europe is working to create an increasingly sustainable economic and financial system, with the aim of making companies aware of and responsible for the impact they generate on the planet. A public consultation has been launched to implement the new direct CSRD.

The Ministry of Economy and Finance (MEF) launched a public consultation to transpose the Corporate Sustainability Reporting Directive (CSRD) in Italy. The consultation started on 19 February and ended on 18 March 2024. The consultation, concerns the decree transposing the Corporate Sustainability Reporting Directive (EU) 2022/2464, known as the CSRD, with the aim of gathering views and feedback from the main stakeholders while waiting for the approval process of the European Delegation Act 2022-2023, currently being published in the Official Journal and containing the specific delegation for the reception of the CSRD by 6 July 2024, to be completed.

The consultation addresses several important topics in order to clarify some still open points that will hopefully be resolved taking into account the results. One of the key issues concerns the scope of the reception of CSRD in Italy and the assessment of the size thresholds of companies subject to the obligation of sustainability reporting. The CSRD aims to extend the obligation to prepare the "non-financial statement" under the Directive 2014/95/EU to more companies. 3Bee, is dedicated to regularly providing its partner companies with transparent data to keep their sustainability report up-to-date, communicating progress in biodiversity protection.

The CSRD envisages that the sustainability reporting obligations will gradually apply from the financial year beginning on: 1 January 2024 for large companies and parent companies of large groups with more than 500 employees that are public interest entities, which are already subject to the obligation to prepare the "non-financial statement; 1 January 2025 for all large companies and parent companies of large groups other than those mentioned in the previous point; 1 January 2026 for the small and medium-sized enterprises with financial instruments listed on regulated markets, small and non-complex credit institutions and captive insurance and reinsurance companies; on 1 January 2028 for third-country companies.

Sustainability reporting will become an integral part of the directors' management report, as stipulated by the Corporate Social Responsibility Directive. This will entail adjusting the timeframes under national law for the approval and publication of the financial documents of the companies concerned, as well as defining the competences between the board of directors and the auditing body. The Public Consultation proposes an amendment to article 154-bis, paragraph 5, d.lgss. 58/1998 of the Consolidated Law on Finance (TUF), which will make sustainability reporting an integral part of the duties of the manager in charge of keeping accounting records for companies with shares listed on regulated markets. This reporting will have to be prepared according to the common European ESRS standards defined by EFRAG and adopted by the Commission by means of a delegated act.

The CSRD stipulates that sustainability reporting must be subject to assurance, i.e., an attestation by a statutory auditor or audit firm, based on a process aimed at obtaining a limited assurance level and, subsequently, a reasonable assurance level once the attestation principles have been adopted by the European Commission. By 1 October 2026, the European Commission will adopt the attestation principles for the limited assurance level, while those for the 'reasonable assurance' level will be adopted by 1 October 2028. In the meantime, auditors will use the criteria developed at national level, in cooperation with the authorities, industry associations and professional bodies, and adopted by the Ministry of Economy and Finance (MEF) after consultation with the Consob.

As auditors for the audit of sustainability reporting, the directive requires that the audit be performed by an accredited 'statutory auditor'. The auditors must be registered in the register of statutory auditors (legislative decree no. 39/2010 of 27 January 2010) and also authorised to certify the sustainability reporting in accordance with the provisions in force. The proposal of the decree, included in the public consultation, extends the discipline provided for by Art. 20 of Legislative Decree 39/2010 also to auditors in charge of sustainability reporting. In line with the CSRD, 3Bee has developed XNatura, the terrestrial biodiversity monitoring protocol based on bioacoustics and remote sensing. This methodology allows companies to monitor their impact on biodiversity, resulting in a detailed report, in line with the taxonomy in ESG matters and compliant with EU regulations, including the CSRD directive.

The Consob and the MEF, within three years of the entry into force of the decree transposing the CSRD, will evaluate the experience of other countries that have adopted the legislation, to examine the capacity of the market to manage the increase in the number of entities obliged to attest the sustainability reporting and the related burdens and benefits. Finally, in order to avoid interruptions in the provision of compliance attestation services for companies subject to the first period of application (financial statements for the financial year beginning on 1 January 2024), the public consultation provides that the appointments conferred in accordance with Legislative Decree No. 254/2016 will remain valid until the previously agreed expiry date, with the possibility for the company to terminate the appointment early.

In the Public Consultation, two interesting exemptions were proposed regarding the disclosure of specific information in sustainability reporting. The exemptions concern both individual and consolidated sustainability reporting. The first exemption concerns the required information on the company's activities and value chain. The parent company may omit this information for the first three reporting periods. However, a detailed explanation of the reasons for the omissions must be included in the sustainability report. The second exemption concerns information on upcoming developments and transactions. In exceptional cases, the company may omit such information in the sustainability report if its disclosure would seriously jeopardise the company's business position. Before making this omission, a resolution is required.

In terms of supervision and sanctions, the Consob will only supervise listed companies, over which it already has competence in the area of financial and corporate reporting. There is no additional supervision by Consob for unlisted companies subject to the CSRD. The sustainability reporting will be included in the management report as part of the annual financial report, subject to Consob supervision and sanctions only for listed companies. With regard to sanctions, the Consultation proposes to maintain the same sanction framework as for periodic financial statements. This approach is considered in line with the principles of legality and equal treatment established by article 194 of the TUF. However, the MEF also considers the possibility of introducing specific sanctions limited to violations relating to sustainability information.

In reference to the public consultation on the implementation of CSRD in Italy, the Associazione Nazionale Commercialisti presented changes with regard to the role of auditors for sustainability reporting. With regard to the improvement of ESG criteria and sustainability reporting, the 3Bee CSR network plays an important role for companies, with ongoing support that goes beyond a simple training course. It is an exclusive community of sustainability professionals who share a common goal: continuing education in the ESG field and sharing best practices and experiences related to sustainability. This network, conceived with the aim of offering concrete and constant support, uses 3Bee's technical and scientific team to bring together professionals and accompany them in their professional growth in the field of environmental sustainability.