The European Union has set itself the objective of giving more and more weight to the sustainability of companies. And here the Business Register has a key role to play. As well as monitoring annual accounts, the recent Corporate Sustainability Reporting Directive (CSRD) stipulates that information on the sustainability of companies must be included in their management report in order to facilitate its scrutiny.
The CSRD sets out stricter requirements for sustainability reporting by companies. In this way it aims to promote greater transparency of information related to the environmental, social and governance (ESG) performance of companies. This will help investors and other stakeholders to compare data and enable them to make more informed decisions.
Timetable of the CSRD Directive
The CSRD entered into force on 5 January 2023 and the first declarations are expected to be published in 2024, following these milestones:
- 1 January 2024 for companies with more than 500 employees subject to the current non-financial reporting directive NFRD.
- 1 January 2025 for large companies not currently subject to the NFRD Directive with more than 250 employees and/or EUR 40 million turnover and/or EUR 20 million total assets.
- 1 January 2026 for small and non-complex credit institutions, captive insurers. The CSRD will also enter into force on 1 January 2026 for listed SMEs. But they will have an «opt-out» option available until 2028.
Who is affected by the CSRD?
The CSRD applies to more than 49,000 companies in the EU:
- Companies listed on regulated markets.
- Large European companies and those subsidiaries of non-EU companies operating in their territory if they meet at least two of the following requirements: a turnover of more than 40 million, a balance sheet total of 20 million or more than 250 employees.
- Insurance companies and credit institutions.
On the contrary, they are exempted:
- Subsidiaries if the parent company includes them in its report.
- Listed micro enterprises and unlisted SMEs, which may nevertheless choose to comply with the provisions of the CSRD on a voluntary basis.
Paradigm shift in sustaintability reporting
The European Union aims to put sustainability information on an equal footing with financial information. With this objective in mind, the deposit of non-financial information of companies will be promoted, together with financial information in the commercial registers. Data referring, for example, to the carbon footprint of facilities, energy efficiency certificates, etc.
In this way, the aim is to help encourage the channelling of funds, investment and financing towards activities that are considered sustainable. Because the Business Register provides public and transparent information that has been subject to the registrar’s impartial control of legality. It thus creates a space of legal certainty and confidence for contracting.
Against greenwashing
Incidentally, this avoids greenwashing fraud, a marketing tactic that consists of giving an image of sustainability and respect for the environment to products and services that do not always comply with these premises to the letter.
In the coming years, companies will face increasing sustainability due diligence obligations. Any announcements or statements about their performance in this area will need to be rigorously demonstrated to be true and backed up by information filed with the Companies Registry. In these times of increasing demands in terms of due diligence, Confianz gives you the peace of mind of knowing that you are complying with the current law at all times.