CSR : The rose and its thorn (1)
Jacques Perotto and Maxime Hermes
CORPORATE SUSTAINABILITY REPORTING DIRECTIVE
The climate emergency, and the raising of awareness by the authorities on the paramount necessity for strong corrective actions at the State and corporate levels, have contributed to a political consensus at the EU level, which resulted in this European Directive, December 16, 2022.
It came into force on 5 January 2023; members have until July 6, 2024 to transpose it into national law.
We have taken this occasion to launch the publication of our chronicles on the topic of CSR in companies confronted with sustainability issues.
Why this new Directive?
The EU ultimately wishes to bring the level of information on sustainability, to the same level as financial information, to contribute to its objective of climate neutrality in 2050.
In this regard, the CSRD extends the ambitions of the previous NFRD directive of 2014: with more companies falling into its scope, and more detailed reporting obligations.
Who is impacted?
CSRD applies to the following companies:
- All big companies, including companies outside the EU listed on the European market, and not-listed companies, meeting two out of the three following criteria:
i. 250 employees
ii. 40M€ net of net turnover
iii. 20M€ total balance sheet
All parent companies of a big group fall within the scope of CSRD.
- Small and medium size companies listed on the European market and meeting two out of the three following criteria:
i. Between 10 and 250 employees
ii. Net turnover between 700K€ and 40M€
iii. Total balance sheet between 350K€ and 20M€
- Non-EU companies generating at least 150M€ of net turnover within the EU with a branch or subsidiary (big companies or small and medium size listed companies).
Not-listed companies and listed small and medium size companies (including subsidiaries of non-EU groups) are exempt from publishing a sustainability report at their level if they belong to a group publishing a consolidated report compliant with CSRD.
Which information to report?
In a nutshell, the report shall mention information which allows a clear understanding of the interactions between the activity and sustainability:
- How the company’s activities impact sustainability matters;
- How the sustainability may impact the growth of the company, its performance, and its position compared to its competitors.
The company will support its report by:
- Identifying the main negative impacts – current or potential – generated by the company’s activities and its value chain;
- Providing a reminder of the commitments taken and the actions performed on sustainability;
- Describing the main risks for the company in relation to sustainability matters and the way these risks are managed.
This is not so different from the process applicable under French law to fight occupational risks in the workplace: the construction of the health and safety risk assessment leads to identifying the risks for employees generated by the company’s activities, as well as actions to be taken to eliminate the risks, or mitigate their occurrence and the consequences.
To be followed…
Jacques Perotto, Partner and Maxime Hermes, Associate