The New Sustainability Reporting Becomes a Legal Requirement

Legislative Decree 125/2024, published in the Official Gazette and implementing the EU Directive 2022/2464 (Corporate Sustainability Reporting Directive - CSRD), establishes the obligation for large companies and parent companies of large groups with more than 500 employees to include detailed sustainability information in the Management Report starting from January 1, 2024. The obligation will be extended in 2025 to other large companies and parent companies of large groups that exceed specific asset, revenue, and employee limits.
The decree specifies that small and medium-sized enterprises (SMEs) with financial instruments traded on regulated markets will be subject to these obligations starting in 2026. However, listed SMEs will be allowed to postpone the application of the regulation until 2028, provided they explain their reasons.

Legislative Decree 125/2024 introduces a new approach to sustainability reporting for Italian companies: the principle of double materiality. This regulation, implementing Directive (EU) 2022/2464, requires companies to report not only on the impact of their activities on the environment, society, and governance (inside-out approach) but also on how sustainability factors affect the company's financial performance (outside-in approach).

The guidelines provided by the European Sustainability Reporting Standards (ESRS) from EFRAG require companies to identify and report this information in a transparent and integrated manner. The process involves rigorous analysis, supported by due diligence, to ensure that material topics are addressed accurately.

The principle of double materiality represents an opportunity for companies to integrate sustainability into their business strategies, preparing them for a more equitable and sustainable future. Companies will be required to report both the financial risks and opportunities related to ESG factors, ensuring an objective and transparent assessment of their real and potential impacts.