The New Corporate Sustainability Reporting
2024 is a very important year at the level of European policies because many regulations have been approved and the principle of sustainability has been redefined, and on the other hand there is no surprise. Samantha Burgess, deputy director of the European climate service Copernicus, reported that based on data collected in recent months, the 2024 boreal summer (i.e. June-July-August) was the hottest ever (1). The European Commission's strategy is to make the European Union the first continent with zero or at least low CO2 emissions (2) by 2050 and to reduce emissions by 55% by 2030. The Paris Agreement (3) and the Green Deal (4) promote binding targets for reducing the impacts and emissions of climate-changing gases, in line with the European goal of climate neutrality to be achieved in 2050. Compliance with the regulatory framework plays a very important role in the culture of business risk. Complying with ESG criteria (these three areas are summarized with the acronym ESG, Environmental, Social, Governance) is essential to comply with global directives and regulations, which are increasingly stringent especially in Europe, in order to maintain a good reputation and access financing opportunities more easily. Officially entered into force on January 1, 2024, the Corporate Sustainability Reporting Directive (CSRD), also known as Directive 2022/2464, is the new European directive on sustainability reporting (5). The European Union has been actively working to shift the economy to a sustainable path. This includes creating a comprehensive legislative package, in which CSRD (Corporate Sustainability Reporting Directive) is a key element. The legislation aims to make companies transparent about their ESG performance and data. The regulation and related standards will affect a huge range of companies along with their supply chains. In fact, according to the so-called "principle of double materiality", not only the impacts on the environment and people caused by the company's activities will have to be considered (as companies already did in compliance with the previous directive, the Non-Financial Directive[6]), but also the opposite: companies will have to report information on how the external environment, or people, impact their business, generating economic repercussions. In addition to this, information must be reported regarding the corporate sustainability strategy, consisting of programs, and related objectives, on sustainability issues that can then be assessed through specific metrics. This change marks the end of statements made solely for public relations purposes: maintaining an impeccable human rights record will be just as crucial as having a perfect balance sheet. The new directive has extended the obligation to share a non-financial reporting report to medium and small enterprises as well. Companies that neglect ESG aspects are more exposed to the risk of lawsuits that can result from environmental damage, violation of workers' rights, or poor governance. Compliance with ESG criteria can significantly reduce this risk, protecting the company from costly legal proceedings and reputational damage, and ensuring access to significant economic incentives and tax relief. Such activism is seen by some as a quirk of transnational global classes to subjugate workers, and not as the path it should have taken long ago instead of complacent in the theory of unlimited growth in a finite world. What we are witnessing is not an ecological transition but a transition from an industrial to a post-industrial society. By now the term sustainability is often associated with the environmental field; however, it is now proven that the evolution of global risks depends on the correlation of risks of environmental, social and corporate governance factors. The intersectionality of these three areas and the measurement of them determine the success of an efficient and effective sustainable strategy. On 25 July 2024, the European Corporate Sustainability Due Diligence Directive (CSDDD or CS3D [7]) came into force, not to be confused with CSRD. While the similarities between CSRD and CSDDD are obvious, there are some important differences. CSRD-compliant companies would not automatically be able to declare full CSDDD compliance. Similarly, companies that are already conducting human rights and environmental due diligence in their operations and supply chains may not have enough data to prepare a CSRD-compliant report. The term due diligence generally indicates the verification activity that is carried out before major corporate transactions such as mergers or acquisitions, signing contracts; However, due diligence acquires a broader meaning in the Directive. Large companies operating in the European market will have to identify, prevent, mitigate, stop or remedy the denied impacts on human rights and the environment that derive from the performance not only of their own activities, but also those of their suppliers. It should be specified that companies are not required to guarantee that any harm to human rights and the environment will never occur or that it will be neutralized in all circumstances but must demonstrate that they have done everything reasonably possible to achieve the protection of human rights and the environment. The duty of diligence is clearly configured as an obligation of means and in the event of non-compliance the CSDDD Directive in art. 1 and 8, provides for an extension of corporate social responsibility to any link in the entire value chain in the field of human rights and the environment and civil liability pursuant to art. 29, i.e. a company can be held liable for damage caused to a natural or legal person, provided that the company has not complied, intentionally or negligently, to the obligations to prevent and stop adverse impacts on human rights and environmental impacts. 2024 is a year that places quite a few obligations on large companies as well as SMEs, creating discontent and concern among the recipients of these measures, however this year is a year that sees the European apparatuses united and committed to pursuing the agenda of sustainability and climate neutrality. The annual report on the state of the Energy Union, published on 11 September 2024, provides yet another reminder to Italy on the issue of energy transition and public policies for the redevelopment of Italy's real estate assets. In 2023, 4.1% of Italians had difficulty paying their bills and 9.5% could not keep their homes warm during the winter (8). For this reason, Italy must increase the rate and intensity of the renovation of buildings, in particular those with the worst energy performance already repeatedly indicated by the Green Homes Directive (9). This is in the wake of the judicial system, the European Court of Human Rights (ECHR) in Strasbourg, France, issued a ruling on April 9, 2024, in a case brought by more than 2,000 Swiss women (10), the majority of whom are over 70 years old, against the government of Switzerland. They argued that heatwaves fuelled by climate change have compromised their health and quality of life, putting them at risk of death. In line with the international commitments made by Member States, in particular under the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, and the clear scientific evidence provided, in particular, by the IPC, the Court ruled (11) that the Swiss government (and more generally all Contracting States) must adopt the necessary legislation and measures to prevent an increase in greenhouse gas (GHG) concentrations in the atmosphere and an increase in the global average temperature beyond levels capable of producing serious and irreversible adverse effects on human rights, in particular the right to private and family life and housing under Article 8 of the Convention. The court found Switzerland to be in breach of its obligations, thereby violating some of women's human rights due to loopholes in national legislation to reduce planet-warming emissions, as well as failure to meet past climate targets. This is the first time the court has ruled on a climate litigation. There is no right of appeal, and the sentence is legally binding. Sustainability is no longer an abstract ethical principle but is, in fact, a general principle of European law no longer confined only to the Treaty on European Union but is now the cardinal principle of its political action and its future projection to lead the continent to abandon a resource-intensive industrial economy, to a post-industrial economy, circular and non-consumerist. There is also a sanctioning system inspired by that in the field of competition protection. Member States will have to establish independent supervisory authorities, with adequate resources and powers, and responsible for supervising compliance with the obligations arising from the CSDDD and the allocation of sanctions. The independent supervisory authorities will be able to impose disqualification sanctions such as ordering the cessation of a certain conduct or refraining from repeating it, in short, we are talking about administrative sanctions that must be effective, proportionate and dissuasive, taking into account the company's collaboration in reducing the effects of the violation and, as for the pecuniary ones, the maximum limit provided for by national regulations must not be less than 5% of the Net sales worldwide. and pecuniary with considerable reputational effects. Sustainability is no longer an abstract ethical principle but, precisely, an obligation of means susceptible to sanction in the event of non-compliance.
BIBLIOGRAPHY
1) Summer 2024 – Hottest on record globally and for Europe
https://climate.copernicus.eu/copernicus-summer-2024-hottest-record-globally-and-europe
2) European Climate Law
https://climate.ec.europa.eu/eu-action/european-climate-law_en
3) The Paris Agreement
https://unfccc.int/sites/default/files/english_paris_agreement.pdf
4) The European Green Deal
https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en
5) Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (Text with EEA relevance)
https://eur-lex.europa.eu/legal-content/EN/TXT/?toc=OJ%3AL%3A2022%3A322%3ATOC&uri=uriserv%3AOJ.L_.2022.322.01.0015.01.ENG
6) Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups Text with EEA relevance
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0095
7) Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 (Text with EEA relevance)
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202401760
8) On 11 September 2024, the European Commissioner for Energy, Kadri Simson, presented the 2024 State of the Energy Union report. In the chapter dedicated to Italy, the EU urges the government to accelerate the restructuring of buildings. The contradiction is clear: Italy is a leading market in clean technologies, with more than a fifth of the photovoltaic panels in European buildings coming from Italy, yet it remains a country with an energy mix dominated by fossil fuels. The EU also examined one of Italy's critical points, namely the poor energy performance of itshousing stock.
9) Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (recast)
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32010L0031
10) Climate change failings violate citizens’ rights, European court ruleshttps://www.ft.com/content/2f65a1b9-ba6c-4f09-8e66-96a1e06ad5b6