The CSRD Directive, recycled content as part of sustainability reporting information
The landscape of corporate social responsibility reached a turning point with the entry into force of the “CSRD” Directive and even more so with its transposition into Italian law through Legislative Decree 125/2024.
Directive 2022/2464 of 14 December 2022 (the Corporate Sustainability Reporting Directive, CSRD) updated the rules on corporate sustainability reporting, amending the parent directive on the matter (EU Directive 34/2013) and, in particular, adding Article 19-bis on sustainability reporting. It therefore requires large undertakings and small and medium-sized enterprises (SMEs) to include in their management report the information necessary to understand the undertaking’s impact on sustainability matters, as well as the information necessary to understand how “sustainability matters” affect the undertaking’s development, performance, and position.
The term “sustainability matters” refers to environmental, social, human rights, and governance factors, while “sustainability reporting” is the reporting of information related to sustainability matters.
Article 29-ter, concerning the principles of sustainability reporting, was also introduced.
The Commission is tasked with adopting delegated acts that supplement the directive to establish these sustainability reporting standards.
The sustainability reporting standards ensure the quality of the reported information, requiring it to be understandable, relevant, verifiable, comparable, and a faithful representation.
Taking into account the subject matter of a given sustainability reporting standard, the standards specify the information that companies must report regarding the following environmental factors:
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Climate change mitigation;
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Climate change adaptation;
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Water and marine resources;
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Resource use and circular economy;
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Pollution;
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Biodiversity and ecosystems.
These environmental factors echo the environmental objectives contained in EU Regulation 2020/852 on Taxonomy (which the Commission must also consider, pursuant to Article 29-ter, when drafting the delegated acts). By analogy, it can therefore be argued that if an activity, to avoid causing significant harm to the circular economy objective under the Taxonomy Regulation, must optimize the use of materials, especially raw materials, and therefore provide for the use of recycled materials, as well as consider the recyclability of products; it can therefore be stated with certainty that among the information that a company is required to report under the CSRD Directive will also be information on recycled content. Furthermore, the use of recycled material leads to a reduction in air pollutants, and can therefore also be linked to the “pollution” environmental factor mentioned above.
The Council of Ministers, in transposing the “CSRD” Directive, enacted Legislative Decree 125 of 6 September 2024, in force since 25 September 2024, specifically on corporate sustainability reporting.
Article 3 provides that large undertakings, as well as publicly traded small and medium-sized enterprises [1], must include in their management report the information necessary to understand the undertaking’s impact on sustainability matters, as well as the information necessary to understand how sustainability matters affect the undertaking’s development, performance, and position.
Individual sustainability reporting includes:
- A brief description of the business model and strategy, indicating:
- The resilience of the company’s business model and strategy in relation to sustainability-related risks;
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The opportunities for the company related to sustainability matters;
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The company’s plans, where prepared, including implementation actions and related financial and investment plans;
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How the company’s business model and strategy take into account the interests of stakeholders and their impact on sustainability matters;
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The methods for implementing the company’s strategy regarding sustainability matters;
- A description of the time-bound sustainability-related goals set by the company;
- A description of the role and expertise of the administrative, management, and supervisory bodies regarding sustainability matters;
- A description of the company’s policies in relation to sustainability matters;
- Information on the existence of incentive schemes related to sustainability matters for members of the administrative and supervisory bodies;
- A description of:
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The due diligence procedures applied by the company in relation to sustainability matters;
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The main actual or potential negative impacts related to the company’s activities and its value chain, including its products and services, business relationships, and supply chain, the actions taken to identify and monitor such impacts, and other negative impacts the company is required to identify;
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Any actions taken by the company to prevent, mitigate, remedy, or end actual or potential negative impacts, and the results of those actions;
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- A description of the main risks to the company related to sustainability matters, including a description of the company’s main dependencies on such matters, and the company’s adopted methods for managing these risks.
The sustainability reporting auditor may be the same legal auditor responsible for the statutory audit of the financial statements or a different legal auditor.
