Social reporting in the context of the Corporate Sustainability Reporting Directive

06 June 2023

Consulting services for companies engaged in communicating their sustainability

The social report is a reporting tool that allows complex organisations, such as companies and groups of companies, to communicate their social and environmental commitment to all stakeholders. This tool has become increasingly important in recent years, as business groups, companies and organisations are becoming increasingly aware of and accountable to third parties for the impact their actions and initiatives have on society and the environment.

Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022, known as the Corporate Sustainability Reporting Directive (‘CSRD’ or ‘Directive‘), introduced a number of new rules, and extended the applicability of existing ones, for corporate sustainability reporting, which are to be transposed by the Member States and progressively implemented as follows:

  • from 1 January 2024 for large public interest companies (with more than 500 employees) already subject to the Non-Financial Reporting Directive, with reporting due in 2025;
  • from 1 January 2025 for large companies not subject to the Non-Financial Reporting Directive (with more than 250 employees and/or EUR 40 million turnover and/or EUR 20 million total assets), expiring in 2026;
  • 1 January 2026 for SMEs and other listed companies, expiring in 2027.

SMEs may choose to postpone until 2028.

One of the most important sections of the social report is dedicated to reporting, i.e. the process of assessing and communicating the results achieved by the organisation with respect to its social and environmental objectives. Reporting is a crucial element in guaranteeing the transparency and accountability of the organisation towards its stakeholders, i.e. all the subjects, individuals or organisations whose interest is in turn negatively or positively affected by the result or performance, of the organisation.

Social reporting invokes the concept of accountability, i.e. the responsibility and obligation to be accountable to third parties for one’s actions and decisions and to be open to review and evaluation by other stakeholders or organisations.

The CSRD stipulates that large enterprises and small and medium-sized enterprises, with the exception of micro-enterprises, must draw up sustainability reports, including in the management report information necessary for understanding the impact of the enterprise on sustainability issues, as well as information necessary for understanding how sustainability issues affect the enterprise’s performance, results and situation.

For companies required to carry out reporting, it can be difficult to deal with the complex process of data collection and analysis, as well as the drafting of the social report itself. Furthermore, reporting also has important tax implications, as costs incurred in pursuit of the organisation’s social and environmental objectives can be deducted for tax purposes.

In this context, ECOVIS STLex Studio Legale Tributario offers consultancy and assistance services to companies that are obliged to comply with this reporting requirement, as well as those that will be obliged to do so in the coming years.

The objective of ECOVIS STLex is to best support companies in identifying the most relevant social and environmental objectives for their sector and mission, as well as in defining the most appropriate KPIs (Key Performance Indicators) to measure progress, and to support companies in collecting and analysing the data required for reporting, as well as in drafting the social report according to reporting principles.

Finally, ECOVIS STLex’s team of professionals can offer tax and accounting advice and assistance to companies wishing to support social and environmental objectives by assessing the correct tax deductibility of costs incurred for this purpose.

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