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2022, a year of real revolution in the field of Extra-Financial Reporting

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Since the beginning of the 21st century, the world is regularly confronted with new challenges: climate change, preservation of natural resources, safeguarding of species. Organizations and individuals are faced with major and unprecedented events, leading them to rethink their development models. Thus, the Covid crisis has highlighted the risks induced by the massive relocation of the means of production of many essential goods (food, medicine, etc.). Today, the war unleashed in Eastern Europe marks a turning point in contemporary history. In its turn, it reopens a period of great uncertainty for everyone and the various organizations. As a result, the search for tools to measure the impact of “their environment” on their activity and the need to adapt their strategy are once again major concerns for stakeholders. It turns out that in the field of management, 2022 is shaping up to be a year of evolution, even a year of revolution…

2022, a year of evolution of the regulatory framework

Since 2017, the Non-Financial Reporting Directive (NFRD) (transposed into French law in 2017 by the decree of August 9, 2017) has introduced the obligation of an annual Non-Financial Performance Declaration (NFPD) for companies with more than 250 employees and companies listed on a European market.

Now, as of December 1, 2022, this directive is to be replaced by the Corporate Sustainability Reporting Directive (CSRD) in order to strengthen the European Union’s sustainable finance objectives.

Globally, these companies must now publish additional information relating to sustainability and climate change issues. They must also assess the impact of their activity on the environment and society in general. The governance implemented must be made explicit.

These companies subject to the NFRD are also concerned by the adoption in June 2020 of the European Green Taxonomy regulation. This regulation created a standardized classification of economic activities according to their potential contribution to the six environmental objectives defined by the European Union, which are:

  • Climate change mitigation,
  • Adaptation to climate change
  • Protection and sustainable use of water and marine resources The transition to a circular economy
  • The prevention and reduction of pollution
  • Protection and restoration of biodiversity and ecosystemes

This regulation specifies that the Extra Financial Performance statement of non-financial companies must be enriched with 3 new indicators:

  • The share of Sustainable activities in revenues,
  • The share of Sustainable activities in OPEX, and
  • The share of Sustainable activities in CAPEX as defined by the Green Taxonomy. The sustainable share must also be aligned with the environmental objectives.

For 2022, the potential contribution of business activities is only for two of the six objectives (i.e. climate change mitigation and climate change adaptation).

With the arrival of the new CSRD and the Green Taxonomy, 2022 will be a year of real revolution in the field of reporting: the merger of financial and non-financial reporting.

So are you ready?

 

Fabien Coudert

Consolidation & Reporting Manager Head of Sustainability

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