Extra-Financial Communication - Its Role in Sustainability Awareness

Extra-financial communication, also known as extra-financial reporting or CSR (Corporate Social Responsibility) reporting, refers to the communication of non-financial information from a company or organization, primarily regarding environmental, social, and governance (ESG) aspects.

Unlike financial communication, which focuses on the economic and financial performance of the company, extra-financial communication aims to account for the overall impact of the company on society and the environment.

It enables stakeholders such as investors, customers, employees, regulatory authorities, and civil society to assess the social and environmental contribution of a company, as well as its level of social responsibility.

The current European directive NFRD (Non-Financial Reporting Directive), which currently regulates extra-financial performance reporting at the European level, will be replaced by a new directive, the Corporate Sustainability Reporting Directive (CSRD).

The CSRD - The Beginning of a New Era

Clearly, the CSRD marks a new era in the consideration of sustainable development principles by companies.

The CSRD is one of the cornerstones of the European Green Deal, compelling economic actors to reconsider the impact of their activities on the planet and the respect for human rights.

Its main objectives:

1. To standardize the social market economy of the European Union
2. To encourage companies to communicate information about the sustainability impacts of their activities.

According to many experts, this new directive is seen as a tidal wave in the field of CSR.

Nearly 40 years after the definition of sustainable development by the Brundtland Commission, the CSRD formalizes sustainability reporting.

Fundamentally, the directive will require companies to disclose information about the environmental, social, and governance impacts of their activities.

This strengthening of requirements is part of a historic movement to address environmental issues, particularly those related to climate change.

This regulatory evolution will have a direct impact on a large number of European companies, including SMEs and mid-caps. The number of companies required to disclose environmental information is expected to quadruple in the next two years.

Implementation Timeline

• As of January 1, 2024, publicly traded companies with more than 500 employees will be required to comply with the CSRD.
• As of January 1, 2025, it will be the turn of companies with at least 250 employees to adopt this directive.

The CSRD marks an ideological shift from voluntary CSR to normative CSR. It requires companies to be accountable for their impact on society and the environment, while offering an opportunity to mobilize employees around a sustainability-focused corporate project.

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