Jean-Jacques Pluchart
The new European CSRD directive, published on December 16, 2022, constitutes a significant step forward in the practices of managers – in particular CFOs and CSR managers -, but also in the professions of accountancy and law. The CSRD directive will gradually impose “sustainability reporting” on all companies (excluding micro-enterprises) according to a staggered timetable from the reference years 2024 to 2028. The data published by the companies will have to be audited and certified by independent third parties (the PSAIs) including specialized compliance control firms, lawyers and auditors specially trained in the various disciplines (technical, legal, accounting) mobilized by CSR and sustainable development. These auditors, supervised by the French Audit Office (H3C), renamed the French Audit Authority (H2A), may be assisted by Chat GPT-type applications, informing them of the rules, standards or markers applicable or observable in the main sectors of activity. A few months later, on June 26, 2023, the ISSB, created in 2021 at COP 26, published two initial climate standards (IFRS S1 and IFRS S2) applicable internationally. The two repositories have notable differences.
The sustainability reports published by European companies will display indicators divided into 4 types of ESG standards (cross-cutting, environmental, social and governance) and 13 sustainability standards (ESRS). While the European Union had aligned itself with the Anglo-Saxon financial accounting standards (IFRS), the European extra-financial framework (CSRD) differs from the American (RCRD) and international (ISSB) frameworks. The Commission recommends the application of dual materiality, both financial and material, of the “impacts, risks and opportunities” resulting from the activities of companies, while the Anglo-Saxon standards are limited to financial issues. The European approach has multiple implications: How to anticipate and measure the risks incurred by the company and its ecosystem? How to identify and classify the internal and external stakeholders included in the value creation chains of companies? How can we map the interactions between the company and its various stakeholders? How to detect and weigh their impacts, risks and opportunities? How can they present their strategies and business models concisely without revealing certain projects or business secrets? How to define the roles and responsibilities of the various governance and management bodies involved in achieving the 17 Sustainable Development Goals (SDGs) set by the Paris agreements in 2015? How can we ensure the traceability of the sources and the validity of the measures of the global and specific impacts, positive and negative, induced in the short, medium and long term by the activities of companies and their stakeholders, within the perimeters of their ecosystems? What metric should be adopted to make the indicators robust and comparable? How can the report be made understandable by the multiple actors and observers of the companies’ activities? How can indicators be made comparable between companies in the same sector and/or territory? How can all the indicators within the same group be weighted, aggregated and consolidated?
The drafting of sustainability reports in accordance with the CSRD, which will replace the DPEF, raises issues that require the mobilization of managers, accountants, financiers, academics and experts from various disciplines, whose coordination falls under Impact, Risk and Opportunities (IRO) Management. This new mode of strategic and operational management of the company is still in its learning phase, because its concepts and models are not all stabilized and its implementation is the subject of debate in professional and scientific circles. Analyses of the NFPRs of French companies carried out in particular by the Autorité des Marchés Financiers (AMF) and by extra-financial rating agencies show that company data is not always sufficiently traced, monitored over time, and comparable within the same sector of activity. Last but not least, the application of the new CSRD standards should make public the strategic thinking process that was previously the domain of shareholders and company managers. This transparency should lead to the limitation of green and social washing and the revision of certain founding paradigms of management.
