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CSRD: all hands on deck!

CSRD: all hands on deck!

Summary

Interview with Badis Belgacem and François Bazi

2023 was an important milestone for Econocom Group as it decided to publish its first sustainability report.
Double materiality: the cornerstone of CSRD

This involves assessing financial and impact materiality.
The companies concerned

Requirements vary depending on the company’s size, revenue and balance sheet, with timelines ranging from 2025 to 2027.

Putting together Econocom’s 2023 report

A report of the company’s extra-financial performance was produced over a period of 8 months, with the help of an independent third-party organization.

Interview with Badis Belgacem and François Bazi

One’s perspective...

Badis Belgacem and François Bazi

Head of CSR and Financial Controller

2023 was an important milestone for Econocom Group as it decided to publish its first sustainability report as required by CSRD. This involved the Group’s CSR and Finance departments coordinating the disclosure of extra-financial data in France and overseas.
The increased requirements of the new regulation meant that Econocom Group had to reorganize its material matters to align them with the concept of double materiality.
People have a number of questions about CSRD, which is why we wanted to give you the benefit of our understanding and experience of the subject.

What is CSRD and what’s its purpose?

The Corporate Sustainability Reporting Directive (CSRD) is an amendment to the previous Non-Financial Reporting Directive (NFRD), which set forth companies’ requirements for sustainability reporting.

The new directive extends the scope of companies required to make extra-financial disclosures: some 40,000 companies in the euro zone will be eligible in the first year of publication, i.e. 2025 for the 2024 financial year. It also requires a greater degree of assurance, with an audit conducted by statutory auditors. The EU aims gradually to transition to "reasonable assurance", in line with the assurance requirements for financial reporting.

 

Double materiality: the cornerstone of CSRD

All companies are required to carry out a double materiality assessment in order to determine the number of material standards and measure their sustainability performance through a set of quantitative and qualitative indicators.

Essentially, double materiality means financial and impact materiality, i.e.: 

  • How a company’s operations affect the environment and society (impact materiality) 
  • How environmental and societal issues in turn impact a company’s performance and development through these financial aggregates (financial materiality).

In practice, a double materiality assessment is made of the company’s own operations on the one hand, but also across the entire value chain.

It starts by mapping impacts, risks and opportunities as well as the company’s stakeholders, both internal and external. By applying a scoring system to the impacts, risks and opportunities, we can identify three types of matters: 

  • Doubly material matters
  • Financially material matters 
  • Impact material matters 
     

Once these sustainability matters have been identified, they can be matched with regulatory requirements and ESRS (European Sustainability Reporting Standards). 

The second and final stage involves conducting a compliance gap analysis between the extra-financial information available and the requirements of the directive. For example, a materiality assessment for companies that have submitted reports in the past may bring to light issues they had previously identified as new issues. The purpose of this process is therefore to identify gaps in terms of methods or definitions, and draw up action plans to implement new indicators to comply with regulations.

The companies concerned

2025

+500 employees

Fulfilling one of the 2 following criteria:
Balance sheet  > 25 M€
Revenue  > 50 M€
-
Entry into force
for 2024 financial year
Formerly subject to NFRD

2026

+250 employees

Fulfilling one of the 2 criteria :

Balance sheet > €25 M
CA > 50 M€
-
Entry into force
for 2025 financial year 

Not formerly subject to NFRD

2027

10 - 250 employees

Fulfilling 2 of the 2 criteria:

Employees > 50
Balance sheet > 8 M€
Bilan > 8 M€ 
-
Entry into force
for 2026 financial year 

Not formerly subject to NFRD

2027

Non-EU companies

Revenue > €150 M in the UE market in the last 2 years
At least one subsidiary in the EU with revenue of > €150 M that qualifies as a “large” company
-
Entry into force
for 2026 financial year
Not formerly subject to NFRD

Putting together Econocom’s 2023 report

To comply with the directive, Econocom conducted a double materiality assessment over a period of 8 months, with the help of an independent third-party organization, which enabled the group to establish a methodology in line with the issues that are relevant to it; then the CSRD compliance gaps were analysed. As a result of this, the group was able to report its extra-financial performance at the end of 2023, and for the first time included ESRS data in the report.  

The materiality assessment brought to light a number of standards relating to the following three areas:

The Environment

Reporting information on Climate Change, the Circular Economy and use of resources.

The Social dimension

Reporting information on the group’s employees, workers in its value chain and consumers and end-users. 

Governance

Reporting information on the group’s code of business conduct. 

In practice, the assessment revealed that Econocom was required to publish some 300 quality and quantity indicators. 

Key takeaways and difficulties encountered

It was a learning curve for both the companies and consulting/audit firms, in terms of both what methodology to adopt and the content of the information to include in the report. It involved a great deal of groundwork ahead of the double materiality assessment and gathering quality and quantity indicators:

•    The constantly-changing nature of regulatory requirements meant frequent adjustments had to be made throughout the double materiality process. 
•    A lot of the information required was either not previously available, or not available in time for the purposes of reporting.

To give you an example: the group’s carbon footprint was reported retrospectively (for the previous year), whereas CSRD now requires companies to report on their carbon footprint for the current year. 
All in all, a great deal of effort and resources went into compliance. It was very challenging, because CSRD requires constantly adjusting: identifying which ESRS are material for the Econocom Group, listening to feedback from stakeholders (with a particular focus on internal stakeholders), tracking KPIs, etc. 
But these requirements have forced the group to improve its medium- and long-term behaviour and practices and measure their impact.

 

So the report was a real driver for progress: it will be a major ESG standard for all the group’s stakeholders – clients, investors and employees.

Goals for 2024: continuous improvement 

The statutory auditors conducted a detailed review of the double materiality assessment and a more general one of the ESRS standard reporting. Their feedback, a year after the first mandatory publication, was very positive. 

Improving

The double materiality methodology in light of the auditors’ observations. 

Drawing up

Action plans (particularly concerning the value chain) for standards and their content in order to continuously optimize measurement of the company’s extra-financial performance. 

Implementing

And developing a software program for centralizing data and industrializing data collection. This project will be a joint effort by the group CSR team and the various parties involved in drafting the report. 

All the measures that need to be implemented to ensure CSRD compliance over the next few months will require time and resources. 

For example, building the monitoring system was a real challenge, because it goes against the grain in terms of company culture: the Econocom group is a decentralized model that fosters autonomy and agility. So people initially saw the system as a hindrance, a move towards centralization. But staff soon realized that it would enable them to coordinate things more easily and have better visibility of the group’s actions.

Regular communication and a timeline of the project helped put people’s mind at rest: now all the group’s staff feel as though they’re making headway. 

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