On September 10, 2024, Legislative Decree No. 125 of September 6, 2024 (the “decree”) was published in the Italian Official Gazette transposing Directive 2022/2464/EU, commonly referred to as the Corporate Sustainability Reporting Directive (CSRD), into Italian law.

The decree replaces Legislative Decree No. 254 of December 30, 2016, which had implemented Directive 2014/95/EU concerning non-financial reporting.

While the Italian legislator has largely adopted the provisions of the European Directive verbatim, the Directive allows for specific national adjustments. Consequently, areas such as the sanctions regime and supervisory powers have been adapted to align with the Italian legal framework.

Sanctions Regime

The sanctions regime introduced by the decree recognizes the unique nature of sustainability information included within annual financial reports and adheres to the principle of proportionality, key elements include:

• Applicability to Listed Companies –A dedicated sanctions framework applies specifically to listed companies. The Italian Securities and Exchange Commission (CONSOB), which regulates the Italian financial markets, is authorized to impose administrative sanctions on listed entities pursuant to Articles 154-ter and 193 of Legislative Decree No. 58 of 1998 (the Consolidated Law on Finance or “TUF”).
• Liability of Directors –The decree introduces specific liability for directors of companies subject to sustainability reporting obligations. Directors may be held accountable for failures to meet the information requirements specified in sustainability reports.
• Transitional Provisions on Monetary Sanctions – To facilitate adaptation to the new regulatory framework, monetary sanctions are capped during the first two years following the Decree’s entry into force. Specifically:
  • For irregularities related to the company’s corporate and organizational structure, sanctions for members of the board of statutory auditors, the supervisory board, and the management control committee may not exceed €150,000. After this two-year transitional period, sanctions outlined under paragraphs 1, 2, and 3 of Article 193 of the TUF will apply, including administrative fines ranging from €5,000 to €2,000,000.
  • For breaches of mandatory disclosure obligations, including those involving financial reports and transparency regarding payments to governments, administrative fines may initially reach up to €2,500,000. After two years, paragraph 1 of Article 193 of the TUF will govern such sanctions, with fines ranging between €5,000 and €10,000,000 or up to 5% of turnover if turnover exceeds €10,000,000.
• Less Severe Sanctions for Minor Violations –Minor violations characterized by low risk or harm may result in less severe measures. These include public statements regarding the violation, orders to rectify deficiencies, or formal warnings.
• Assessment of Violations – In determining the nature and extent of sanctions, CONSOB evaluates the reporting processes adopted by the company’s administrative body and considers whether the violations arose from incorrect or incomplete information supplied by third parties.

Supervisory Authorities

Oversight, investigative, and sanctioning powers aimed at ensuring compliance with the decree’s requirements are entrusted to CONSOB for listed issuers. Unlisted companies fall outside CONSOB’s jurisdiction and are subject solely to the provisions of the Italian Civil Code.

Within companies, compliance with sustainability reporting obligations is monitored by the corporate control body, which is required to report on such compliance to the shareholders’ meeting.

Specific Oversight Powers

The decree assigns oversight responsibilities to both the Ministry of Economy and Finance (MEF) and CONSOB to ensure adherence to certification requirements. Sanctions applicable to auditors, audit firms, or sustainability officers may include monetary penalties or disqualifications.

• Role of the MEF – Supervises auditors without assignments involving public interest entities.
• Role of CONSOB – Supervises auditors engaged with public interest entities.

Further, the MEF and CONSOB are tasked with conducting a feasibility study to explore the possibility of delegating supervisory responsibilities to an independent third party.

What This Means for Companies Operating in Italy

The core provisions of the European Directive, particularly those related to reporting obligations, have been transposed into Italian law with deviations only where necessary to adapt the EU legal framework to the national legal context. 

Companies operating in Italy, including subsidiaries and branches of foreign entities, must therefore consider the unique national provisions introduced by the decree. One example is the sanctions regime, which applies exclusively to listed companies and is based on the detailed provisions of the TUF. National-specific features are also evident in the allocation of supervisory powers, which vary depending on whether companies are listed or unlisted.