# Impact and Innovation: How Italian Companies Can Assess Their Potential with the New Sustainability Reporting


The Italian entrepreneurial ecosystem is rich in history, innovation, and potential, but often these resources remain hidden and undervalued by the companies themselves. With the introduction of the CSRD (Corporate Sustainability Reporting Directive), Italian SMEs now have the opportunity to highlight their intrinsic value and leverage reporting strategies to enhance their competitiveness. This new regulation is set to transform the way companies communicate their environmental, social, and governance (ESG) impact.

## A New Horizon for SMEs: The CSRD

The European Directive 2022/2464/EU, recently enacted in Italy, expands the obligation for non-financial reporting to a larger number of small and medium enterprises. This means that even those companies that have never considered ESG reporting as a necessity must now pay attention to these fundamental aspects. The ability to communicate their commitment to sustainability becomes a crucial element not only for corporate image but also for access to funding and business opportunities.

## The Benefits of ESG Rating

Receiving a certified ESG rating is no longer an option but a necessity for modern companies. Evaluation of environmental and social aspects, along with governance, not only forms a solid foundation for sustainability reporting but also helps identify areas for improvement and optimize resource use. Although this requires a commitment of time and resources, the return on investment proves significant: a good ESG rating facilitates access to bank credit and enhances brand value while improving relationships with stakeholders.

### The Vision of Modefinance

Modefinance, an Italian fintech rating agency based in Trieste, is leading this transformation. Founded in 2009 as a spin-off of the University of Trieste, Modefinance emerged from the idea of using innovative technologies to speed up and automate the risk assessment process. Led by founders Valentino Pediroda and Mattia Ciprian, the company has quickly gained significant recognition at the European level.

Since 2015, it has been authorized to operate under the supervision of ESMA (European Securities and Market Authority), and its rating methodology, known as MORE (Multi Objective Rating Evaluation), has provided a vital boost to credit analysis.

## The Rating Framework: Algorithms and Data

Modefinance’s MORE methodology is based on advanced Artificial Intelligence and machine learning algorithms that process financial data to deliver a comprehensive risk assessment. To ensure maximum accuracy, automated evaluations are integrated with input from experienced analysts. This hybrid approach allows for the necessary flexibility and adaptability to changes in the business context.

Key factors considered include the climate risk index, corporate governance, and remuneration policies. The importance of a methodology based on concrete data and in-depth analysis is crucial for providing a clear picture of a company’s situation.

## Advantages of Automated Assessment

The adoption of an automated rating system brings numerous advantages:

1. **Transparency**: The direct correlation between initial data and the final score provides an important indication of the company’s health.
2. **Responsiveness**: Scores can be quickly updated in response to significant changes, ensuring that information is always current.
3. **Efficiency**: The ability to handle large volumes of data economically and rapidly reduces both analysis time and overall costs.

Modefinance’s flagship product, the Tigran platform, allows companies to become their own rating agencies,