Reform of the EU Non-Financial Reporting Directive
The EU Commission has initiated the process to reform the Non-Financial Reporting Directive and announced plans to create EU standards for corporate sustainability reporting. For this purpose, a public consultation has been opened by regulators to gather input from all stakeholders which ended on June 11 2020. The European Securities and Markets Authority (ESMA) also recently published a report on their activities and actions carried out in 2019 showing the shortcomings of the implementation of the Directive.
What are the goals of the new Non-Financial Reporting Directive?
The EU is citing clarity, consistency and comparability across value chains
The EU considers there is market failure in corporate disclosure
Companies’ reporting at large is regarded as insufficient. There is lack of information on risks, impacts and their management. Similarly, targets are not provided for outcomes, but rather for activities.
The Sustainable Development goals and their context factors are missing in the reports. In the transformation to a Sustainable Development Goals (SDGs) aligned business model a lot hast o happen and the EU and the UN are expecting business to lead the way. Making a more explicit linkages of disclosure data to corporate sustainability goals. s one requirements. This includes ensuring disclosure principles that are chosen – and relevant – to ensure incorporation of sustainability into business strategy and implementation in relation to risks, opportunities and impacts.