07 December 2022

Keynote speech by Commissioner McGuinness at the 2022 EFRAG Conference, 'Where is Corporate Reporting heading?'

On the importance of corporate reporting that includes both sustainability and financial information, on an equal footing; Where we stand on sustainability reporting; And the prospects for financial reporting.

What I would really say for EFRAG, in your 21 years, and certainly your work with us in the Commission, we've had the value of all that you've delivered to us.

You've been a vital part, and your work on financial reporting has helped us in the Commission with technical advice on International Financial Reporting Standards.

You have provided us with endorsement advice more than 120 times. So that is a body of work.

And through that work, you have made an important contribution to the European Union's single market – and as you know the single market will celebrate its 30^th birthday. So thank you for your contribution to that.

And you have become influential on global financial reporting standard setting, including your work with the IFRS.

Recently – and I think this represents your coming of age – we've asked you to take on a new role, on sustainability reporting.

And I have to say, as Jean Paul outlined, you have risen to the challenge, delivering the first set of draft European Sustainability Reporting Standards just a couple of weeks ago.

Today I would like to talk about the wider context of the work you do, specifically:

• On the importance of corporate reporting that includes both sustainability and financial information, on an equal footing,
• Where we stand on sustainability reporting,
• And the prospects for financial reporting.

So I'll begin with corporate reporting, which is at the heart of the financial system.

Accurate, verified information is vital for internal management and of course external scrutiny of investors and auditors.

Simple, but important, issues like how much money a company is making, whether companies meet their targets and growth, what the share price.

Today of course financial information is increasingly complemented by information on sustainability.

Including looking at a company's climate emissions, whether the company board is gender balanced, how employees in their supply chain are treated.

Both sets of information are important and should work together.

Just as we shouldn't focus only on the profitability of a company, sustainability by itself does not provide enough information either.

So it's not one or the other.

We need companies that are both sustainable and profitable.

We want every part of the economy and the financial system to get on board, and help us become more sustainable. And this is very much part of the European Green Deal.

The is a Deal about supporting jobs, growth and investment – in a way that is sustainable, and in a way that contributes to reaching net zero by 2050.

And so moving corporate reporting towards combining financial and sustainability information is fully in line with our Green Deal.

And EFRAG is very well placed to look at the links between these two sets of company data, given your role on both financial and sustainability reporting.

The Corporate Sustainability Reporting Directive – and I'm sure everyone in this room knows it well - this a major step forward in corporate reporting. . 

And if I recall today, companies can really pick and choose between many different standards.

The Directive takes all of that choice away but gives clarity and certainty to companies.

It takes account of the need for companies to report on sustainability. 

The Parliament and the Council recently approved the final text of the Directive, which should be published before the end of this year.

So it is a very big piece of work, and I want to congratulate everyone involved, especially the French Presidency and the Parliament's rapporteur Pascal Durand, for very intensive and good work.

For the first time ever, sustainability reporting will be on an equal footing with financial reporting.

The new Directive covers large companies and listed companies.

Listed SMEs will report, but they will get more time to adjust and more proportionate expectations on what they need to report.

The information reported will be made available in a digital format.

And this will make it easily accessible to anyone interested in seeing it.

Companies will have to get an assurance opinion on their sustainability reporting...

 more at Commission

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