05 February 2020

CDSB publishes changes needed to ensure successful revision of the EU Non-Financial Reporting Directive

Non-financial reporting must be in the management report to satisfy investor needs and ensure that the Directive on Non-Financial Reporting is fit for purpose to achieve Europe’s ambitious sustainable finance goals.

As outlined in the EU Green Deal, the European Commission will review the Non-Financial Reporting Directive (NFRD). Last week, the European Commission started the revision of the Non-Financial Reporting Directive, which will run until the 27 February 2020.  

While the introduction of the NFRD was a significant milestone for corporate accountability and transparency in Europe, it has not achieved its objectives in its current form. The Climate Disclosure Standards Board (CDSB) therefore welcomes the European Commission’s announcement to review the Directive.

In response to this, CSDB has published its draft position on the key changes needed to the Directive should take into account, including red lines and tracked changed to current Directive. 

Red lines:

1. Make reporting in the management report mandatory by removing the exemption to allow the non-financial statement to be reported outside the management report;
2. Increase scope by changing business size to >250 employees, as by definition of PIEs in Accounting Directive as opposed to >500;
3. Explicitly state the word climate in the Directive;
4. Apply the TCFD’s recommendations to disclosure of ESG information in the management report;
5. Elevate materiality as a useful construct for making decision-useful disclosures from guidance to the Directive and adopt IASB’s new definition of materiality – materiality from the accounting world in the Accounting Directive;
6. Set the investor as primary audience, while recognising that information may satisfy other stakeholder needs;
7. Strengthen linkages between non-financial and financial information, in line with the TCFD recommendations; and
8. Strengthen governance disclosures by incorporating TCFD recommended disclosures a) and b) on governance into the ‘corporate governance statement’ in Article 20 and in the non-financial statement in 19a and 29a of the Accounting Directive.

Full press release on CDSB

Full red lines explanation on CDSB

 

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