The EU Non-Financial Reporting Directive (NFRD) (2014/95/EU) requires large corporates, including credit institutions, listed companies, and insurance companies with more than 500 employees (approximately over 6000) to disclose information on how they manage environmental and social issues. This allows investors and policy makers to review the non-financial performance of firms and encourages them to adopt a more social and environmental approach to conducting business. The NFRD amends and requires firms who fall within scope to include non-financial information in their annual statements from 2018 onwards (although this is currently non-binding).
In December 2019 and as part of the communication on the European Green Deal, the Commission agreed to review the Directive, in order to improve the disclosure of environmental data, and to make any changes as required under the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation. The Commission has acknowledged that the current reporting requirements are not sufficient to meet the needs of investors and consumers and do not provide enough detail to show what a firms impact on the environment and society is due to a number of reasons:-
On 20 February 2020, the European Commission launched a detailed consultation on proposed changes to the NFRD to create an EU-wide standard which closed in June 2020. In parallel with the work on NFRD, the Commission have also requested that the European Financial Reporting Advisory Group (EFRAG) begin to create standardised non-financial reporting templates.
It is expected that the review will take the form of a regulation rather than a directive, with a legislative proposal for NFRD expected in Q2 2021.
The Project Task Force on non-financial reporting standards (PTF-NFRS) submitted its final report to the European Commission on 28 February 2021, proposing a roadmap for the development of a comprehensive set of EU sustainability reporting standards.