On 21 April, the European Commission published its legislative proposal on the Corporate Sustainability Reporting.
It reforms the existing rules on disclosure of non-financial information in annual reports for companies operating in Europe.
These proposals are the result of the Commission’s review of the non-financial reporting directive, ‘the NFRD’. FERMA contributed to this review via a public consultation in June of 2020.
We are also active on the topic of sustainability in the context of our theme for this year, #risk2resilience. Our recently published sustainability guide presents our thoughts on the topic.
These proposals from the Commission mark a new era for companies, in terms of their reporting. Non-financial information has become sustainability information.
FERMA’s initial reaction to the Corporate Sustainability Reporting Directive proposal
On 21 April, the European Commission published an important legislative proposal on Corporate Sustainability Reporting. This proposal is the result of the Commission’s review of the non-financial reporting directive, ‘the NFRD’. FERMA contributed to this review via a public consultation in June of 2020 (see here).
This proposal marks a new era for companies in terms of their reporting reforming the rules of disclosure of non-financial information in Europe.Non-financial information has become sustainability information.
FERMA’s initial reactions to the proposal are as follows:
We are positive about, and supportive of the Commission’s objective to develop a common standard on sustainability reporting. Work on a standard should help our profession, and we believe we can also help this process with our expertise.
On scope, the Commission proposes to require more companies to report sustainability information. On the one hand, this is welcome since in principle it will create more information. On the other, companies unfamiliar with and unexperienced in this domain are going to need assistance, and this will take some time to bed-in. As a final initial reaction, we are still to fully analyse the implications of the proposal to require assurance of sustainability information, especially before the ‘standard’ for the reporting has been developed, or had time to bed-in.
The proposal of the European Commission is now going to be discussed by the European Parliament and EU Member States. For companies, it will be some time until the new requirements take effect, a minimum of two years, and the requirements will depend on the negotiations between the EU Institutions and EU countries. However, what’s already clear is the direction of travel: more companies will need to report on sustainability, more sustainability reporting will be done, and there will be more checks on that information.
We look forward to working out the details of this proposal in coming months and engaging with EU policy-makers.