The European Commission has welcomed today the publication of two reports setting out recommendations on the development of sustainability reporting standards. These reports, which were prepared at the request of the Commission following an invitation by the Council, are an important step in the development of corporate sustainability reporting across the EU.
Both reports recognise the importance of coordinating the development of EU sustainability reporting standards with existing and emerging global initiatives. EU sustainability standards are necessary to meet the political ambition and urgent timetable of the European Green Deal. They are also necessary to ensure consistency of reporting rules at the heart of the EU’s sustainable finance agenda, especially the existing Sustainable Finance Disclosure Regulation, the Non-Financial Reporting Directive (NFRD), the Taxonomy Regulation, as well as with the requirements of forthcoming legislation on sustainable corporate governance and due diligence.
The first report proposes a roadmap for the development of a comprehensive set of EU sustainability reporting standards. It was prepared by a multistakeholder task force established by the European Financial Reporting Advisory Group (EFRAG).
A second report proposes reforms to EFRAG’s governance structure to ensure that future EU sustainability reporting standards are developed using an inclusive and rigorous process. It sets out, for example, how national and European authorities will be involved, while ensuring that the process also draws upon the expertise of the private sector and civil society. The publication of the reports is very timely.
EU law requires large companies to disclose certain information on the way they operate and manage social and environmental challenges. This helps investors, civil society and other stakeholders to evaluate the sustainability performance of large companies and encourages these companies to develop a sustainably responsible approach to business.
The Non-Financial Reporting Directive (NFRD) lays down the rules on the disclosure of non-financial information by large companies. In its Communication on the European Green Deal, the Commission committed to reviewing the Non-Financial Reporting Directive as part of the strategy to strengthen the foundations for sustainable investment. The Commission will carefully consider these reports as it prepares its proposal to strengthen the Directive, which is planned for April.
You can read the full reports here.