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By Nikos Avlonas, President and Founder of CSE
The reformation of EU Non-Financial Reporting Directive (NFRD) is one of the priorities to strengthen the foundations for sustainable investment, as stated by Mairead McGuinness, the EU Commissioner for Financial Services. Stakeholders demand more and more sustainability data to evaluate a company’s strategy and long-term viability. However, according to various studies, the existing reporting framework is still insufficient and not compatible with the context of the Paris Agreement and Sustainable Development Goals.
There is a call for mandatory reporting obligations and the clarification of the legal framework. The top 10 key issues that the reformed NFRD are expected to address follow below.
Extended scope
It is very likely that the NFRD scope will be extended, including all large companies (both those with assets listed on stock exchanges and private) with more than 250 employees.
Small and medium enterprises debate
There are small or medium enterprises that face high risks, such as energy producers, and are expected to comply with reporting requirements proportionate to their size and impact.
New mandatory criteria
New qualitative criteria for disclosure of forward-looking information on identification of risks and setting the targets are likely to be proposed.
Stricter climate transition plans
This means more specific information, including timeline, intermediary objectives, time horizons and alignment with the public objectives or science-based targets.
Emphasis on human rights and environmental due diligence
Disclosure requirements on these issues are already proposed, but only a few companies fulfil them. Updated requirements regarding management of risks and impacts in supply chains are expected.
Sector-sensitive Key Performance Indicators
Mandatory sector-sensitive KPIs are on the way, concerning climate change, natural resources, biodiversity and workforce statistics.
Sustainability reporting within annual reports
It is possible that sustainability reporting will be integrated within annual reports.
Sustainable corporate strategy
Corporate strategy development based on governance and sustainability will take the lead with the new NFRD Legislation.
Double materiality principle
The double materiality principle refers to the financial impacts coming from sustainability topics and corporate impacts on people and the planet. Further clarification is expected.
Mandatory assurance specification
Assurance is a significant part of sustainability reports and the new NFRD Legislation will give more attention on it.
HOW CSE CAN HELP BUSINESS ON THEIR SUSTAINABILITY PATH
CSE holds the international Certified Sustainability (ESG) Practitioner Program for business executives, presenting all the new trends in sustainable development and how to gain a competitive advantage.
CSE is one of the leading ESG Consulting and Training firms specializing in maximizing social, economic and environmental impact. CSE helps FORTUNE 500 and other organizations around the globe improve their ESG Ratings and maximize their impacts.
CSE offers integrated consulting services on Sustainability (ESG) with a sector-based approach.
