Home / Droit des sociétés et gouvernance / Non-financial Reporting

Non-financial Reporting

The EU 2014 Non-financial Reporting Directive (NFRD) requires large public-interest entities in the EU to publish non-financial information on an annual basis. Although it represents a milestone in non-financial reporting (NFR), the Directive has not been strong enough to guarantee that companies provide the information that stakeholders expect and need. One reason is that there is no requirement to include trade unions and worker representatives in the non-financial reporting process. The current consensus on the need to revise the Directive represents an opportunity to strengthen the involvement of trade unions and worker representatives in NFR and improve the relevance, quality, trustworthiness and comparability of information provided in non-financial reports.  

The Non-financial Reporting Directive (NFRD)

The Non-financial Reporting Directive 2014/95/EU represents a milestone at the EU level in terms of requiring "large public-interest companies" to provide non-financial information. The Commission estimates that about 6,000 companies are covered, as the Directive applies to the following types of companies and groups with more than 500 employees: 

  • listed companies
  • banks
  • insurance companies
  • other companies designated by national authorities as public-interest entities

Under the NFRD, large companies have to publish reports on the policies they implement in relation to:

  • environmental protection
  • social responsibility and treatment of employees
  • respect for human rights
  • anti-corruption and bribery
  • diversity on company boards

Starting with the 2018 reporting cycle, companies are required to publish a non-financial statement which includes:

  • a brief description of the undertaking's business model
  • a description of the policies pursued by the undertaking in relation to the matters listed above, including due diligence processes implemented
  • the outcome of those policies
  • the principal risks related to those matters linked to the undertaking's operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking manages those risks
  • non-financial key performance indicators relevant to the particular business

Companies are free to choose between existing national or international reporting frameworks for specific guidance on how exactly to report, and are also given the option to "report or explain". The European Commission provided voluntary guidance for environmental and social reporting in 2017 and guidance on climate-change related reporting in 2019.  

Shortcomings of the 2014 NFRD and the revision process

A number of studies, such as the Alliance for Corporate Transparency's 2019 report on the top 1000 listed European companies and its 2020 report on 300 companies in Central, Eastern and Southern Europe, have pointed out that many of the companies covered by the NFRD are not providing basic information on environmental and social impacts and governance needed by stakeholders.  

These shortcomings were confirmed by the large majority of participants in the European Commission's public consultation on Non-financial reporting by large companies. The summary document on the consultation pointed out in particular that:

  • Users say NFR lacks comparability (84%) reliability (74%) relevance (70%)
  • 82% say there should be a common EU NFR standard
  • 67% say there should be (stronger) audit requirements
  • 70% want large non-listed companies covered by NFRD
  • 69% want environmental disclosures by the Financial Taxonomy

In part based on this consultation, the European Commission announced that it would publish a proposal for revising the NFRD in 1Q of 2021. At the same time it commissioned two key reports for the development of a comment set of EU NFR standards:

European Trade Union Confederation (ETUC) demands

The European Trade Union Confederation (ETUC) has made a number of demands which relate to non-financial reporting: