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EC launches initiative to update the NFRD

  • European Union Image

Feb 04, 2020

In 2020, the European Commission (EC) launched an initiative "Revision of the Non-Financial Reporting Directive".

As reported earlier, Executive Vice President Valdis Dombrovskis of the EC announced in January 2020 that later this year he would present a renewed sustainable finance strategy, which would include a revision of the Non-Financial Reporting Directive (NFRD).

As a first step of the corresponding initiative that has just been launched, an "Inception impact assessment" has been published. The background paper for the impact assessment notes the following current problems with the NFRD:

  • Reported non-financial information is not sufficiently comparable or reliable.
  • The reported non-financial information does not meet users' needs.
  • Companies incur unnecessary and avoidable costs related to reporting non-financial information.
  • Companies face uncertainty and complexity when deciding what non-financial information to report, and how and where to report such information.

The background papers names three options that could be followed to address these problems:

  1. Continue the current approach of non-binding guidelines to assist companies when reporting according to the NFRD.
  2. Explore the use of standards (which would remain voluntary for companies to use if they wish to).
  3. Revise and strengthen the provisions of the NFRD.

Given Mr Dombrovskis earlier remarks and the title of the initiative, it seems that the EC has already formed an opinion on the best way forward. However, stakeholders have the possibility to comment on the impact assessment (until February 27, 2020), and a formal full consultation is announced for the first quarter of 2020.

Review the consultation page on the EC website that offers access to the Inception impact assessment background paper, the feedback possibility and a general outline on the planned timing for the revision.

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