Final reports on possible EU non-financial reporting standards
08 Mar, 2021
In July 2020, the European Commission (EC) sent two letters to the European Financial Reporting Advisory Group (EFRAG) asking it to undertake preparatory work for the possible elaboration of EU non-financial reporting standards. The first letter tasked the European Reporting Lab with appointing a multi-stakeholder project task force to carry out the preparatory work for possible standards. The second letter was directed ad personam to the EFRAG Board President to consider a possible need for changes to the governance and financing of EFRAG if it were to be tasked with the development of EU non-financial reporting standards. On both tasks, final reports have now been submitted to and published by the EC.
The Commission notes that while EU sustainability standards are necessary to meet the political ambition and urgent timetable of the European Green Deal and necessary to ensure consistency of reporting rules at the heart of the EU's sustainable finance agenda, coordinating the development of EU sustainability reporting standards with existing and emerging global initiatives is also important.
The first report proposes a roadmap for the development of a comprehensive set of EU sustainability reporting standards. The report contains 54 proposals organised into four groups and describes a three-layered target architecture that would contain sector agnostic standards, sector specific standards, and entity specific standards. It also contains an ambitious standard-setting roadmap that would see a first set of draft standards by mid-2022.
The second report proposes reforms to EFRAG's governance structure to establish a non-financial reporting pillar with a robust governance structure and due process, and a sustainable funding structure. The non-financial reporting pillar would basically mirror the financial reporting pillar, and an Administrative Board sitting above the two pillars would join them. The report notes that establishing a non-financial reporting Board must not come at the cost of weakening the financial reporting pillar.
Please click for access to the reports on the EC website:
