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Deloitte response to ad personam mandate on non-financial reporting standard setting

Published on: 10 Nov 2020

The Deloitte firms in the European Union have responded to the request of the President of the EFRAG Board to share views on the future governance and framework of EFRAG in the context of possible changes to non-financial reporting by companies.

As general background, we welcome the European Commission’s review of the non-financial reporting directive and support companies disclosing high-quality, transparent, relevant and comparable non-financial information that is connected to financial information within mainstream corporate reporting. We support global standards for reporting these because issues such as climate change are global, and the UN Sustainable Development Goals are of course global. However, we recommend a ‘building block approach’ where core global standards can be supplemented by local requirements.

We recognise the urgency of developing harmonised standards for non-financial reporting, and the particular needs of the EU, given that the EU has adopted reporting requirements that will apply in the relatively near term, particularly for financial sector companies. We are encouraged by recent international developments, including the statement of intent of five leading sustainability and integrated reporting organisations to work together in this area and by the IFRS Foundation’s consultation paper on sustainability reporting.

We agree that EFRAG has an essential role to play with respect to non-financial reporting requirements in the EU. What that role would be will depend on the overall approach agreed by the EU Institutions as well as the outcome of current developments in non-financial information standard-setting at the global level. We can see at least two possible roles and approaches for EFRAG:

  • an influencer and endorsement adviser with respect to global sustainability standards; or
  • standard-setting activities for the EU for non-financial reporting standards.

The expected role of EFRAG in non-financial reporting standard-setting will depend on a proper understanding of what needs to be developed at a European level versus what could be leveraged from global existing and future developments, and related timing. This would have significant implications on the possible changes to EFRAG’s governance and resourcing.

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