The Non-Financial Reporting Directive (NFRD) is an EU directive that requires large companies and listed firms to disclose non-financial information in their annual reports. This non-financial information pertains to aspects such as environmental, social, and employee matters, human rights, anti-corruption efforts, and diversity within the board of directors. The aim of the directive is to promote transparency and provide stakeholders, including investors and the public, with relevant information about these companies’ impact on society and the environment.
Some key features of the Non-Financial Reporting Directive include:
Reporting Obligation: Large companies and listed firms are required to provide information on non-financial matters relevant to their business activities in their annual reports. This includes aspects such as environmental issues, social issues, employee rights, anti-corruption efforts, and diversity within the board of directors.
Materiality Assessment: Companies are required to report non-financial information that is material to their business operations and impact on stakeholders. This means that only information that is relevant to stakeholder decision-making should be reported.
Strategic Information: The directive encourages companies to place non-financial information in a broader strategic context and discuss long-term sustainability objectives and risks.
Diversity Policy: Companies must provide information about their gender diversity policies, including the composition of the board of directors and management positions.
Non-Financial Information Statement: Companies are also required to provide a statement on their diversity, inclusion, and anti-corruption policies, as well as their due diligence processes related to human rights and the environment.
The Non-Financial Reporting Directive aims to encourage companies to be accountable for their sustainability performance and the impact of their activities on society and the environment. It contributes to the promotion of sustainability and responsible business practices in the European corporate world and facilitates more transparent and informative communication between companies and their stakeholders.
