The Non-Financial Reporting Directive (NFRD), also known as Directive 2014/95/EU, is a European Union (EU) directive that requires certain large companies to disclose non-financial information in their annual reports. The directive came into effect in December 2014 and was implemented in EU member states by the end of 2016.
Under the NFRD, large companies with over 500 employees operating within the EU are required to disclose information on environmental, social, and employee-related matters, as well as human rights, anti-corruption, and bribery issues. The information must be relevant, material, and specific to the company’s operations and business model, and should include a description of the policies, outcomes, risks, and indicators related to these matters.
The NFRD aims to improve transparency and accountability of large companies, and to encourage them to take into account the impact of their business activities on the environment and society. By providing stakeholders with more information on non-financial matters, such as a company’s sustainability performance and its impact on the community, the NFRD aims to facilitate the transition towards a more sustainable and responsible business model.
In April 2021, the European Commission proposed a new regulation, the Corporate Sustainability Reporting Directive (CSRD), which aims to update and strengthen the NFRD. If adopted, the CSRD would expand the scope of the reporting requirements to include all large companies and groups operating within the EU, regardless of whether they are listed or not, and would require them to report on a broader range of sustainability topics.
Sources:
- European Commission website: Non-Financial Reporting Directive (NFRD): https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/9837-Non-Financial-Reporting-Directive
- European Parliament website: Non-financial reporting by companies and disclosure of non-financial information: https://www.europarl.europa.eu/legislative-train/theme-a-better-regulation/file-non-financial-reporting-by-companies-and-disclosure-of-non-financial-information
- Accounting Today: EU’s Non-Financial Reporting Directive promotes sustainability: https://www.accountingtoday.com/opinion/eus-non-financial-reporting-directive-promotes-sustainability
