On 19 February, Accountancy Europe issued a publication Towards reliable non-financial information across Europe.
Non-financial information (NFI) is crucial for companies, investors and other stakeholders to make sound business decisions. Providing independent assurance on the reported NFI enhances its quality and reliability. The demand for assurance on NFI has been growing steadily, but the practice still varies across Member States.
Our publication sets out how European countries have transposed the Non-Financial Reporting Directive 2014/95/EU (the NFRD) into national law and the impact on the role of the statutory auditor and independent assurance services provider. We also look into the voluntary assurance practice beyond legal requirements across Europe.
Our fact sheet shows that out of the 26 European countries covered:
If you have additional information on how independent assurance practice is developing across Europe, please contact [email protected]
On 20 February, the European Commission launched a public consultation on the upcoming review of the Non-Financial Reporting Directive (NFRD). The Commission formally committed to the revision of the NFRD in its European Green Deal published in December 2019. The public consultation is looking into a number of topics, including standardisation, strengthening assurance requirements, materiality etc. The consultation will remain open until 14 May 2020. Read more
On 19 February, Executive Vice President (EVP) Valdis Dombrovskis addressed attendees of the IFRS Foundation conference on financial reporting. In his speech, EVP said that the European Securities Markets Authority (ESMA) should be also involved in the process of establishing the European non-financial reporting standards. The future Platform on sustainable finance will also play a role in this process (note: it was agreed to create this Platform in the context of the Taxonomy regulation). Read full speech
On 18 February, the Committee of Economic and Monetary Affairs held a hearing with Hans Hoogervorst, Chair of IASB and Erkki Liikanen, Chair of IFRS Foundation Trustees. Hans Hoogervorst remains very cautious when talking about sustainability and standards. In his speech, he recognised that a lot of financially relevant information (e.g. business model or intangible assets) cannot be captured in financial statements. That is why the IASB worked on a management commentary practice statement where companies can provide explanation on their future risks. In response to MEP Paul Tang (S&D, NL) about lack of available standardised sustainability data, Hans said that at the IASB they discussed sustainability in the context of management commentary. However, in his view it is important to engage in the activities that are within the remit of the IASB. There is indeed a need for proper sustainability reporting. Hans also encouraged bodies which are already doing a great job in this area (like GRI) to get together, merge and create a global standard setter.
On 17 February, the Alliance for Corporate Transparency launched its final report of a three–year project on companies non-financial reporting practice. This initiative analyses information that companies disclose on their environmental and societal risks and impacts under the requirements of the Non-Financial Reporting Directive.
The results show troubling poor quality of reporting on sustainability issues. Common issues, as the research identifies, are:
On 28 January, the European Commission held a public stakeholder meeting on the implementation of the European Green Deal and the upcoming EU Climate Law. Executive Vice-President (EVP) Valdis Dombrovskis delivered his speech emphasising the revision of the NFRD and that companies will have to increase disclosures on their sustainable activities. He announced that the Commission will support the development of European Standards for non-financial reporting. The Commission still needs to figure out the details, but EVP will be contacting the European Reporting Advisory Group to start preparatory work. Read full speech
The European Commission is expected to publish the Circular Economy Plan on 10 March. Circular economy is at the heart of the new regenerative growth strategy for Europe which is necessary to achieve climate-neutrality by 2050. The plan will establish a set of interrelated initiatives to enable a strong and coherent policy framework. In the draft Circular Economy Plan, the Commission specifies a number of cross-cutting actions to address the main economic barriers in order to promote sustainable production, investment and consumption. The EC will use the following initiatives to scale up financing in the circular economy, to mention a few: enhancing disclosure of environmental data by companies in the upcoming revision of the NFRD; support a business led initiative to develop environmental accounting principles that complement financial data with circular economy performance data.
On 6 February, ESMA published its strategy on sustainable finance outlining its key priorities, which are the following:
On 6 February, the Project Task Force (PTF) of Climate-related Reporting of the European Lab launched its report on climate-related reporting.
The PTF was tasked to identify good reporting practice in climate reporting and to assess the maturity in the implementation of the TCFD recommendations. The PTF also took into consideration the Non-Financial Reporting Directive and the non-binding guidelines.
The report identifies 58 examples considered as good reporting practices selected from 30 companies. Read more
On 23 January, ECON and ENVI confirmed the political agreement on sustainable finance taxonomy by 85 votes, 16 against and 5 abstentions. The taxonomy regulation is meant to lay down the foundation for classification of economic activities. The political agreement has been already endorsed by Coreper and went to ECOFIN for adoption.
On January 15, the European Parliament adopted its joint Motion for a Resolution on the European Green Deal by an overwhelming majority of votes: 482 votes in favour, 136 against and 95 abstentions. MEPs welcome the European Green Deal and support an ambitious sustainable investment plan to help close the green investment gap. They also call for an adequately funded Just Transition Mechanism.
The Motion for a Resolution aims for, among others:
On the 14 January, the European Commission presented its so-called Green Investment Plan which will contribute to the overall goal to become a climate-neutral continent by 2050. Major investments are needed to fund the transition. The Green Investment plan is supposed to mobilise public investment and help to unlock private funds through EU financial instruments which would lead to at least €1 trillion of investments over a period of 10 years, mostly through InvestEU. Part of the plan is the so-called Just Transition Mechanism, which will be focused on fair and just green transition. Read more
Accounting For Sustainability (A4S) coordinates call to action in response to climate change.
The statement includes eight actions which accountants are called upon to take in response to the climate emergency. The call to action highlights that climate change represents an economic, social and business risk – a risk that accountants from across the world must take action on. Read more
On 20 February, the International Integrated Reporting Council (IIRC) opened a call for feedback in order to revise its <IR> framework. The IIRC has identified key themes around which it invites feedback, outlined in three topic papers, covering business model considerations, responsibility for an integrated report and charting a path forward.
The online survey is open until 20 March. Read more
On 22 January, the World Economic Forum’s International Business Council (IBC) launched a white paper on a common, core set of metrics and recommended disclosures for sustainable value reporting. This was issued in an effort to align the IBC members mainstream reporting and as a result to reduce the fragmentation in ESG reporting.
The proposed metrics and disclosures have been organised in four pillars that are aligned with the SDGs and principal ESG domains: 1. Principles of governance 2. Planet 3. People 4. Prosperity. Two sets of metrics are proposed for each of the pillars: core and expanded metrics.
The report will be finalised after consultation and feedback with companies, investors and other stakeholders. Read more
Sustainable Development Foundation published its report containing 6 recommendations for green reporting:
These recommendations are based on the results of the survey of a 130 non-financial statements sample.
On 20 February, the FRC announced a review of how companies and auditors assess and report on the impact of climate change. The review will consider how the quality of information can be improved to support informed decision-making by investors and other stakeholders.
Read more This curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.