Recent years have seen an increased appreciation of the need for decision-useful environmental, social and governance (ESG) information to help drive sustainable financial markets. As we obtain a better understanding of the potential risks associated with climate change and environmental degradation, companies are expected to provide evidence of how they are responding, to strengthen decision-making by investors, lenders, and insurers in allocating capital and in underwriting risks.
A large number of initiatives have emerged, many with the shared intention to improve the quality and consistency of corporate reporting. In Europe, one of the most significant developments has been the transposition of the Non-Financial Reporting Directive, and its entry into force in Member States legislation. It seeks to facilitate “relevant, useful and comparable information by undertakings”.
The Directive 2014/95/EU on the Disclosure of Non-Financial and Diversity Information the (NFR Directive) requires certain large companies to disclose information. More specifically, the NFR Directive requires these companies to disclose information on their business models, policies, risks and outcomes as regards to environmental matters, social and employee aspects, respect for human rights, anti-corruption and bribery issues, and diversity in their board of directors. The disclosures required on these matters should be “to the extent necessary for an understanding of the undertaking’s development, performance, position and impact of its activity relating” to these matters. Companies meeting the criteria for disclosure were required to disclose such information in a non-financial statement for the financial years commencing on or after 1 January 2017. As part of the European Green Deal, the European Commission will review the NFR Directive in 2020.
This Handbook, EU Environmental Reporting Handbook, follows on from CDSB and CDP’s First Steps review of corporate climate and environmental disclosure under the EU Non-Financial Reporting Directive, and is an update to the EU environmental reporting handbook published in 2016. To demonstrate how companies have responded to the NFR Directive, this Handbook contains annotated examples of disclosures on environmental matters from annual reports of select European companies.
The examples are drawn from different sectors and across the five content categories of the NFR Directive to assist companies in understanding what reporting looks like in line with the NFR Directive, and how they can enhance their own disclosures. Suggestions made throughout the Handbook provide additional tips and offer examples of decisionuseful information. While the examples are focused on environmental matters, the conclusions from the analysis may also be useful for reporting other non-financial information.
Each section is also mapped to the corresponding requirements of the CDSB Framework for reporting environmental information, the recommendations of the Task Force on Climate-related Financial Disclosure, and relevant questions of the CDP Climate Change Questionnaire. This mapping is intended to help reduce the reporting burden for companies, demonstrate commonalities and synergies, and to ensure that information is connected across various reporting channels.