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14 June 2023 Glossary

What is the NFRD

European Union Directive 2014/95/EU, the Non-Financial Reporting Directive (“NFRD”), is a legislative directive that has legally required certain large, listed companies in Europe to disclose sustainability related information in their annual reports.

By Klappir

From the NFRD to the CSRD: How the EU is Reshaping Corporate Non-Financial Disclosure

Unlike a regulation, which is directly applicable in Member States after its entry into force, EU directives are not directly applicable in Member States, but must first be transposed by EU and EEA member states into their own national law before becoming applicable.

Key points:
It requires certain large companies to disclose relevant non-financial information to provide investors and other stakeholders with a more complete picture of their development, performance and position and of the impact of their activitiy.

Such companies are required to give a review of their business model, policies, outcomes, principal risks and key performance indicators, including on:

  • environmental matters;
  • social and employee aspects;
  • respect for human rights;
  • anti-corruption and bribery issues.

If companies do not have a policy on one of these areas, the non-financial statement should explain why not. Companies also have to report about their policy on the diversity of the board of directors. (EUR-LEX)

It is estimated that 11.000 large, listed companies in Europe have been required to report their non-financial information according to the NFRD. Those companies are the first to transition into the new and expanded Corporate Sustainability Reporting Directive (“CSRD”) framework.

By Klappir14 June 2023

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