Upcoming EU Reporting Standards: NFRD & CSRD & SFRD & TCFD


Deloitte Report


Non-Financial Reporting Directive
The NFRD, together with the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation, are the central components of the sustainability reporting requirements underpinning the EU’s sustainable finance strategy. The purpose of this legal framework is to create a consistent and coherent flow of sustainability information throughout the financial value chain.
Interesting points:
  • “sufficient level of comparability to meet the needs of investors and other stakeholders as well as the need to provide consumers with easy access to information on the impact of busi­nesses on society” -> we can play into this with our call to transparency
  • Minimum requirements: “certain large undertakings should prepare a non-financial statement containing information relating to at least environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters.” + they should show due diligence
  • Environment wise it SHOULD include: “details of the current and foreseeable impacts of the undertaking's operations on the environment, and, as appropriate, on health and safety, the use of renewable and/or non-renewable energy, green­ house gas emissions, water use and air pollution.”
  • Social wise it MAY include: “actions taken to ensure gender equality, implementation of funda­ mental conventions of the International Labour Organisation, working conditions, social dialogue, respect for the right of workers to be informed and consulted, respect for trade union rights, health and safety at work and the dialogue with local communities, and/or the actions taken to ensure the protection and the development of those communities.”
  • Human rights, anti-corruption and bribery wise, COULD include: “information on the prevention of human rights abuses and/or on instruments in place to fight corruption and bribery.”
  • It’s not for SME’s
  • A lot of focus on diversity policies
  • Large undertakings which are public-interest entities exceeding on their balance sheet dates the criterion of the average number of 500 employees during the financial year
Inky’s thoughts:
The intent is good, but it’s not very ambitious in my opinion. The things that they need to report on are quite open to interpretation or ‘what’s relevant to the particular business’. The report should just provide “understanding” of the business’s social and environmental impact. There are no sanctions in place yet for not meeting the requirements, which is questionable.


Corporate Sustainability Reporting Directive
The CSRD is an update/extra thing under the NFRD, making it more elaborate.
Compared to the NFRD sustainability reporting requirements, the principal novelties of this proposal are:
  • – to extend the scope of the reporting requirements to additional companies, including all large companies and listed companies (except listed micro-companies);
  • – to require assurance of sustainability information;
  • – to specify in more detail the information that companies should report, and require them to report in line with mandatory EU sustainability reporting standards;
  • – to ensure that all information is published as part of companies’ management reports, and disclosed in a digital, machine-readable format.
Mandatory EU sustainabiligy reporting standards
  • environmental matters
  • social matters and treatment of employees
  • respect for human rights
  • anti-corruption and bribery
  • diversity on company boards (in terms of age, gender, educational and professional background)
Good overview by Plan A:
Inky’s thoughts:
Looks a lot more elaborate, but why did it take so long to make this lol. Anyway, at first glance it looks good, especially that more companies are included in the reporting rules. Again kind of missing that mandatoryness I think?
It is a bit ambitious to think that reporting can already start the 1st of January 2024. The CSRD was taken into affect in 2014, but the first time companies had to report was 1st of January 2018.
The EU has put out extra non-mandatory guidelines on top of the NFRD before, and this did not improve the quality of sustainability information reported by companies (CSRD proposal).
SDIA applauds the directive’s mention of the aim to make companies be more transparent about their impact on the environment. In addition, we think it’s good that we start thinking about sustainbility infromation and data the same way as financial infomation and data and not see one more impartant than the other.
It is not clear yet what exactly will be mandatory. It seems like EFRAG has been appointed to give the EU recommendations on what this should mandatory standards should be included and how this should be done.
The NFRD had a disconnect between the information provided and the information that users of this information wanted. Also wasn’t machine-readable, so difficult to work with.
The CSRD is a directive, so it will first be up to the member states to get to the results, without the EU dictating how to achive these results. It will first have to be voted into law on a national level before it actually will apply (https://european-union.europa.eu/institutions-law-budget/law/types-legislation_en).
These are all great ideas that will advance transparency wiht regards to sustainability of European companies, however it would be very interesting to know as soon as possible what the mandatory and non-mandatory reporting standards will be. This way, companies can start to prepare and collect the right information.
We hope that EFRAG considers digital infrastructure as part of the things that have to be sustainable in the future.


Sustainable Finance Disclosure Regulation
To increase transparency about sustainability of financial institutions (banks, insurers, asset managers and investment firms) in the EU. Not very relevant for us.


Task Force on Climate-Related Financial Disclosures
Summary by Deloitte:
In governance, companies must:
  • describe the board’s oversight of climate-related risks and opportunities
  • describe management’s role in assessing and managing climate-related risks and opportunities
In strategy:
  • describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
  • describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
In risk management:
  • describe the organisation’s processes for identifying and assessing climate-related risks
  • describe the organisation’s processes for managing climate-related risks
  • describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.
In metrics and targets:
  • disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
  • disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
  • describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.
This is a voluntary thing, not implemented by the EU or anything. It’s basically to give companies moe guidance on being more sustainable. It is supported by some government entities though. Could be interesting for the smallers orgs of the SDIA, because it’s not so focused on the size of the company and can be adopted by all orgs. The general consensus seems to be that it’s “forward looking”.