ESG Thema #7 – ESG Corporate Disclosure: Towards more demanding and harmonized reporting

February 1, 2022

  • The 21st century company is one that must go beyond considerations of financial profitability, ensuring that the ecosystem in which it operates is preserved.
  • Protecting the environment and the employees who work for a company can only be done if the latter has identified the ESG risks it is likely to face and has an action plan in place to manage them.
  • For this reason, the EU passed the Non-Financial Reporting Directive (NFRD)1 in 2014, requiring public interest enterprises with more than 500 employees to report on a number of non-financial information, including on the “double materiality” concept.
  • *This first directive will be replaced in December 2022 by the Corporate Social Responsibility Directive (CSRD), which is more demanding in terms of reporting and the comparability of information provided by companies. It notably expands considerably the number of companies subject to extra-financial information reporting.
  • If the European Union is taking the lead in terms of sustainability, it is worth mentioning that other initiatives are being developed around the world as well.
  • For example, the G20, the G7 and the Financial Stability Board among others are developing initiatives to create a baseline of global sustainability disclosure requirements and reporting standards that would build on the work of the Task Force on Climate-related Financial Disclosures (TCFD).
  • The emergence of other, non-binding, international legislations outside Europe has thus increased the importance and potential of CSR as a means to hold businesses accountable for the negative externalities of their activities.

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