The European Financial Reporting Group (EFRAG) is to begin preparatory work on the development of possible EU non-financial reporting standards in a revised non-financial reporting directive (NFRD)
The move follows the European Commission’s decision in May to revise the NFRD in the first quarter of next year.
At the time, the Commission said one of the possible ways of enhancing the comparability, reliability and relevance of information disclosed by companies under the NFRD would be to mandate the use of a common set of non-financial reporting standards. Such standards could also facilitate the assurance of non-financial information, its enforcement and its digitisation using a taxonomy and a structured data standard.
Now the Commission has mandated EFRAG to undertake preparatory work for the elaboration of possible EU non-financial reporting standards, so as to have options available for the swift adoption and implementation of European standards, should that be the choice of the Commission’s legislative proposal.
The preparatory work will be carried out by a multi-stakeholder project task force (PTF) and is expected to be completed in early 2021, with a progress report to be released at the end of October 2020. A call for candidates for this project task force will be issued shortly.
The PTF will be required to take into account at least the four non-financial matters currently covered by the NFRD (environment; social and employee matters; human rights; bribery and corruption) and the key categories of information (business model; policies including due diligence processes; outcomes; principal risks and risk management; Key Performance Indicators).
It will also consider how to improve narrative reporting about intangible factors, including in relation to human capital and workforce skills.
The Commission has also asked EFRAG to look at possible changes to its governance and funding in the future, if it is required to develop NFRD standards.
Jean-Paul Gauzès, EFRAG board president and chair of the European Lab Steering Group, said: ‘The European Commission has taken account of EFRAG’s established reputation and key role in the development of financial reporting standards, our more recent involvement in the non-financial reporting arena through the European Lab and opportunities for the interconnectivity between financial and non-financial reporting.’