Non-Financial Reporting Directive (NFRD)

The NFRD requires organizations to disclose non-financial information, such as environmental, social, and governance aspects. It aims to increase the transparency and quality of sustainability reporting.

The Non-Financial Reporting Directive (NFRD), officially known as Directive 2014/95/EU, is a significant regulation of the European Union aimed at improving the transparency and accountability of companies regarding environmental, social, and governance (ESG) aspects. The NFRD, adopted in 2014 as a supplement to the Accounting Directive (Directive 2013/34/EU), responds to the increasing demands for sustainable business practices and the growing awareness of corporate responsibility. The goal is that larger companies within the EU disclose comprehensive information about their non-financial performance, enabling stakeholders such as investors, consumers, and policymakers to make informed assessments of the impact of companies on society and the environment.The NFRD applies to publicly listed companies, banks, and insurance companies with more than 500 employees, affecting approximately 11,000 companies in the EU. The directive requires the disclosure of non-financial information in the annual management reports, covering five main areas: environmental aspects, social matters and treatment of employees, respect for human rights, anti-corruption, and diversity in corporate boards.

The NFRD has laid the foundation for standardized reporting on ESG aspects in Europe and improved comparability between companies. With the transition to the Corporate Sustainability Reporting Directive (CSRD), an expanded reporting framework will be introduced from 2024, which will also include smaller companies and impose stricter requirements on the verification of sustainability statements.