NFRD (Non-Financial Reporting Directive): The Basis for Non-Financial Reporting

The NFRD (Non-Financial Reporting Directive) is a regulation by the European Union that requires companies to disclose non-financial data alongside their financial reports, with a particular focus on sustainability. The NFRD aims to ensure that companies report more transparently on their social and environmental impacts, as well as their internal governance processes.

What is the aim of the NFRD?

The goal of the NFRD is for companies to disclose non-financial information that helps investors, regulators, and other stakeholders assess the company’s sustainability performance. The reports must include environmental efforts, social responsibility programs, employee treatment, as well as measures taken regarding human rights and anti-corruption.

Who does the NFRD apply to?

The NFRD primarily applies to large companies that are of public interest, such as listed companies, banks, and insurance companies. The regulation mandates that these companies include non-financial information in their annual reports. The goal of the regulation is to increase the transparency of large companies’ activities and support sustainable investments.

The Importance of the NFRD

The NFRD provides a regulatory framework that enhances the transparency of companies’ environmental and social responsibility. The directive allows investors to better understand how a company manages sustainability-related risks and opportunities. The importance of the NFRD has grown particularly with the rise of ESG investments, as investors are increasingly paying attention to sustainability performance.

The NFRD was replaced by the CSRD (Corporate Sustainability Reporting Directive) in 2021, which introduces more detailed reporting requirements for companies. The new regulation aims to further strengthen the transparency and comparability of companies’ sustainability data within the EU.

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