Mandatory exemplary NFRD regulations, i.e. the publication of sustainability indicators, are planned for the beginning of 2023. Climate change is here and is greatly affecting the lives of all mankind and until recently we can say that this topic was reserved exclusively for certain individuals and scientists who have been planning to respond to this crisis.
Most factors of climate change affect food production and farmers, and thus affect the economy of each country. In the focus of governments around the world, this topic has been one of the most prevalent for years, and economic analysts have begun to state that climate change is one of the key reasons for the continued production and operation of any industry. Special sustainability standards will be developed by the European Commission, thus prescribing additional audit tasks.
Proposal of Directive on non-financial reporting
Recognizing the problems facing the world, the Proposal of Non-Financial Reporting Directive amending the Accounting Directive was adopted. Companies covered by the Non-Financial Reporting Directive were required to report for the first time in 2018 in accordance with the provisions of the Directive for the previous financial year. The Non-Financial Reporting Directive requires companies with more than 500 employees to report on how sustainability issues affect their business performance, position and development, but also their impact on people and the environment.
The main users of sustainability information published in the company's annual reports are investors and NGOs, social partners and other stakeholders. Investors, including asset managers, want to better understand the risks and investment opportunities arising from sustainability issues, as well as the impact of these investments on people and the environment. NGOs, social partners and other stakeholders want greater corporate responsibility for the impact of their business on people and the environment.
Financial reporting standards and frameworks
The Covid-19 pandemic further accelerated the whole process. Demand for information on sustainability from companies, such as worker vulnerability and resilience of supply chains, has increased. The current situation is also problematic for reporting companies.
At the level of the European Union, a regulatory framework has been established which seeks to achieve various environmental, social and management objectives, which are popularly abbreviated ESG. NFRD regulations require large companies of public interest to supplement their financial statements with defined indicators of impact on the environment, society and corporate governance. Due to the imprecision of existing requirements and the number of standards and frameworks in the private sector, it is difficult for companies to know reliably what information they should report.
The aim of the regulation is to achieve the presentation of an investment that complies with environmental rules and to limit "greenwashing". Grant Thornton experts can help you with daily reporting, as well as planning any business in the future. In order to enable the inflow of funds from this market segment, our experts will harmonize technical standards for the classification of investment strategies, which will also enable environmentally friendly business.
Source: European Commission