By proposing to cut greenhouse gas emissions by at least 55% by 2030, the European Commission (EC) sets Europe on a responsible path to become climate neutral by 2050. To achieve this goal, we need high-quality non-financial data to assess businesses’ impact on environmental and social matters.
Non-financial information (NFI) is crucial for companies and investors to make sustainable business decisions. NFI is not sufficient though, it needs to be reliable to strengthen confidence in companies and in markets and to progress sustainable finance objectives.
Independent assurance on NFI is necessary to enhance its reliability. Join our 26 November webinar The path to high-quality non-financial information assurance to debate this with us, the EC, businesses and investors.
The demand for assurance on NFI has been growing steadily, but the practice still varies across Member States. In February 2020 we set out how European countries have dealt with relevant requirements in the Non-Financial Reporting Directive (NFRD) and which voluntary assurance practices exist.
The EC is currently reviewing the NFRD and summarised over 600 responses to the public consultation. Respondents agreed that consistent NFI assurance requirements were needed across Member States and companies and 2/3 of respondents indicated that stricter audit requirements were needed for NFI.
Our paper Setting up for high-quality non-financial information assurance in Europe (June 2020) puts forward the following conditions to achieve high-quality assurance in revising the NFRD:
- The EU regulatory framework should mandate assurance
- The EU regulatory framework should mandate assurance at EU level. Ultimately, the level of assurance on NFI should be equal to that on financial information.
- All assurance service providers should apply professional standards
- Assurance providers should be bound by widely accepted and recognised standards to enhance NFI’s relevance and reliability. Professional accountants abide by high-quality ethical and technical standards which helps provide an internationally recognised consistent high-quality framework for proving assurance
- Assurance service providers need public oversight
- The growing importance of NFI to investors and other stakeholders makes public oversight necessary to ensure the standards are met. Accountants are already subject to a comprehensive regulatory framework and their work is assessed independently.
The EC expects to adopt a proposal to revise the NFRD in early 2021. Taking the legislative procedure into consideration, the revised NFRD could become law by mid-2022. Meanwhile, we will actively participate to the debate to shape the revision of the Directive.