In the face of our social and environmental crisis, the European Commission calls on businesses to meet the UN’s Sustainable Development Goals (SDGs) and the Paris Climate Agreement. With its Non-Financial Reporting Directive (2014/95/EU), circular economy strategy, Sustainable Finance Action Plan, and European Green Deal, the EU has shown bold leadership. It should be encouraged to continue doing so, especially on a troubled and uncertain global stage.
How non-financial reporting helps the shift to a sustainable economy
Companies are increasingly citing environmental, social and governance (ESG) matters in their non-financial reports, but the relevance, quality and comparability of the information needs to be improved. There are many initiatives in the field of ESG reporting, as it is much less mature compared to financial reporting.
Since there is no established method, the Non-Financial Reporting Directive lets companies choose the reporting framework or standard of their choice. We recently launched a thought leadership paper Interconnected standard setting for corporate reporting. Hereby we propose a global solution, that harmonises non financial reporting frameworks and interconnects it with financial reporting standards.
Regarding the expected review of the Directive, we have also proposed five steps to consider this revision and achieving high-quality and consistent reporting, Furthermore, the success of the European Commission’s sustainable finance initiative will depend heavily on the quality of data and information that companies provide.
Accountancy Europe has led the debate on the future of corporate reporting since 2015. We have highlighted the need for innovation and for leveraging technology; we called for setting-up a European Corporate Reporting Lab; we outlined that corporate information was of interest to a wider variety of stakeholders and not only shareholders; we introduced the Core & More concept to support relevance and simplicity in corporate reporting;
Reporting is not enough – we need decisive business and policy action
We further tackle how to put sustainability at the centre of business in our recent Cogito paper 10 ideas to make corporate governance a driver of a sustainable economy.
Non-financial reporting is not about complying with legal requirements; it is about changing behaviour and building a sustainable future. However, reporting is not a magic bullet and cannot replace public policy action, especially in today’s situation of high emergency.
We support the European Green Deal, to turn Europe into the first climate neutral continent by 2050. We expect both MEPs and EU Heads of State to look beyond national, political or short-term interests to achieve this challenging goal. The EU will have to show determined leadership and stay the course.
ESG considerations are not just about doing good and making the planet a better place, they are about staying in business and still having a planet to live on. It is time to get our priorities right: once the planet is exhausted, there will be no ground for business, investors or politicians.