Alliance for Corporate Transparency carried out its 2019 Research Report on companies’ sustainability disclosures. The study assessed how 1000 European companies disclosure information on their environmental and social risks and impacts, as required by the EU Non-financial Reporting Directive.
The three main criteria for the companies are:
- Size – both large and SMEs are part of the study
- Geographical approach – balance across the whole of Europe
- Scope of sectors – 11 different sectors were part of the study
In terms of reports:
- 95% of companies provide a non-financial statement
- 57.5% provide the non-financial information in the annual report
- 37.8% provide the non-financial information in a separate report
In terms of KPIs:
- 10.5% provide no KPIs
- 67.86% provided KPIs in different parts of the report
- 21.9% provided KPIs in a summarised report
- 37.5% provided KPIs with a clear structure
- Presentation of KPIs = <22%
- Description of risks = only 20-25% is specific
- TCFD criteria are not applied – in terms of scenarios, long-term horizon and targets
- Outcomes 4% for management of salient human rights issues
- Supply chain transparency = <14% in Apparel
- Economic figures for sustainable activities = <6%
- Immaterial disclosures – as many identify the issues but do not disclose how they plan to mitigate them. – materiality is a key point.
On the 11th May 2020, the European Commission organised a webinar regarding the Reform of the EU Non-financial Reporting Directive: Clarity, Consistency and Comparability. The webinar consisted of discussions about the Report by Alliance for Corporate Transparency and how the findings of the study help to reform the directive.
According to the World Benchmarking Alliance, there four aspirations for the reform of the Non-financial Reporting Directive. The first of which is helping companies to measure what matters most to society and the environment, to support the Sustainable Development Goals and the targets of the Paris Agreement. The second; supporting data on the impact of companies to become widely available, reliable and comparable, especially for investors. Thirdly, building on existing frameworks for the reform of the directive to catalyse the process towards a global standardisation. The fourth aspiration for the reform is that the directive should be used by companies and their stakeholders, investors, civil society, governments and individuals to have accurate data; which is especially prevalent during the Coronavirus pandemic.
Proposals for the reform of the directive will be put forward alongside the Green Deal at the end of the year 2020; as well as the impact assessment processes, after the end of the current open public consultation. The European Commission is working closely with the TEG at EFRAG to help with the mandate of the use of reporting standards and methods. The European Commission, with EFRAG, is currently analysing various options of creating new standards for the reform of the directive, whilst recognising that it would be easier to update and adapt the current standards of the TCFD to create an overall European standard.