“NFRD” stands for the “Non-Financial Reporting Directive.” The Non-Financial Reporting Directive is an EU directive that requires certain large companies to disclose non-financial and diversity information in their annual reports. The directive aims to increase transparency and accountability regarding environmental, social, and governance (ESG) matters, as well as diversity within company boards.
Key features of the Non-Financial Reporting Directive include:
Scope: The NFRD applies to large public-interest entities with more than 500 employees, including listed companies, banks, insurance companies, and other entities designated by EU member states.
Non-Financial Information: Companies subject to the NFRD are required to disclose information on environmental matters, social and employee-related aspects, respect for human rights, and anti-corruption and anti-bribery matters. This information should cover policies, risks, outcomes, and due diligence processes.
Diversity Reporting: The directive also includes a requirement for certain companies to disclose information about their diversity policy regarding board composition, including information related to age, gender, and educational and professional backgrounds.
Reporting Frameworks: The NFRD allows companies to use recognized international reporting frameworks, standards, or guidelines when preparing their non-financial statements. This flexibility aims to align the reporting with established best practices.
Integration with Financial Reporting: Companies are encouraged to integrate their non-financial information with their financial reporting to provide a comprehensive view of their performance and risks.
Verification and Assurance: Member states have the option to require independent assurance of the disclosed non-financial information.
Public Accessibility: The information disclosed under the NFRD must be included in the company’s annual report and made publicly accessible on the company’s website.
The Non-Financial Reporting Directive is part of the EU’s broader sustainability and corporate governance agenda, aimed at enhancing transparency, accountability, and sustainable practices in the business sector. It acknowledges the importance of non-financial considerations in assessing a company’s long-term value and impact.