| Legislation Type |
Directive with Shared Competence (EU sets non-financial reporting requirements; Member States transpose and enforce through national legislation) |
| Source Type |
Secondary Source: Directive 2014/95/EU amending the Accounting Directive (2013/34/EU). It mandates non-financial disclosures but allows flexibility in reporting frameworks used by companies. |
| Institution/Organization |
European Parliament and Council of the European Union (legislators), European Commission (initiator and enforcer), Member States (transposition and enforcement), European Court of Justice (interprets and ensures uniform application) |
| Legislation Code |
Directive 2014/95/EU of the European Parliament and of the Council (NFRD) |
| EU Policy Area |
Corporate Governance; Environment; Social Affairs; Fundamental Rights; Sustainable Finance |
| Field |
Non-Financial Reporting; Corporate Social Responsibility (CSR); Environmental and Social Impact Disclosure; Anti-Corruption; Human Rights; Board Diversity; Risk Management; Key Performance Indicators (KPIs) |
| Official EU Name |
Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups |
| Categories |
- Scope: Applies to large public-interest entities with more than 500 employees, including listed companies, banks, and insurance firms (~6,000 companies).- Disclosure Areas: Environmental matters; social and employee issues; respect for human rights; anti-corruption and bribery; diversity on company boards (age, gender, educational and professional background).- Content Requirements: Business model, policies (including due diligence), outcomes, risks and risk management, and KPIs.- Flexibility: Companies can choose reporting frameworks (e.g., GRI, SASB, TCFD, UN Guiding Principles).- Double Materiality: Reporting must cover how sustainability issues affect the company and how the company impacts society and the environment.- Comply-or-Explain: Companies must explain if they do not pursue policies on any of the required topics. |
| Related Information |
- The NFRD aims to increase transparency and comparability of non-financial information to support sustainable investment and corporate accountability.- It leaves significant flexibility, which has led to varied reporting quality and comparability challenges.- Assurance of non-financial information is limited; statutory auditors may verify but no mandatory third-party audit is required.- The Directive has been criticized for lack of mandatory standards and limited scope.- It has been superseded by the Corporate Sustainability Reporting Directive (CSRD) starting in 2023, which expands scope and introduces mandatory European Sustainability Reporting Standards (ESRS).- The NFRD was a foundational step towards integrating ESG considerations into corporate reporting in the EU. |