Helen Brand on non-financial reporting in Europe

The Chief Executive of the ACCA comments on the review of EU corporate reporting conducted by CDSB & CDP.

The introduction of non-financial reporting in Europe, one of the first initiatives of its kind globally, was a landmark step to signal the future direction of finance in the region. It is therefore unsurprising that the European Commission published last year a comprehensive set of actions to promote long-term, sustainable finance.

Reliable and consistent information forms part of the bedrock upon which the financial system operates. It tracks corporate performance and informs investment decisions. The accountancy profession plays an important role in ensuring that such information is robust and suitable for such decision-making. Indeed, we have much to learn from the long history of financial accounting practice to support wider environmental, social and governance reporting. One of these practices is to look at what the market is doing, assess whether current requirements are fit for purpose and adjust where necessary.

This report provides important insights into corporate reporting on environmental and climate matters in the first year of reporting under the Directive, as well as highlighting areas for improvement both in regulation and corporate practice. The analysis of issues, such as the disclosure of environmental and climate-related risks, due diligence processes, KPIs and targets also provides an understanding of how companies are aligning quantitative and qualitative non-financial information into their management reports. In this arena, the increasing adoption of integrated reporting within Europe, and beyond, is to be welcomed. 

As companies move into the second year of reporting under the Non-Financial Reporting Directive, this research provides important feedback for the market. To improve environmental reporting, companies need to make the connection between different reporting aspects, allowing information to be disclosed within reports in a consistent way.

Policymakers must also assess the effectiveness of existing regulation, as the EU Commission is doing right now through its Fitness check on the EU framework for public reporting by companies, and provide the enabling space for information to be disclosed in a comparable way. Again, the International <IR> Framework is becoming a well-used and powerful vehicle for driving this greater breadth and consistency of reporting.

As part of our global commitment to more meaningful and decision-useful reporting, ACCA strongly supports the continuous innovation and development in Europe as a means to delivering a resilient and sustainable global financial system.

Helen Brand OBE is the Chief Executive of the ACCA.

Download the report "First steps: Corporate climate and environmental disclosure under the EU Non-Financial Reporting Directive".