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From NFRD to CSRD: The evolution of European extra-financial reporting

From NFRD to CSRD

The NFRD (Non-Financial Reporting Directive) represents a major step in the evolution of financial and non-financial reporting within the European Union. Adopted by the European Commission, this directive establishes a framework for the publication of sustainability information.

With the progressive entry into force of the CSRD (Corporate Sustainability Reporting Directive ), companies are now required to report on their environmental, social and governance impacts with an unprecedented level of precision.

This development marks a turning point: sustainable development is no longer limited to voluntary commitments or marketing reports. It has become a structuring issue, part of an organization's strategy.

This article reviews the main stages of this transformation, the obligations it entails and the tools you need to prepare effectively. The aim: to understand the new rules of the game, without making them too complex, so that you can better grasp them.

3 Contents

Context and changes in the regulatory framework

 

The 2014 NFRD directive marked a turning point in sustainability reporting by European companies. It laid the foundations for standardized non-financial reporting, before evolving into the more ambitious and demanding CSRD (Corporate Sustainability Reporting Directive).

Transition from NFRD to CSRD

 

The transformation of the regulatory framework from NFRD to CSRD reflects a major change:

  • Extended scope of application
  • Tougher reporting requirements
  • Greater standardization of information
  • External audit obligation

Reporting obligations and requirements

📝 Required information

  Companies need to communicate environmental policiesincluding carbon footprintas well as the challenges social and societal. The corporate governance and financial and non-financial information must also be included in the reporting to ensure an accurate optimum transparency. This often includes GHG assessment covering the scopes 1, 2 and 3.

🌍 Scope of application

  The new directive applies to major listed companies as well as Listed SMEswith adapted provisions. Visit subsidiaries of foreign groups operating in the EU and companies exceeding certain thresholds are also concerned by these reporting obligations.

Implementation of non-financial reporting

🔍 Data collection and analysis

 

The sustainability reporting process is based on a structured methodology and appropriate data collection tools. Rigorous verification and in-depth impact analysis are essential to guarantee the reliability of the data reported. This may include LCA calculations for certain products or services.

📏 Reporting standards

  Visit European Commission has developed specific standards in order to harmonize reporting practices, facilitate data comparability and ensure a consistent approach. greater transparency. These standards are also designed to strengthen credibility published information, particularly in DPEF and the BDESE.

Impact on business transformation

🌍 Contribution to the ecological transition

  Non-financial reporting plays a crucial role in the ecological transition by measuring environmental impacts and identify climate risks. It also encourages sustainable actions and facilitates strategic decision-making on sustainability, including the exploration of the scope 4 for avoided emissions.

💼 Performance and durability

  Integrating criteria ESG directly influences the financial performance companies, their global strategy and their ability to innovate. A better risk management is also one of the major benefits of this integration.

Challenges and opportunities

🏢 For companies

  The regulatory framework for extra-financial reporting represents a veritable transformation opportunity and a lever for sustainable development. It promotes enhanced dialogue with stakeholders and is a a key competitive factor. The use of a CSR materiality matrix can help identify priority issues.

💹 For investors

  The new reporting requirements offer investors a better risk assessment and facilitate comparison between companies. They enable more informed investment decisions and a more precise measurement impact on sustainability.

Outlook and recommendations

🛠️ Anticipation and preparation

  To meet the new requirements, companies need to familiarize themselves with the new regulationsadapt their information systems and train their teams. It is also essential to structure their reporting process to ensure its effectiveness.

📈 Best practices

  Effective reporting is based on a integrated involving all stakeholders. Investment in suitable tools and the assurance of rigorous data verification are fundamental elements in guaranteeing the quality of published information. Companies can also explore options for carbon offsetting and carbon balance subsidies.

Conclusion

The evolution of the regulatory framework for non-financial reporting, from the NFRD directive to the CSRD, reflects the growing importance of sustainability issues for companies and investors alike. This transformation represents both a major challenge and an opportunity for organizations to rethink their business model and their contribution to sustainable development.

To make this transition a success, companies must :

  • Anticipating new requirements
  • Investing in the necessary resources
  • Adopting a systematic approach
  • A commitment to continuous improvement

In a context where sustainability is becoming a central issue, non-financial reporting is becoming a strategic tool for steering corporate transformation and meeting the growing expectations of stakeholders in terms of transparency and responsibility. Effective CSR communication based on these reports is essential to enhance the value of a company's efforts.