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March 2020 | Tweet @CDSBGlobal
What You Need to Know:
Decoding the Review of EU’s Non-Financial Reporting Directive
Joanne Houston,
EU Policy Officer,
Frank Bold
Mardi McBrien,
Managing Director,
CDSB
Michael Zimonyi,
Policy and External Affairs Director,
CDSB
March 2020 | Tweet @CDSBGlobal
Webinar information
• Q&A session: ask your questions using the Q&A option on your right-hand side
• Feel free to submit your questions throughout the webinar
• In case of technical problems, use the chat function to flag them
• This webinar will be recorded and shared with slides
cdsb.net/NFR
March 2020 | Tweet @CDSBGlobal
Mardi
McBrien
Managing Director, CDSB
March 2020 | Tweet @CDSBGlobal
To provide decision-useful environmental
information to markets via the mainstream
corporate report
March 2020 | Tweet @CDSBGlobal
Reporting Requirements
REQ-01 Governance REQ-07 Organisational boundary
REQ-02 Management’s environmental
policies, strategy and targets
REQ-08 Reporting policies
REQ-03 Risks and opportunities REQ-09 Reporting period
REQ-04 Sources of environmental
impact
REQ-10 Restatements
REQ-05 Performance and comparative
analysis
REQ-11 Conformance
REQ-06 Outlook REQ-12 Assurance
cdsb.net/Framework
The CDSB Framework
March 2020 | Tweet @CDSBGlobal
Background to the
Non-Financial Reporting
Directive
March 2020 | Tweet @CDSBGlobal
EU NFR Directive
Where should it be disclosed?
.
What
should be
disclosed?
Annual Report
Flexibility to include information
in separate report under certain
circumstances.
How?
Guidelines
• Guidelines on Non-financial
Reporting
• Guidelines on Reporting
Climate-related Information
Who?
Public Interest
Entities
employing >
500 people
• Business Model
• Policies
• Policy Outcomes
• Principal Risks
• Non-financial KPIs
What You Need to Know
March 2020 | Tweet @CDSBGlobal
• Enables investors to
evaluate the non-financial
performance of large
companies; and
• Encourages companies to
develop a responsible and
sustainable approach to
business
Why is it important?
March 2020 | Tweet @CDSBGlobal
What’s next?
“…companies and financial
institutions will need to increase
their disclosure on climate and
environmental data so that
investors are fully informed about
the sustainability of their
investments. To this end, the
Commission will review the Non-
Financial Reporting Directive.”
EUROPEAN COMMISSION
The European Green Deal
Decoding the review of EU's
Non-Financial Reporting
Directive
Alliance for Corporate
Transparency
www.allianceforcorporatetransparency.org
@EUCorpReporting
Project coordinated by
Content partners
Advisory group
Management partners
12
Methodology
Policies Outcomes Risks KPIs
1. Environmental matters
Climate change, use of natural resources, pollution, waste, biodiversity and ecosystem
conservation
2. Social and employee matters
Employee and workforce, Tax transparency
3. Respect for human rights
Supply chain management, Impacts of indigenous rights and communities, High-risk areas
for civil and political rights, Conflict resources, Data protection
4. Anti-corruption and anti-bribery matters
Anti-corruption policies, Whistleblowing
13
Scope
14
Presentation of information
96% of companies provide a non-financial statement, however:
No KPIs provided
KPIs provided in different parts of the report
KPIs provided in a summarized statement(s)
Clear structure for Policy - Outcomes - Risks
10.5
67.6
37.5
21.9
Policies
17.8
4.5
69.5
21.2
54.5
43
17.8
60.3
52.4
23.6
56.7
36.5
38.9
47.7
21.9
43.1
6.9
22.1
8.9
18.1
34.5
Human Rights
Employee and Workforce Matters
Biodiversity
Waste
Polluting Discharges
Use of Natural Resources
Climate Change
0
No information provided
Policy is described or referenced
Policy description specifies key issues and objectives
16
Climate change
Targets
Risks (TCFD/EC Guidelines)
Strategy
Climate scenarios
Alignment with Paris Agreement/
Science Based Target
Climate target
Actions to
achieve target
Outcomes in terms of
meeting target
 53% Energy & Resource Extraction
 22% Energy & Resource Extraction
36.2
30.4
27.5
13.9
31.5
6.6
17
Environmental issues
Natural resources
Pollution
Waste
Biodiversity
Issue addressed Specific risks
3.1
12.5
11
7.6
7.8
73.1
60.8
88.1
36.1
18
Key findings
1. Presentation of KPIs (< 22%)
2. Vague disclosure (policies, outcomes, risks)
3. Targets (less than 40% report on climate targets)
4. TCFD criteria are not applied (strategies, scenarios)
5. Environmental issues (relevance of information disclosed)
19Contact us
Joanne Houston
EU Policy Officer
joanne.houston@frankbold.org
+32 28 931 063
Social Media
www.allianceforcorporatetransparency.org
@EUCorpReporting
http://eepurl.com/dJPBjQ
Contact us
April 20 | Tweet @CDSBGlobal
The changes needed for effective
Non-Financial Reporting
Michael Zimonyi
Policy & External Affairs Director
CDSB
April 20 | Tweet @CDSBGlobal
CDSB’s work on Non-Financial Reporting
cdsb.net/Framework
Climate Change and Natural Capital Information
CDSB
Framework
Annual Report / Integrated Report
(MD&A, Form 10-K/20-F, Lagebericht, Form 56-1)
April 20 | Tweet @CDSBGlobal
Red lines for successful NFRD revision
1. Make reporting in the management report mandatory
• “It is hard for investors and other users to find non-financial
information even when it is reported”
• Connectivity of information
• Governance of information
• Supervision of information
Ensuring that the NFRD supports Europe’s goals
cdsb.net/NFRD
Annual
Report
2021
April 20 | Tweet @CDSBGlobal
Red lines for successful NFRD revision
2. Increase scope by changing business size to >250 employees
“Expanding the NFRD's scope should capture all those companies that significantly impact the
environment due to their sector's environmental and social profile.”
– Accountancy Europe
Ensuring that the NFRD supports Europe’s goals
cdsb.net/NFRD
April 20 | Tweet @CDSBGlobal
Red lines for successful NFRD revision
3. Apply the TCFD’s recommendations for ESG information, such as biodiversity and
natural capital
• A unified approach, ensuring consistency and connectivity of information globally;
• Strengthen links between financial & non-financial information;
• ESG information in the management report should cover all four elements of the TCFD (i.e.
Governance, Strategy, Risk Management, Metrics & Targets; and
• Explicitly state “climate”.
Ensuring that the NFRD supports Europe’s goals
cdsb.net/NFRD
April 20 | Tweet @CDSBGlobal
Red lines for successful NFRD revision
4. Keep the investor in mind
• Materiality
5. Strengthen governance disclosures
• Incorporate TCFD into Article 20 of Accounting Directive – ‘corporate governance statement’; and
• Clarify definitions of ‘policies’ and ‘due diligence’.
Don’t forget supervision – ESMA Report on Enforcement
Ensuring that the NFRD supports Europe’s goals
cdsb.net/NFRD
April 20 | Tweet @CDSBGlobal
Thank you
Michael Zimonyi
Policy & External Affairs Director
E-mail: michael.zimonyi@cdsb.net
www.cdsb.net
@CDSBGlobal
March 2020 | Tweet @CDSBGlobal
Questions?
Mardi McBrien,
CDSB
With the contribution of the LIFE Programme of the European Union.
Hosted by CDP Europe.
Joanne Houston,
Frank Bold
info@cdsb.net
Michael Zimonyi,
CDSB
March 2020 | Tweet @CDSBGlobal
Register on cdsb.net:
Registrations are open!
13 MAY 19 MAY
March 2020 | Tweet @CDSBGlobal
Thank you!
LinkedIn:
Climate Disclosure Standards Board
With the contribution of the LIFE Programme of the European Union.
Hosted by CDP Europe.
Twitter:
@CDSBGlobal
info@cdsb.net

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Decoding the review of EU's Non-Financial Reporting Directive

  • 1. March 2020 | Tweet @CDSBGlobal What You Need to Know: Decoding the Review of EU’s Non-Financial Reporting Directive Joanne Houston, EU Policy Officer, Frank Bold Mardi McBrien, Managing Director, CDSB Michael Zimonyi, Policy and External Affairs Director, CDSB
  • 2. March 2020 | Tweet @CDSBGlobal Webinar information • Q&A session: ask your questions using the Q&A option on your right-hand side • Feel free to submit your questions throughout the webinar • In case of technical problems, use the chat function to flag them • This webinar will be recorded and shared with slides cdsb.net/NFR
  • 3. March 2020 | Tweet @CDSBGlobal Mardi McBrien Managing Director, CDSB
  • 4. March 2020 | Tweet @CDSBGlobal To provide decision-useful environmental information to markets via the mainstream corporate report
  • 5. March 2020 | Tweet @CDSBGlobal Reporting Requirements REQ-01 Governance REQ-07 Organisational boundary REQ-02 Management’s environmental policies, strategy and targets REQ-08 Reporting policies REQ-03 Risks and opportunities REQ-09 Reporting period REQ-04 Sources of environmental impact REQ-10 Restatements REQ-05 Performance and comparative analysis REQ-11 Conformance REQ-06 Outlook REQ-12 Assurance cdsb.net/Framework The CDSB Framework
  • 6. March 2020 | Tweet @CDSBGlobal Background to the Non-Financial Reporting Directive
  • 7. March 2020 | Tweet @CDSBGlobal EU NFR Directive Where should it be disclosed? . What should be disclosed? Annual Report Flexibility to include information in separate report under certain circumstances. How? Guidelines • Guidelines on Non-financial Reporting • Guidelines on Reporting Climate-related Information Who? Public Interest Entities employing > 500 people • Business Model • Policies • Policy Outcomes • Principal Risks • Non-financial KPIs What You Need to Know
  • 8. March 2020 | Tweet @CDSBGlobal • Enables investors to evaluate the non-financial performance of large companies; and • Encourages companies to develop a responsible and sustainable approach to business Why is it important?
  • 9. March 2020 | Tweet @CDSBGlobal What’s next? “…companies and financial institutions will need to increase their disclosure on climate and environmental data so that investors are fully informed about the sustainability of their investments. To this end, the Commission will review the Non- Financial Reporting Directive.” EUROPEAN COMMISSION The European Green Deal
  • 10. Decoding the review of EU's Non-Financial Reporting Directive Alliance for Corporate Transparency www.allianceforcorporatetransparency.org @EUCorpReporting Project coordinated by
  • 12. 12 Methodology Policies Outcomes Risks KPIs 1. Environmental matters Climate change, use of natural resources, pollution, waste, biodiversity and ecosystem conservation 2. Social and employee matters Employee and workforce, Tax transparency 3. Respect for human rights Supply chain management, Impacts of indigenous rights and communities, High-risk areas for civil and political rights, Conflict resources, Data protection 4. Anti-corruption and anti-bribery matters Anti-corruption policies, Whistleblowing
  • 14. 14 Presentation of information 96% of companies provide a non-financial statement, however: No KPIs provided KPIs provided in different parts of the report KPIs provided in a summarized statement(s) Clear structure for Policy - Outcomes - Risks 10.5 67.6 37.5 21.9
  • 15. Policies 17.8 4.5 69.5 21.2 54.5 43 17.8 60.3 52.4 23.6 56.7 36.5 38.9 47.7 21.9 43.1 6.9 22.1 8.9 18.1 34.5 Human Rights Employee and Workforce Matters Biodiversity Waste Polluting Discharges Use of Natural Resources Climate Change 0 No information provided Policy is described or referenced Policy description specifies key issues and objectives
  • 16. 16 Climate change Targets Risks (TCFD/EC Guidelines) Strategy Climate scenarios Alignment with Paris Agreement/ Science Based Target Climate target Actions to achieve target Outcomes in terms of meeting target  53% Energy & Resource Extraction  22% Energy & Resource Extraction 36.2 30.4 27.5 13.9 31.5 6.6
  • 17. 17 Environmental issues Natural resources Pollution Waste Biodiversity Issue addressed Specific risks 3.1 12.5 11 7.6 7.8 73.1 60.8 88.1 36.1
  • 18. 18 Key findings 1. Presentation of KPIs (< 22%) 2. Vague disclosure (policies, outcomes, risks) 3. Targets (less than 40% report on climate targets) 4. TCFD criteria are not applied (strategies, scenarios) 5. Environmental issues (relevance of information disclosed)
  • 19. 19Contact us Joanne Houston EU Policy Officer joanne.houston@frankbold.org +32 28 931 063 Social Media www.allianceforcorporatetransparency.org @EUCorpReporting http://eepurl.com/dJPBjQ Contact us
  • 20. April 20 | Tweet @CDSBGlobal The changes needed for effective Non-Financial Reporting Michael Zimonyi Policy & External Affairs Director CDSB
  • 21. April 20 | Tweet @CDSBGlobal CDSB’s work on Non-Financial Reporting cdsb.net/Framework Climate Change and Natural Capital Information CDSB Framework Annual Report / Integrated Report (MD&A, Form 10-K/20-F, Lagebericht, Form 56-1)
  • 22. April 20 | Tweet @CDSBGlobal Red lines for successful NFRD revision 1. Make reporting in the management report mandatory • “It is hard for investors and other users to find non-financial information even when it is reported” • Connectivity of information • Governance of information • Supervision of information Ensuring that the NFRD supports Europe’s goals cdsb.net/NFRD Annual Report 2021
  • 23. April 20 | Tweet @CDSBGlobal Red lines for successful NFRD revision 2. Increase scope by changing business size to >250 employees “Expanding the NFRD's scope should capture all those companies that significantly impact the environment due to their sector's environmental and social profile.” – Accountancy Europe Ensuring that the NFRD supports Europe’s goals cdsb.net/NFRD
  • 24. April 20 | Tweet @CDSBGlobal Red lines for successful NFRD revision 3. Apply the TCFD’s recommendations for ESG information, such as biodiversity and natural capital • A unified approach, ensuring consistency and connectivity of information globally; • Strengthen links between financial & non-financial information; • ESG information in the management report should cover all four elements of the TCFD (i.e. Governance, Strategy, Risk Management, Metrics & Targets; and • Explicitly state “climate”. Ensuring that the NFRD supports Europe’s goals cdsb.net/NFRD
  • 25. April 20 | Tweet @CDSBGlobal Red lines for successful NFRD revision 4. Keep the investor in mind • Materiality 5. Strengthen governance disclosures • Incorporate TCFD into Article 20 of Accounting Directive – ‘corporate governance statement’; and • Clarify definitions of ‘policies’ and ‘due diligence’. Don’t forget supervision – ESMA Report on Enforcement Ensuring that the NFRD supports Europe’s goals cdsb.net/NFRD
  • 26. April 20 | Tweet @CDSBGlobal Thank you Michael Zimonyi Policy & External Affairs Director E-mail: michael.zimonyi@cdsb.net www.cdsb.net @CDSBGlobal
  • 27. March 2020 | Tweet @CDSBGlobal Questions? Mardi McBrien, CDSB With the contribution of the LIFE Programme of the European Union. Hosted by CDP Europe. Joanne Houston, Frank Bold info@cdsb.net Michael Zimonyi, CDSB
  • 28. March 2020 | Tweet @CDSBGlobal Register on cdsb.net: Registrations are open! 13 MAY 19 MAY
  • 29. March 2020 | Tweet @CDSBGlobal Thank you! LinkedIn: Climate Disclosure Standards Board With the contribution of the LIFE Programme of the European Union. Hosted by CDP Europe. Twitter: @CDSBGlobal info@cdsb.net