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Non Financial Reporting Reinforced in EU

From CDP, Published 15 April 2014

The European Parliament voted in favour of a new law governing corporate reporting of non-financial information. As a result large listed companies in the EU will be asked to disclose their environmental and social impacts as part of their mainstream reporting to investors. The new Directive requires companies to explain how specific environmental, social and governance criteria have a material impact on business operations. The issues companies will be reporting on may influence not only the business operations directly, but also company’s future profitability.

“For a company reporting such information for the first time, this new legislation may seem challenging,” says Steven Tebbe, Managing Director of CDP’s operations in Europe. “But CDP’s long-term experience with some 5.000 companies worldwide is that mapping a company’s environmental and social impacts unveils important corporate risks and previously unseen business opportunities, both ultimately contributing to the company’s bottom line.”

In addition, the financial community and investors in particular are increasingly turning to environmental, social and corporate governance indicators to assess which investments are likely to be most profitable.

“Our experience in working with 767 institutional investors is that non-financial information provides shareholders with a better understanding of the companies they invest in,” says Tebbe. “For example levels of carbon dioxide emissions and the environmental management systems a company has in place are all material issues to business operations. CDP research consistently demonstrates that companies monitoring their impact on the environment constitute better investments over a period of time. Non-financial information is hence a key factor in whether investors buy, sell or hold onto a company.”

Through the Climate Disclosure Standards Board (CDSB), a special project of CDP, CDP has been directly engaged in the development of standards and methods for non-financial reporting. CDSB’s Reporting Framework for natural capital is a unique tool that will enable EU companies to use data from their CDP response to comply with the new European legislation on nonfinancial reporting. CDP and CDSB actively promoted the legislation put forward by the EC jointly with several other European organisations.

Suggested additional reading about corporate non-financial reporting and CSR reporting:

Environmental Compliance Reporting Reduces Business Risks
FCS CSR Reporting
UK Businesses’ Preparation for International Climate Change Impacts