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Reform of the EU Non-Financial Reporting Directive

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The research of the Alliance for Corporate Transparency, to which ECCJ is an advisor, shows that the quality of corporate reporting practices varies among EU companies and across Member States under the EU Non-Financial Reporting Directive. 

The Directive mandates large listed EU companies and financial corporations to disclose information on environmental, social, human rights and anti-corruption matters. However, we found that most companies fail to disclose relevant, meaningful and comparable sustainability information.

Only 36.2% of companies report on their climate targets, and an even lower percentage report on the alignment of such target with the Paris Agreement. Similarly, only 23% of companies report on human rights issues.

The Directive fails to define which specific information and indicators companies must disclose, nor the specific matters they should address. In addition, the listed reporting requirements allow contradicting interpretations, all of which undermines the objective of the law to increase the consistency and comparability of sustainability information.

We strongly welcome the European Commission’s commitment to reform the EU Non-Financial Reporting Directive and explore the development of future mandatory EU non-financial reporting standards. These processes offer a unique opportunity to address the gaps and shortcomings of corporate sustainability reporting, which in turn will support smoother achievement of EU goals, such as the EU Green Deal and Sustainable Finance Action Plan.