{"id":185897,"date":"2024-06-01T06:28:00","date_gmt":"2024-06-01T05:28:00","guid":{"rendered":"https:\/\/datascientest.com\/en\/?p=185897"},"modified":"2024-05-29T12:29:22","modified_gmt":"2024-05-29T11:29:22","slug":"all-about-non-financial-reporting-directive","status":"publish","type":"post","link":"https:\/\/datascientest.com\/en\/all-about-non-financial-reporting-directive","title":{"rendered":"Non-Financial Reporting Directive (NFRD): What is it?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"185897\" class=\"elementor elementor-185897\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-67bf996 e-flex e-con-boxed e-con\" data-id=\"67bf996\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-f8b2a68 elementor-widget elementor-widget-heading\" data-id=\"f8b2a68\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.15.0 - 02-08-2023 *\/\n.elementor-heading-title{padding:0;margin:0;line-height:1}.elementor-widget-heading .elementor-heading-title[class*=elementor-size-]>a{color:inherit;font-size:inherit;line-height:inherit}.elementor-widget-heading .elementor-heading-title.elementor-size-small{font-size:15px}.elementor-widget-heading .elementor-heading-title.elementor-size-medium{font-size:19px}.elementor-widget-heading .elementor-heading-title.elementor-size-large{font-size:29px}.elementor-widget-heading .elementor-heading-title.elementor-size-xl{font-size:39px}.elementor-widget-heading .elementor-heading-title.elementor-size-xxl{font-size:59px}<\/style><h2 class=\"elementor-heading-title elementor-size-default\">Adopted in 2014, the NFRD is the first European directive mandating large companies to report on non-financial matters. The objective: to factor in environmental impacts, social concerns, and governance into the overarching performance metrics of organizations.<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ad65f90 elementor-widget elementor-widget-text-editor\" data-id=\"ad65f90\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.15.0 - 02-08-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><span style=\"font-weight: 400;\">While this European regulation fosters more environmentally responsible business models, it was deemed inadequate for achieving the goals set by the <a href=\"https:\/\/unfccc.int\/process-and-meetings\/the-paris-agreement\/the-paris-agreement\">Paris Agreement<\/a>. As a result, the NFRD has been succeeded by the CSRD as of January 1, 2024.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-7455ec8 e-flex e-con-boxed e-con\" data-id=\"7455ec8\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-e73d11e elementor-widget elementor-widget-heading\" data-id=\"e73d11e\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">What is the NFRD?<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e87d644 elementor-widget elementor-widget-text-editor\" data-id=\"e87d644\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The NFRD (Non-Financial Reporting Directive) is a directive that <\/span><b>mandates European firms with more than 500 employees to undertake non-financial reporting.<\/b><span style=\"font-weight: 400;\"> Such reporting includes the assessment of <a href=\"https:\/\/www.sasb.org\/\">ESG<\/a> (environmental, social, governance) performance, beyond just financial outcomes.<\/span><\/p><p><span style=\"font-weight: 400;\">This framework is predicated on the double-materiality principle, positing that financial and non-financial matters are intricately connected. They both are pivotal to the composite performance of organizations.<\/span><\/p><p><span style=\"text-decoration: underline;\"><b>Good to know<\/b><\/span><span style=\"font-weight: 400;\">: in France, the NFRD is implemented as the Annual Declaration of Non-Financial Performance (decree of August 9, 2017). This represents the non-financial reporting expected from firms under the European directive.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-8561ce7 elementor-align-center button-principal elementor-widget elementor-widget-button\" data-id=\"8561ce7\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-md\" href=\"https:\/\/datascientest.com\/en\/power-bi-training\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t<span class=\"elementor-button-text\">Mastering NFRD reporting<\/span>\n\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-bda9dbf e-flex e-con-boxed e-con\" data-id=\"bda9dbf\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-4fe8896 elementor-widget elementor-widget-heading\" data-id=\"4fe8896\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">What are the objectives of the NFRD?<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-63450c7 elementor-widget elementor-widget-text-editor\" data-id=\"63450c7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The NFRD aims for a triad of objectives:<\/span><\/p><ul><li><b>Introducing corporate accountability<\/b><span style=\"font-weight: 400;\">: every decision made can impact the environment or society. The intention is firstly to raise awareness about these impacts. But also to hold them accountable by disclosing the outcomes of their actions.<\/span><\/li><li><b>Improving transparency<\/b><span style=\"font-weight: 400;\">: consumers, partners, suppliers, prospective employees, can all access the ESG data of companies. And in an era where environmental consciousness is escalating, it behooves companies to pursue more sustainable practices.<\/span><\/li><li><b>Combating greenwashing<\/b><span style=\"font-weight: 400;\">: faced with the increasing consumer demand for sustainable corporate behavior, numerous firms highlight their ecological initiatives. The issue lies in these claims not always being substantiated. With the NFRD, it&#8217;s the data that speaks. Firms can no longer tout initiatives they do not uphold.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-39041df elementor-widget elementor-widget-text-editor\" data-id=\"39041df\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The adoption of the NFRD has amplified the publication of non-financial information. According to the <a href=\"https:\/\/www.globalreporting.org\/\">Global Insights report<\/a>, there was a 72% increase from 2013 to 2018.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-dd60fc8 elementor-widget elementor-widget-image\" data-id=\"dd60fc8\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.15.0 - 02-08-2023 *\/\n.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=\".svg\"]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}<\/style>\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"800\" height=\"457\" src=\"https:\/\/datascientest.com\/en\/files\/2024\/05\/nfrd-non-financial-reporting-directive1.jpg\" class=\"attachment-full size-full wp-image-185906\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-72ba736 e-flex e-con-boxed e-con\" data-id=\"72ba736\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-cd76a7f elementor-widget elementor-widget-heading\" data-id=\"cd76a7f\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">What comprises the non-financial elements?<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-237b9dd elementor-widget elementor-widget-text-editor\" data-id=\"237b9dd\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Although the NFRD necessitates a non-financial report from companies, what specific non-financial information should be included? In fact, there is <\/span><b>no explicit framework<\/b><span style=\"font-weight: 400;\">. Nonetheless, firms are encouraged to adhere to the guidelines of esteemed reporting standards such as those from the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). And, all these reports are underpinned by ESG principles:<\/span><\/p><ul><li><b>Environment<\/b><span style=\"font-weight: 400;\">: this chiefly involves assessing and mitigating environmental impacts. Strategies may include improved waste management, more sustainable consumption of resources, reduction of air, soil, and water pollution, among others.<\/span><\/li><li><b>Society<\/b><span style=\"font-weight: 400;\">: this encompasses upholding human rights within organizations, inclusion of workers, personnel management, and more.<\/span><\/li><li><b>Governance<\/b><span style=\"font-weight: 400;\">: this pertains to implementing control policies, combating bribery and corruption, board composition, and so on.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-70e0908 elementor-widget elementor-widget-text-editor\" data-id=\"70e0908\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">For each dimension, firms are encouraged to delineate the risks associated with their operations and the strategies adopted to alleviate these risks.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2093b4c elementor-align-center button-principal elementor-widget elementor-widget-button\" data-id=\"2093b4c\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-md\" href=\"https:\/\/datascientest.com\/en\/power-bi-training\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t<span class=\"elementor-button-text\">Find support for NFRD<\/span>\n\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-8756387 e-flex e-con-boxed e-con\" data-id=\"8756387\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-c4718bb elementor-widget elementor-widget-heading\" data-id=\"c4718bb\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">NFRD and CSRD: What are the differences?<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b3b8291 elementor-widget elementor-widget-text-editor\" data-id=\"b3b8291\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">In 2018, the European Commission concluded its assessment of the NFRD, determining that there was a need to enhance the quality, comparability, and pertinence of the non-financial information disclosed by companies. This led to the <\/span><b>replacement of the NFRD by the CSRD.<\/b><span style=\"font-weight: 400;\"> Since January 1, 2024, this new European directive is in effect.<\/span><\/p><p><span style=\"font-weight: 400;\">So, how do the two differ?<\/span><\/p><ul><li><b>The scope<\/b><span style=\"font-weight: 400;\">: the CSRD broadens the mandate for reporting to include a wider range of organizations. Apart from firms with over 500 employees, the CSRD also covers publicly listed SMEs, European companies with more than 250 employees, and non-European companies generating more than 150 million euros in turnover within the EU. This impacts over 50,000 companies (as opposed to 11,000 with the NFRD).<\/span><\/li><li><b>The information required<\/b><span style=\"font-weight: 400;\">: the significant innovation of the CSRD is in the expanded criteria for non-financial reporting. Whereas the NFRD lacks a specific reporting framework, companies can now utilize a genuine and even more detailed standard; the ESRS (European Sustainability Reporting Standards).<\/span><\/li><li><b>Standardization<\/b><span style=\"font-weight: 400;\">: the CSRD consolidates all <a href=\"https:\/\/datascientest.com\/en\/data-cleaning-definition-methods-and-relevance-in-data-science\">ESG reporting<\/a> throughout Europe to standardize them.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b1168f6 elementor-widget elementor-widget-text-editor\" data-id=\"b1168f6\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">While the CSRD is broader than the NFRD, it also introduces more complexity. Hence, proper preparation is crucial.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4675342 elementor-widget elementor-widget-image\" data-id=\"4675342\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"800\" height=\"457\" src=\"https:\/\/datascientest.com\/en\/files\/2024\/05\/nfrd-non-financial-reporting-directive2.jpg\" class=\"attachment-full size-full wp-image-185916\" alt=\"\" srcset=\"https:\/\/datascientest.com\/en\/files\/2024\/05\/nfrd-non-financial-reporting-directive2.jpg 800w, https:\/\/datascientest.com\/en\/files\/2024\/05\/nfrd-non-financial-reporting-directive2-300x171.jpg 300w, https:\/\/datascientest.com\/en\/files\/2024\/05\/nfrd-non-financial-reporting-directive2-768x439.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-e4bc558 e-flex e-con-boxed e-con\" data-id=\"e4bc558\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-39c4638 elementor-widget elementor-widget-heading\" data-id=\"39c4638\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Prepare for the CSRD with DataScientest<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ecab7ca elementor-widget elementor-widget-text-editor\" data-id=\"ecab7ca\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The revised NFRD standards ramp up the ESG transparency requirements. To meet these demands, companies will need to depend on <a href=\"https:\/\/datascientest.com\/en\/all-about-metadata\">vast amounts of data<\/a>. Some data points are relatively straightforward to gather (like gender parity), while others are markedly more intricate (like carbon footprint).<\/span><\/p><p><span style=\"font-weight: 400;\">Companies must, therefore, establish robust data governance to accurately measure this carbon impact. And for this, there is an increasing demand for data experts. Aspire to be among them? <a href=\"https:\/\/datascientest.com\/en\/data-analyst-course\">Train with DataScientest<\/a>.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b06bf6f elementor-align-center button-principal elementor-widget elementor-widget-button\" data-id=\"b06bf6f\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-md\" href=\"https:\/\/datascientest.com\/en\/power-bi-training\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t<span class=\"elementor-button-text\">Learn Power BI for CSRD<\/span>\n\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-a9acc88 e-flex e-con-boxed e-con\" data-id=\"a9acc88\" data-element_type=\"container\" data-settings=\"{&quot;content_width&quot;:&quot;boxed&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-270607b elementor-widget elementor-widget-html\" data-id=\"270607b\" data-element_type=\"widget\" data-widget_type=\"html.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"FAQPage\",\r\n  \"mainEntity\": [{\r\n    \"@type\": \"Question\",\r\n    \"name\": \"What is the NFRD?\",\r\n    \"acceptedAnswer\": {\r\n      \"@type\": \"Answer\",\r\n      \"text\": \"The NFRD (Non-Financial Reporting Directive) is a directive that mandates European firms with more than 500 employees to undertake non-financial reporting. 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Since January 1, 2024, this new European directive is in effect.\"\r\n    }\r\n  }]\r\n}\r\n<\/script>\r\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Adopted in 2014, the NFRD is the first European directive mandating large companies to report on non-financial matters. The objective: to factor in environmental impacts, social concerns, and governance into the overarching performance metrics of organizations. While this European regulation fosters more environmentally responsible business models, it was deemed inadequate for achieving the goals set [&hellip;]<\/p>\n","protected":false},"author":45,"featured_media":185899,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_theme","format":"standard","meta":{"content-type":"","inline_featured_image":false},"categories":[2420],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.7 (Yoast SEO v21.7) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Non-Financial Reporting Directive (NFRD): What is it?<\/title>\n<meta name=\"description\" content=\"The NFRD is the first European directive to mandate non-financial reporting. However, it has been replaced by the CSRD. 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