By Paul Davies, Michael Green and Ei Nge Htut

On 26 June 2017, the European Commission (the EC) published non-binding guidelines on the methodology for reporting non-financial information by certain large companies and groups (the Guidelines) as required by Article 2 of the Directive 2014/95/EU amending the Accounting Directive on the disclosure of non-financial and diversity information (the Directive). The EC intends the Guidelines to help companies disclose high quality, relevant, useful, consistent, and more comparable non-financial information in a way that will encourage growth and provide transparency to key stakeholders.

The Directive was published in the Official Journal on 15 November 2014, entered into force on 5 December 2014, and Member States were required to adopt the necessary measures transposing the Directive into national law by 6 December 2016. Article 2 of the Directive requires the EC to publish the Guidelines, including non-financial key performance indicators (KPI) (both general and sectoral). The EC consulted on the format of the Guidelines in January 2016.

Driving these Guidelines is the principle that appropriate non-financial disclosure is a vital way of ensuring sustainable finance. This builds on the EC’s goal to develop a comprehensive EU strategy on sustainable finance as part of the Capital Markets Union, and forms part of the ongoing work of the High Level Group on Sustainable Finance as established by the EC. Both the Directive and Guidelines reflect the current best practices and most recent developments at international level, including key elements from the UN Sustainable Development Goals, the Paris Climate Agreement, and the industry-led Task Force on climate-related financial disclosures set up by the Financial Stability Board.