Improved Sustainability Corporate Disclosure Policies

Since 2018, the EU Non-Financial Reporting Directive has required large corporations to disclose information on their sustainability impacts, risks, and plans. However, the Directive does not specify the information that has to be disclosed. As a result, many companies have failed to provide meaningful information. This has been particularly true for the project’s target countries. The resulting lack of transparent and comparable disclosures has led to misallocation of investors’ and banks’ investments, and corporations have thus not been incentivised to implement effective climate mitigation plans.

Investors and banks need clear, concise, and comparable data to adjust their investing strategies so that they can be assured that they invest in sustainable assets. The project aimed to develop a clear guidance for corporations to disclose their sustainability-related information in line with the goals of the EU Non-Financial Reporting Directive (NFR Directive), as well as evidence-based recommendations for the improvement of the Directive. 

 It thus enabled banks and investors to make informed decisions and in turn facilitated the redirection of private capital away from carbon-intensive assets and towards sustainable investment. Once sustainability becomes an indispensable condition for investors, large EU companies will be financially motivated to develop and implement profound climate change mitigation plans, in the long-term leading to a GHG-neutral EU.

The project focussed on three steps to reach this goal. First, it analysed the quality of climate-related disclosures of 300 large companies in Central, Eastern, and Southern Europe. Second, it provided guidance to companies, policy makers, regulators, and other relevant stakeholders on the kind of information they need to disclose, based on the NFR Directive requirements and the data from the analysis. Third, it organized a discussion between members of civil society and investors that will in the end deliver a coherent and consensual proposal to EU institutions on the necessary specification of the NFR Directive requirements.

• Deficits in sustainability reporting revealed: Analysis of the sustainability reports of over 300 companies from Central, Eastern and Southern Europe showed that only around 30 per cent of companies provided sufficient information on climate issues and 10 per cent on other environmental issues. The project thus created transparency about the shortcomings in reporting and laid the foundation for targeted reforms and improvements in corporate communication. 
• Guidelines for corporate reports: As part of the project, guidelines were developed that outline what information companies should publish and how this information can best be presented. The guidelines provide companies with long-term support in producing legally compliant, high-quality sustainability reports. 
• Influence on EU reforms: The research findings and recommendations of the project partners were incorporated into the reform of the EU Non-Financial Reporting Directive (NFRD), supported the development of mandatory EU standards for climate reporting, and contributed to the legal basis for improved, standardised sustainability reporting in the EU. 
• Stakeholder participation leads to greater acceptance: At two workshops, several webinars and other events, more than 1,400 participants from business, politics, civil society and investors exchanged ideas, networked with each other and thus promoted the acceptance of reforms. 
• Identification of breaches of reporting obligations: The project partners identified 31 cases of serious breaches of reporting obligations and reported them to 16 authorities in 11 countries. This strengthened the enforcement of EU regulations and improved compliance in companies.