The preparatory works of the Transparency Act makes reference to the Non-Financial Reporting Directive (NFRD). At EU level, sustainable corporate governance has been mainly fostered indirectly by imposing reporting requirements in NFRD. It is to note that NFRD is an act which is referred to in Article 8 of the Taxonomy Regulation. On 6 July 2021, the European Commission adopted the Delegated Act supplementing Article 8 of the Taxonomy Regulation (“the Disclosures Delegated Act”), which requires large financial and non-financial companies to provide information to investors about the environmental performance of their assets and economic activities. The Delegated Act was published on 10 December 2021 in the Official Journal and became applicable on 1 January 2022.
It is also to note that NFRD will be revised with the Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD). The Commission has suggested that CSRD would extend the scope of the companies covered to all large and all listed companies, require the audit (assurance) of reported information and strengthen the standardisation of reported information by empowering the Commission to adopt sustainability reporting standards. CSRD will also complement the current NFRD by adding a substantive corporate duty for some companies to perform due diligence to identify, prevent, mitigate and account for external harm resulting from adverse human rights and environmental impacts in the company’s own operations, its subsidiaries and in the value chain. Of particular relevance of the proposal on CSRD is that it mandates disclosure of plans of an undertaking to ensure that its business model and strategy are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement.
In addition, the EU Taxonomy Climate Delegated Act 2021/21393 adopted on 4 June and published in the Official Journal on 9 December 2021, as well as any future delegated acts on other environmental objectives will have to be assessed in this reporting exercise. Noteworthy, is the fact that the Taxonomy is a very dynamic tool. The Commission has already in principle adopted a Complimentary Delegated Act on gas and nuclear. The Commission has also in this proposal made suggestions for revising the Disclosure Delegated Act since the undertakings in the event that this act will be adopted, need also to report on the activities included for gas and nuclear in this piece of legislation. Moreover, activities included in the first Climate Delegated Act can be added or renewed. The Platform on Sustainable Finance will also soon publish the report on the technical criteria for the remaining 4 environment objectives. This Platform will also, in the near future, publish its final report on the extension of the taxonomy. On 28 February 2021, the report on Social Taxonomy was published. The Platform on Sustainable Finance approached in this report the Taxonomy to develop further a social taxonomy consisting of three objectives: decent work (including for value-chain workers), adequate living standards and wellbeing for end-users together with inclusive and sustainable communities and societies. It is also related to CSRD since this structure of three stakeholder groups of workers, consumers and communities follow the same structure as the European Financial Reporting Authority Group's (EFRAG) draft proposal to non-financial, sustainability reporting companies under the CSRD.