Regulatory Compliance

Non-financial reporting

Organizations are facing ever increasing demands for more extensive corporate reporting and greater transparency from investors, regulators, customers, and other stakeholders. This poses a challenge for organizations due to the pace at which they are being asked to report and as regards ensuring the required data is available and reliable.

In the EU, non-financial reporting is based on the Non-Financial Reporting Directive 2014/95/EU (NFRD). This directive has been transposed by Member States into their national legislation. While there is some variation as regards the national transpositions, the minimum requirements set out by the directive remain the same.

The NFRD applies to large public-interest entities (PIEs), which are companies with more than 500 employees and include listed companies, banks, and insurance companies. The definition of a public-interest entity is a matter for national law, and some countries have opted for a broader definition. In Slovakia, PIEs include health insurance companies, pension funds, asset management companies, other entities specified in the Act on Accounting, and very large companies who meet 2 of the following 3 conditions: 1) net turnover over EUR 170 million; 2) balance sheet over EUR 170 million; 3) over 2,000 employees. The aim of the NFRD is to make more non-financial information available to stakeholders and investors to better contextualize the value creation and risk management of companies. It also encourages businesses to increase responsibility and transparency regarding their social and environmental impact.

EU Taxonomy

By introducing the ambitious Green Deal with the ultimate goal of reaching net zero carbon emissions by 2050, the EU made a commitment to transforming the European economy and supporting sustainable business models. To achieve this, a clear definition of what is sustainable is required and this is where the EU Taxonomy comes into play.

The EU Taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. It provides companies, investors, and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. In this way, it should create security for investors, protect private investors from greenwashing, help companies to become more climate-friendly and help shift investments to where they are most needed.

The Taxonomy Regulation was published in June 2020. It establishes the basis for the EU taxonomy by introducing 6 environmental objectives and laying out 4 conditions for an economic activity to be considered sustainable:

6 environmental objectives

Climate change mitigation

Climate change adaptation

Sustainable use and protection of water and marine resources

Transition to circular economy

Pollution prevention and control

Protection and restoration of biodiversity and ecosystems

4 conditions of sustainability

  • Significantly contributes to one of the 6 objectives;
  • Does no significant harm to any of the 6 objectives;
  • Meets the minimum safeguards for social responsibility;
  • Meets the technical screening criteria set out by the Delegated Acts.

Supplementing the Taxonomy Regulation, the European Commission adopts Delegated Acts to define the technical screening criteria and create an exhaustive list of sustainable economic activities.

  • First Delegated Act on sustainable activities for climate change adaptation and mitigation objectives
  • Delegated Act supplementing Article 8 of the Taxonomy Regulation lays out the EU Taxonomy reporting obligations for companies
  • Complementary Climate Delegated Act including nuclear and gas as “transitional activities’’
  • Second Delegated Act on the 4 remaining environmental objectives (to be published)

The Taxonomy Regulation also introduces new reporting obligations for companies. Supplementing the non-financial reporting requirements currently governed by the NFRD, companies are obliged to publish specific KPIs. For non-financial undertakings, there are 3 KPIs - the proportion of sustainable activities in their turnover, capital expenditure, and operating expenditure, accompanied by several mandatory qualitative disclosures. For financial undertakings, KPIs vary based on the type of undertaking (bank, insurance, etc.), but are generally based on the Green Asset Ratio. This is to inform the investors and stakeholders on how sustainable their business is and how focused it is on becoming more sustainable.

Corporate Sustainability Reporting Directive (CSRD)

Recognizing the shortcomings in the existing rules on disclosure of non-financial information, the NFRD, the European Commission has proposed amending the rules by a new directive. The NFRD has not met the expectations of providing investors with coherent, sufficient and comparable information. The CSRD introduces more detailed reporting requirements and broadens the scope of applicable companies. All large companies will now be required to report on sustainability issues, such as environmental rights, social rights, human rights, and governance factors. Who will be covered by the directive?

  • Large companies = companies meeting 2 of the 3 following criteria:
    • 250 employees
    • EUR 20 million balance sheet
    • EUR 40 million net turnover
  • All listed companies including SMEs
  • Non-EU companies, with a net turnover of EUR 150 million in the EU and at least one subsidiary or branch in the EU

The main features of the CSRD are:

  • Mandatory placement of sustainability information in management reports
  • Mandatory external assurance
  • Introducing mandatory reporting standards – European Sustainability Reporting Standards (ESRS)
  • Subsidiaries are exempt from reporting if covered by a consolidated report meeting the CSRD requirements
  • Digital tagging of reports for automated machine reading

When will the rules apply?

  • 1 January 2024 for companies already subject to mandatory non-financial reporting;
  • 1 January 2025 for all large companies; and
  • 1 January 2026 for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings.
  • 1 January 2028 for non-EU companies if they have substantial operations in the EU (turnover of over €150 million in the EU).

The European Parliament and the EU Council approved the draft CSRD in November 2022 and the final version was published in the Official Journal of the European Union on 16 December 2022. The CSRD will enter into force 20 days after publication.

How can companies better communicate their ESG efforts?

PwC remains committed to helping companies improve their reporting in order to keep up with the regulations and achieve compliance with the required standards. We also support companies in progressing towards voluntary reporting. Moving beyond managing their compliance and reputational risks, many companies have embraced sustainability reporting as an opportunity to attract investors or consumers, reach new markets, improve their communication, gain better access to financing, and prepare for upcoming mandatory reporting requirements in advance.

An ESG report or sustainability report is a report published by a company or organization about its environmental, social and governance (ESG) impacts. It enables the company to be more transparent about the risks and opportunities it faces. It is a communication tool that plays an important role in convincing sceptical observers that the company’s actions are sincere.

The growing importance of sustainability reports is supported by the fact that investors and other stakeholders are calling on companies to disclose more about their sustainability and environmental, social and governance strategies.

GRI – Global Reporting Initiative

  • International organization for independent standards.
  • Issues GRI Standards regarding how companies should report non-financial information.
  • These standards help businesses identify impacts on climate change, the environment, human rights, and corporate governance.
  • GRI Standards are a set of standards companies may decide to comply with when reporting sustainability information.
  • They are most widely used by global corporations.
  • Standards are non-mandatory and non-binding; however, the proposed Corporate Sustainability Reporting Directive (CSRD) and the forthcoming mandatory European Sustainability Reporting Standards (ESRS) are based on the GRI structure.
  • Via high quality reporting (GRI), organizations are able to better understand, communicate, and manage their contributions to the United Nations Sustainable Development Goals (UN SDG).

A sustainability report enables companies to effectively answer a wide variety of questions stakeholders may raise in a single document.

However, creating a sustainability report can be challenging, as it must meet the reporting methodology requirements and have the right balance of information from the individual agendas. Companies must decide how to communicate relevant information and what ESG information and indicators to report.

There is a great deal of specific ESG related legislation financial undertakings must comply with. To find out more, visit our web page on ESG in the financial sector.

How can we support you?

1. To understand where you are and where you want to be

  • AS-IS / ESG gap analysis to identify the current state of your non-financial reporting and its compliance with current and foreseeable future requirements. We put the focus on the availability of data sets needed and the processes and systems for collecting, aggregating, analysing, calculating and reporting the non-financial information and indicators
  • Recommendations on how to close the identified gaps and/or improve the processes and the systems
  • Support and consulting services connected with the ESG transformation strategy


2. Assistance with the preparation of the sustainability report via methodology guidance or a full comprehensive preparation

  • Identification of key stakeholders and performance of a stakeholders’ dialogue to identify the material topics and KPIs
  • Collecting and processing the data and calculation of the identified KPIs.
  • Preparation of the selected disclosures or the sustainability report in accordance with GRI Standards
  • Support to implement CSRD requirements, mandatory EU sustainability standards (ESRS) and EU taxonomy

4. Independent assurance on your current sustainability report in accordance with ISAE 3000

Independent assurance  on your current sustainability report in accordance with ISAE 3000.