Non-Financial Reporting for 2017 - what you need to know
The 2017/18 financial year will see the first year of reporting under the EU Non-Financial Reporting (NFR) Directive, which was implemented into UK law as the ‘The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016’, effective January 1st 2017.
These regulations require large, public companies to disclose a raft of information, from diversity to human rights, and, of course, environmental matters.
Who has to comply with the Non-Financial Reporting Directive?
Under the new UK regulations, NFR reporting is compulsory for companies that are:
- a traded company, or;
- a banking company, or;
- an authorised insurance company, or;
- a company carrying out insurance market activity.
A company may be exempt if it qualifies as ‘small’ or ‘medium’, or has fewer than 500 employees.
These parameters mean that any UK listed company that falls under the new regulations should already disclose specific information on its strategy, business model, risks and market positioning, under the 2006 Companies Act.
But for companies that are not public this new legislation may see them reporting for the first time.
What has to be reported?
The EU Directive states that “Information to the extent necessary for an understanding of the group’s development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters …” should be reported.
This covers a broad range of areas and may seem daunting, but when broken down it entails:
- A description of the group’s business model;
- A description of the group’s policies on these matters, including due diligence;
- The outcome of the implementation of these;
- Assessment of principle risks in these areas, relevant to the business;
- Non-financial key performance indicators (KPIs);
- If any cannot be reported: clear and reasoned explanation’s as to why.
Why is the EU NFR Directive important for environmental reporting?
For many, the addition of yet another layer of legislation may seem unnecessary, and for already overburdened sustainability teams it may prove difficult.
However, standardisation in sustainability reporting can be a boon for those who get out ahead and demonstrate their commitment to sustainability.
UK companies have been reporting on many of these areas for nearly 10 years. The transparency and clarity of a nationwide reporting standard has encouraged significant changes in the way that stakeholders, investors, customers and companies view environmental policy, and sustainability.
With customers and stakeholders paying more attention to sustainability as a key factor in where to spend their money, companies who lag behind are losing out . Equally those who are able to report and demonstrate a commitment to sustainability can gain a competitive edge .
What should you do now?
If your company falls under these new regulations, the chances are you are already reporting the vast majority of what is required.
However, we understand that keeping up with ever changing requirements can be difficult, and having an expert to help you pick your way through them can really help.