In June 2019, the Commission issued new Guidelines on reporting climate-related information as a supplement to the 2017 non-binding Guidelines on non-financial reporting. What are the main takeaways?

1. July 26th, 2019
Commission Guidelines on non-financial
reporting: Supplement on reporting climate-
related information –The key takeaways

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6. 6
Commission Guidelines on non-financial reporting:
Supplement on reporting climate-related information
–The key takeaways

7. 7© 2019 Sustainability Knowledge Group
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways
Starting from January 2018, the non-financial reporting Directive
(2014/95/EU) has made large public interest entities with over 500 employees
(listed companies, banks, and insurance companies) obliged to disclose the non-
financial information. As required by the directive, the Commission has
published non-binding Guidelines in 2017 to help companies disclose relevant
non-financial information in a more consistent and more comparable manner. Yet,
in June 2019, the Commission has issued guidelines on reporting climate-related
information which provide companies with practical recommendations on how to
better report the impact of their activities on climate, as well as the impact of
climate change on their business.

8. 8© 2019 Sustainability Knowledge Group
The new Guidelines on climate-related disclosures
The EU is dedicated to reducing greenhouse gas (GHG) emissions and creating a low-
carbon and climate-resilient economy. In the EU’s quest for a prosperous, modern,
competitive and climate-neutral economy by 2050, companies and financial
institutions will have a critical role and thus, the Commission appointed the Technical
expert group on sustainable finance (TEG) to provide guidance on climate reporting
as part of the Sustainable Finance Action Plan, adopted in March 2018.The aim of the
Sustainable Finance Action Plan is ‘’reorienting capital towards sustainable
investment, managing financial risks that arise from climate change and other
environmental and social problems and fostering transparency and long-termism in
financial and economic activity’’. According to the Guidelines,“corporate disclosure of
climate-related information has improved in recent years. However, there are still
significant gaps, and further improvements in the quantity, quality and comparability
of disclosures are urgently required to meet the needs of investors and other
stakeholders” and ‘‘without sufficient, reliable and comparable sustainability-related
information from investee companies, the financial sector cannot efficiently direct
capital to investments that drive solutions to the sustainability crises’’. It is important
to note that the new Guidelines integrate the TCFD recommendations established by
the G20’s Financial Stability Board.
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

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Benefits for reporting companies
Better disclosure of climate-related information can have numerous benefits for
the reporting company itself, such as:
• increased awareness and understanding of climate-related risks and
opportunities better risk management, and more informed decision-making and
strategic planning;
• a more diverse investor base and a potentially lower cost of capital, resulting for
example from inclusion in actively managed investment portfolios and in
sustainability-focused indices, and from improved credit ratings for bond
issuance and better credit worthiness assessments for bank loans;
• more constructive dialogue with stakeholders, in particular investors and
shareholders;
• better corporate reputation and maintenance of social licence to operate.
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

10. Table 1: The double materiality perspective of the Non-Financial Reporting Directive in the context of reporting
climate-related information
(Source: https://eurlex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52019XC0620(01)&from=EN)
© 2019 Sustainability Knowledge Group 10
The double materiality perspective
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

11. 11© 2019 Sustainability Knowledge Group
It is well-known that a company is required to disclose information on environmental,
social and governance issues, and climate-related information falls into the category
of environmental matters. Yet, in the Commission’s new non-Binding Guidelines on
Non-Financial Reporting, the reference to the “impact of [the companies’] activities”
introduced a new element to be taken into account when assessing the materiality of
non-financial information, revealing that the Non-Financial Reporting Directive has a
double materiality perspective:
• The reference to the company’s “development, performance [and]
position” indicates financial materiality, in the broad sense of affecting the value
of the company. Climate-related information should be reported if it is necessary
for an understanding of the development, performance and position of the
company.This perspective is typically of most interest to investors.
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

12. 12© 2019 Sustainability Knowledge Group
• The reference to “impact of [the company’s] activities” indicates environmental
and social materiality. Climate-related information should be reported if it is
necessary for an understanding of the external impacts of the company.This
perspective is typically of most interest to citizens, consumers, employees, business
partners, communities and civil society organisations. However, an increasing
number of investors also need to know about the climate impacts of investee
companies in order to better understand and measure the climate impacts of their
investment portfolios.
The materiality perspective of the non-Financial Reporting Directive covers financial
materiality as well as environmental and social materiality.
As per the Guidelines, companies are advised to consider their whole value chain,
both upstream and downstream, when assessing the materiality of climate-related
information. Yet, companies that conclude that climate is not a material issue are
advised to consider making a statement to that effect, explaining how that conclusion
has been reached.
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

13. 13© 2019 Sustainability Knowledge Group
How companies should approach the new Guidelines?
Companies are advised to study the supplement together with the applicable national
legislation transposing the Non-Financial Reporting Directive (2014/95/EU),and the
text of the Directive itself. Companies,‘‘should also consider the Non-Binding
Guidelines on Non-Financial Reporting published by the Commission in June 2017 ,
which contain 6 key principles for good non-financial reporting” according to which,
the “disclosed information should be: (1) material; (2) fair, balanced and
understandable; (3) comprehensive but concise; (4) strategic and forward-looking; (5)
stakeholder-oriented; and (6) consistent and coherent.’’. Moreover, companies are
encouraged to read the recommendations of the TCFD, and if relevant the
supplementary guidance for the financial sector and for companies operating in the
sectors of energy, transport, material and buildings, and agriculture, food and forest
products. When it comes to starting date, companies should be able to use the new
Guidelines for reports published in 2020, covering financial year 2019.The Guidelines
urge companies to look beyond compliance, and focus on new business models,
impact driven disclosures to ensure they remain relevant, profitable and sustainable
in this new low-carbon and climate-resilient economy.
Commission Guidelines on non-financial reporting: Supplement
on reporting climate-related information –The key takeaways

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