Non-Financial & Sustainability Disclosure

Non-financial disclosure — increasingly termed sustainability disclosure — encompasses the reporting of environmental, social, and governance information that is material to understanding a company's performance, risks, opportunities, and impacts beyond traditional financial metrics.

The landscape of non-financial disclosure has transformed from voluntary, fragmented reporting to a comprehensive mandatory regime in many jurisdictions. The EU's Corporate Sustainability Reporting Directive (CSRD), the ISSB's IFRS S1 and S2, and numerous national requirements are creating a global baseline for sustainability disclosure.

Regulatory Framework

The EU CSRD requires approximately 50,000 companies to report under the European Sustainability Reporting Standards (ESRS), covering the full range of environmental, social, and governance topics using a double materiality approach. The ISSB standards (IFRS S1 and S2) provide a global baseline focused on enterprise value, adopted or being adopted by jurisdictions including the UK, Japan, Singapore, Hong Kong, and Australia. The US SEC's climate disclosure rule requires climate-related disclosures for US-listed companies.

Materiality Approaches

Financial materiality (ISSB approach) focuses on sustainability information that could reasonably be expected to influence investors' decisions. Impact materiality considers the company's impacts on the economy, environment, and people. Double materiality (ESRS approach) considers both perspectives, requiring disclosure of information that is material from either or both viewpoints.

Assurance of Non-Financial Information

The credibility of non-financial disclosure depends increasingly on independent assurance. The IAASB's ISSA 5000 provides the first international standard for sustainability assurance. The EU CSRD requires limited assurance of sustainability reports, with a pathway to reasonable assurance. Many companies are already obtaining voluntary assurance of key ESG metrics, particularly greenhouse gas emissions data.

Further Reading

• ESRS — EU sustainability reporting standards
• IFRS S1 & S2 — Global sustainability disclosure baseline

Key Resources

• EFRAG European Sustainability Reporting Standards
• GRI Standards

Related Topics

• Sustainability Disclosure Governance
• ESG Assurance
• Financial Reporting