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SFDR – CSRD – NFRD – What’s it about?

This article provides an overview of the following EU-Directives: CSRD: Corporate Sustainability Reporting Directive, NFRD: Non-Financial Reporting Directive and SFDR: Sustainable Finance Disclosure Regulation. These directives of the EU foresee non-financial reporting (ESG-reporting) at a much larger scale (i.e. for more companies and with additional information). The directives will give consumers additional ESG information in order to make informed decisions. This means that a decision for a product or service will not only be based on price but also on ESG-factors. These developments are in line with the EU Green Deal.

SFDR – Sustainable Finance Disclosure Regulation

The Commission put forward the action plan on financing sustainable growth in March 2018. Action 7 of the action plan calls for clarifying institutional investors’ and asset managers’ duties. The European Commission followed through on this action in May 2018 with a proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341. The proposal was adopted as part of the sustainable finance package.

The disclosures regulation was adopted by co-legislators in spring 2019 and was published on 9 December 2019 in the Official Journal. It is already in force but will apply from 10 March 2021.It lays down sustainability disclosure obligations for manufacturers of financial products and financial advisers toward end-investors. It does so in relation to the integration of sustainability risks by financial market participants (i.e. asset managers, institutional investors…, all entities offering financial products where they manage clients’ money) and financial advisers in all investment processes and for financial products that pursue the objective of sustainable investment.

NFRD – Non-Financial Reporting Directive (Directive 2014/95/EU)

The Non-Financial Reporting Directive (NFRD) requires certain large companies to report on social, employee and environmental matters, human rights, bribery and corruption. Currently, the information reported by companies does not meet users’ needs (investors, civil society and others). Some companies from whom users need information do not report. Even when companies do report, the information is usually not sufficiently relevant, comparable, reliable or easy to access and use. User demand for non-financial information is expected to increase significantly so these problems will intensify. The lack of adequate non-financial information for investors and civil society creates investment risks, inhibits financial flows to activities that address the sustainability crisis, and creates an accountability gap between companies and society. Preparers (reporting companies) incur unnecessary costs due to uncertainty about what to report and stakeholders’ demands for information in addition to what companies report publicly. The flexibility and lack of specificity in the NFRD is one reason for this. In addition, there are many overlapping reporting standards and frameworks, and consequently no consensus on what companies should report.

CSRD – Corporate Sustainability Reporting Directive

On 21 April 2021, the Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the NFRD. The proposal

  • extends the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises)
  • requires the audit (assurance) of reported information
  • introduces more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards
  • requires companies to digitally ‘tag’ the reported information, so it is machine readable and feeds into the European single access point envisaged in the capital markets union action plan

The proposed CSRD directive will extend the EU provisions for sustainability reporting to all large companies and all listed companies. This means that in the future almost 50,000 companies in the EU will have to comply with detailed standards for sustainability reporting, significantly more than the 11,000 companies subject to the current requirements. The Commission proposes the development of standards for large companies and separate, proportionate standards for SMEs that non-listed SMEs can apply voluntarily.


The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. The EU taxonomy is an important enabler to scale up sustainable investment and to implement the European Green Deal. Notably, by providing appropriate definitions to companies, investors and policymakers on which economic activities can be considered environmentally sustainable, it is expected to create security for investors, protect private investors from greenwashing, help companies to plan the transition, mitigate market fragmentation and eventually help shift investments where they are most needed.

The Commission is currently preparing an IT tool that will facilitate the use of the taxonomy by allowing users to navigate easily through the taxonomy.

Environmental Labelling – Airlines/Flights

The European Union Aviation Safety Agency (EASA) is planning to prepare a Environmental Labelling system for airlines and flights. The EASA has started a tender process at the beginning of 2021.

Aircraft technology environmental performance and labelling

Objectives: The draft aircraft label developed by EASA and the Environmental Label Task Force, including the choice of indicators, their assessment methodology and presentation to citizens shall be reviewed and refined. The environmental impact of all life cycle phases shall be assessed and appropriate product category rules to enable harmonised life cycle assessments of aircrafts based on, but not limited to, EASA certification data, manufacturer data as well as Environmental Footprint compliant datasets hall be developed. The draft aircraft label including its indicators, metrics and methodology based on EASA proposals shall be reviewed and tested.

Airline and flight environmental performance and labelling

Objectives: The draft airline label developed by EASA and the Environmental Label Task Force, including the choice of indicators, their assessment methodology and presentation to citizens shall be reviewed and refined. Existing data reporting shall be identified and verified. The candidate indicators for a wide range of European operators covering all airline business models shall be assessed, using best available data aligned with life-cycle based approaches (e.g. Product and Organisational Environmental Footprint). The label on actual data shall be tested with a selection of launch partners. The results should take into account different business models and be aligned with a life-cycle approach.


There are a wide range of initiatives in Europe that have been initiated via the EU Green deal. Non-financial indicators (as shown in the SFDR, CSRD or NFRD) will become a common basis for decisions making – for consumers and companies. In the near future price will be only one decision factor amongst others. It’s important to evaluate the changes now and see how they are impacting your business model. Contact us, to evaluate your situation and identify your options in order to comply with SFDR, CSRD and NFRD.

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Georg Tichy

Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues. Contact me or Book a MeetingView Author posts