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10 March 2020
Non-Financial and ESG Reporting: A New Era 
of Sustainability Reporting? 
Executive Summary 

Current market developments indicate that the 
pressure on reporting entities to disclose material, 
balanced and comprehensive ESG information will 
continue to increase.  

The European Commission published additional 
guidelines on the disclosure of climate-related 
information based on the recommendations of the 
TCFD. 

The EU Taxonomy Regulation will oblige corporates 
in the scope of the non-financial reporting directive 
to publish the proportion of their turnover, CapEx 
and OpEx associated with taxonomy-aligned 
sustainable assets, products or activities.  

The European Commission is currently reviewing the 
non-financial reporting directive and is expected to 
propose a non-financial reporting regulation by the 
end of 2020.
In the fast paced world of sustainable finance regulation, 
the 
European 
non-financial 
reporting 
directive 
2014/95/EU (“NFRD”) is the dinosaur: Introduced in 
2014 and transposed into Luxembourg law in 2016, its 
ESG reporting requirements have become a familiar part 
of the annual reporting exercise. However, recent 
developments indicate that the true transition in the 
field of non-financial reporting is yet to come. 
I.
Background 
Since January 2017, certain large undertakings are 
required to provide ESG and diversity related disclosures 
under the Luxembourg law of 23 July 20161. The high-
level requirements of the law were accompanied by non-
binding guidelines of the European Commission 
published in July 20172, recommending as key principles 
that the information provided should be:  

Material, 

Fair, balanced and understandable, 

Comprehensive but concise, 

Strategic and forward-looking, 

Stakeholder oriented, and 

Consistent and coherent. 
With the launch of the EU Action Plan on Sustainable 
Finance in 2018 and the introduction of the EU Green 
Deal in 2020, ESG reporting has become critical for all 
major players in the financial market. Reporting entities 
should get ready for a new era of sustainability 
reporting.  
II.
Additional guidelines by the Commission 
In June 2019, the European Commission provided 
supplemental non-binding guidelines focusing on the 
disclosure 
of 
climate-related 
information3. 
These 
guidelines seek to fill the gap in climate-related data by 
encouraging reporting entities to provide material, 
sufficient, reliable and comparable information on the 
financial and non-financial impact of climate change on 
1 Luxembourg law of 23 July 2016 on the publication of non-
financial information, available here: 
http://legilux.public.lu/eli/etat/leg/loi/2016/07/23/n19/jo
2 available here:  
https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52017XC0705(01) 
3 available here:
https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52019XC0620(01)

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10 March 2020
the entity as well as the entity’s impact on climate 
change. 
The 
guidelines 
are 
based 
on 
the 
recommendations of the Task Force on Climate-related 
Financial Disclosure (TCFD) established by the G20’s 
Financial Stability Board and thus benefit from 
international recognition.  
“Given the systemic and persuasive impacts of climate 
change, most companies […] are likely to conclude that 
climate is a material issue.” 
European Commission, Guidelines of June 2019 
While these guidelines are, at this stage, non-binding, 
entities in the scope of the NFRD should take this 
development seriously. Assessing their climate change 
impact and climate change’s impact on them in line with 
the guidelines will be a difficult task and require both 
time and training. In the meantime, the European 
Commission is successfully promoting incentives to 
comply voluntarily by massively pushing investors’ 
demand for such information. Opting out of climate-
related disclosure will become increasingly difficult and 
the quality standards applied to such disclosure will 
continue to rise.  
III.
Increasing scrutiny of the regulators 
National supervising authorities continue to closely 
monitor and review the non-financial reports published 
by issuers. It is highly likely that their recommendations 
will influence the Commission’s proposal for a new 
regulation.  
In February 2020, the CSSF published its second report4
focusing on the quality of the disclosure compared to 
the key principles introduced by the Commission’s 2017 
guidelines. The CSSF concluded that the information 
provided by the 28 issuers it reviewed lacked sufficient 
materiality and balance. Furthermore, the CSSF sees 
room for improvement regarding: 
4 available here: 
http://www.cssf.lu/fileadmin/files/Publications/Communiques/
Communiques_2020/C_examination_non-
financial_information_published_2018_170220.pdf

the incorporation of sustainability criteria in the 
company’s business model, 

the due diligence process, and 

the identification of the key ESG risks. 
The increasing scrutiny by the CSSF is not specific to 
Luxembourg, but a general trend in Europe. The French 
regulator AMF, for example, issued its fourth report on 
ESG reporting in November 20195. This detailed report 
also criticized issuers for failing to focus on material 
information only. Noting the lack of comparability of ESG 
reporting, the AMF report further aims at providing 
additional guidelines to French issuers.  
“[The CSSF] regrets that unfavourable aspects are 
omitted at least nine times out of ten. […] 
Issuers are urged to present a more fair and balanced 
view of their activities.” 
CSSF, Report on non-financial information (FY 2018) 
IV. Next legislative steps 
1. EU Taxonomy Regulation 
One cornerstone of the EU Green Deal will be the new 
EU Taxonomy Regulation (Taxonomy) which was 
politically agreed on in December 20196. The Taxonomy 
details economic activities which contribute substantially 
to specific environmental objectives and do no 
significant harm. It is expected to influence the entire 
financial sector, but will be of particular relevance for 
corporates under the NFRD: As a last minute change 
during the political negotiation, it was agreed to extend 
certain reporting requirements under the Taxonomy to 
them.  
Non-financial entities in the scope of the NFRD will be 
obliged to disclose the proportion of their 
5 available here:  
https://www.amf-france.org/sites/default/files/2020-
02/rapport-2019-sur-la-responsabilite-sociale-societale-et-
environnementale-des-societes-cotees_0.pdf
6 final text available here: 
https://data.consilium.europa.eu/doc/document/ST-14970-
2019-ADD-1/en/pdf

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10 March 2020

turnover derived from products or services, and 

total investments (CapEx) and/or expenditures 
(OpEx) related to assets or processes 
associated with environmentally sustainable economic 
activities as defined in the Taxonomy. The Commission 
will adopt a delegated act further specifiying these 
obligations by June 2021. 
“Sustainability and the transition to a safe, climate 
neutral and climate resilient, more resource-efficient 
and circular economy is the key in ensuring long-term 
competitiveness of the Union’s economy.” 
Recital 4 of the Taxonomy 
2. Non-Financial Disclosure Regulation 
In February 2020, the European Commission launched a 
public consultation7 on how to improve the disclosure of 
non-financial information. This public consultation which 
is open until May 2020 is expected to shape the further 
legislative proposal of the Commission. Before the end 
of 2020, the European Commission will likely push for a 
non-financial 
reporting 
regulation 
introducing 
amendments to the NFRD.  
V.
Main takeaways for reporting entities 
1.
Identify gaps in your current non-financial and 
financial disclosure, especially in connection with 
climate-related risks.  
2.
Focus on the quality of your non-financial 
disclosure. Only material information should be 
provided and the disclosure should present an 
authentic picture of the company’s ESG strategy 
and risks.  
3.
Prepare for a more detailed and sector-specific
sustainability reporting in line with the Taxonomy. 
4.
Engage with your stakeholders to get a clearer 
picture 
on 
their 
ESG 
and 
sustainability 
requirements and needs. 
7 Participation possible until 14 May 2020: 
https://ec.europa.eu/info/law/better-regulation/have-your-
say/initiatives/12129-Revision-of-Non-Financial-Reporting-
Directive/public-consultation
5.
Consider participating in the public consultation of 
the 
European 
Commission 
on 
non-financial 
reporting to present your views. 
VI. What we offer 
GSK Stockmann offers a variety of services in connection 
with non-financial and ESG disclosure and sustainable 
finance generally, such as:  

Legal advice on corporate governance set-ups, 

Review and creation of ESG policies, 

Tailor-made in-house trainings.
Please contact us for further information. 
VII. Conclusion 
A new era of non-financial reporting is on the rise: A 
strong 
focus 
on 
material 
information, 
a 
clear 
identification of climate-related risks as well as a 
balanced and comparable presentation of the company’s 
non-financial performance will be critical. Issuers should 
get ready for an internal review of their ESG strategies 
and risks and prepare for a changing regulatory 
environment in the years to come. 
Dr. Philipp Moessner 
Partner 
GSK Stockmann SA 
philipp.moessner@gsk-lux.com 
Anna Lindner 
Senior Associate 
GSK Stockmann SA 
anna.lindner@gsk-lux.com

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10 March 2020
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