Non-Financial Reporting Directive
The NFRD (Non-Financial Reporting Directive, Directive 2014/95/EU) was the EU predecessor of the CSRD and required large public-interest entities to disclose non-financial information.
The Non-Financial Reporting Directive (NFRD), formally Directive 2014/95/EU, was the first EU-wide legal framework obliging large companies to disclose non-financial information. It amended the Accounting Directive 2013/34/EU and was transposed into German law through the CSR Directive Implementation Act (CSR-RUG) in Sections 289b et seq. and 315b et seq. of the German Commercial Code (HGB). The reporting obligation applied to large capital-market-oriented companies, credit institutions and insurance undertakings that qualified as public-interest entities and had more than 500 employees on average during the financial year.
In terms of content, the NFRD required a non-financial statement covering at least five matters: environmental, social and employee matters, respect for human rights, and the fight against corruption and bribery. For each matter, companies had to describe the policy pursued, its outcomes, the principal risks, how those risks were managed, and relevant non-financial key performance indicators. A defining feature was the "comply or explain" approach: if a company pursued no policy on a given matter, it had to provide a clear and reasoned explanation. Unlike the later CSRD, the NFRD did not mandate a binding reporting standard but allowed companies to choose national, Union-based or international frameworks such as GRI.
Because of these weaknesses - limited comparability, lack of standardisation, a narrow scope and no mandatory external assurance - the NFRD was replaced by the Corporate Sustainability Reporting Directive (CSRD, Directive (EU) 2022/2464). The CSRD significantly broadens the range of companies in scope and introduces the binding European Sustainability Reporting Standards (ESRS), the double materiality principle, an assurance requirement (initially limited assurance) and digital tagging in the ESEF format. Nevertheless, the NFRD retains historical significance as the starting point of European sustainability reporting and continues to inform the interpretation of its successor rules.
Legal Basis
Directive 2014/95/EU (NFRD); Accounting Directive 2013/34/EU; in Germany Sections 289b-289e and 315b-315c HGB (CSR Directive Implementation Act, CSR-RUG); replaced by Directive (EU) 2022/2464 (CSRD)
Practical Example
A listed mechanical engineering group with around 800 employees prepared an annual non-financial statement integrated into its management report under the NFRD, relying on the GRI Standards. As the compliance officer prepares the transition to the CSRD, she compares the existing NFRD statement with the ESRS data points and realises that a full double materiality assessment, the measurement of Scope 1 to 3 emissions and external assurance will now be required - the NFRD reports provide the substantive basis for this while also revealing the gaps that must be closed before the first CSRD reporting period.