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Governance Authority
Category: Sustainability and ESG

Material Non-Financial Information

Also known as: NFI, Material Non-Financial Disclosure, Material Sustainability Information
Simply put

Material non-financial information is business information that does not appear primarily in the financial statements but is significant enough to affect how a company performs or how it is judged, such as its policies, activities, and impacts on the environment and society. Information is generally considered 'material' when it matters to the decisions of those who rely on the company's reporting. What counts as material can differ depending on whether the focus is the company's financial position or its wider impact on the world.

Formal definition

Material non-financial information refers to disclosures of business information that fall outside the primary content of financial statements but are nonetheless significant to a company's performance, risk profile, or stakeholder assessments, typically encompassing environmental, social, and governance policies, activities, and impacts. The materiality determination is context-dependent: under a 'double materiality' approach, information may be material either because it affects the company's financial condition (financial materiality) or because it reflects the company's impact on the world beyond purely financial considerations (impact materiality). As a result, information that is material for sustainability-related disclosures may not be material for financial statements, and vice versa. Whether disclosure of particular non-financial information is legally required or voluntary, and which materiality standard applies, varies by jurisdiction, sector, and applicable reporting regime; the appropriateness of any given determination is fact-specific and a matter of professional judgment. This entry is educational and not legal, audit, or compliance advice.

Why it matters

Material non-financial information has become central to how companies communicate performance, risk, and their broader impact, because a growing share of what drives value or exposes a company to risk does not appear primarily in the financial statements. Environmental, social, and governance policies, activities, and impacts can shape a company's reputation, its exposure to regulatory and operational risk, and how investors and other stakeholders judge its prospects. Treating this information as an afterthought can leave boards and management without a full picture of the factors that affect the enterprise.

A distinctive challenge is that materiality itself can be assessed through more than one lens. Under a 'double materiality' approach, information may be material because it affects the company's financial condition (financial materiality) or because it reflects the company's impact on the world beyond purely financial considerations (impact materiality). As a result, information that is material for sustainability-related disclosures may not be material for the financial statements, and the reverse can also hold. Governance professionals need to be clear about which materiality standard is being applied, because the answer influences what must be disclosed and to whom the disclosure is directed.

There is also a discipline point that commentators have raised: if disclosure of information that is immaterial for financial purposes is required for other, non-financial reasons, that should be acknowledged as such rather than folded into the traditional concept of financial materiality. Blurring the two can distort how users interpret a company's reporting. Whether disclosure of particular non-financial information is legally required or voluntary, and which materiality standard applies, varies by jurisdiction, sector, and applicable reporting regime, so the appropriate treatment is fact-specific and a matter of professional judgment.

Who it's relevant to

Boards and audit or sustainability committees
Boards and their relevant committees typically hold oversight responsibility for the integrity of a company's reporting, including how materiality determinations for non-financial information are made and disclosed. Directors generally need to understand which materiality lens is being applied and to challenge whether the distinction between financial and impact materiality is being maintained rather than blurred. The specifics of any committee's remit depend on the company's structure and applicable regime.
General counsel and disclosure or compliance functions
Legal, disclosure, and compliance teams generally assess whether disclosure of particular non-financial information is legally required or voluntary under the applicable regime, and which materiality standard governs. They also help ensure that information required for non-financial reasons is acknowledged as such and not swept into the concept of financial materiality. Because requirements vary by jurisdiction, sector, and entity type, these are fact-specific judgments.
Preparers of sustainability and non-financial reports
Those who prepare structured non-financial disclosures work with the core content of this concept: business information outside the financial statements that still affects performance, risk, or stakeholder assessments, typically covering environmental, social, and governance policies, activities, and impacts. They are generally responsible for translating a materiality determination into disclosures aligned with the applicable reporting regime.
Investors and other users of corporate reporting
Investors and stakeholders rely on non-financial disclosures to inform their assessments, and materiality is generally judged by reference to what matters to the decisions of those who rely on the company's reporting. Users benefit from understanding that information material for sustainability-related disclosures may not be material for the financial statements, and vice versa, so that they interpret each disclosure through the correct lens.

Inside NFI

Non-Financial Subject Matter
Information that falls outside conventional financial statements, typically covering environmental, social, and governance (ESG) topics, workforce and human capital matters, business model resilience, and governance arrangements. The precise categories depend on the applicable disclosure regime and the entity's sector and circumstances.
Materiality Threshold
The determination that information is significant enough to warrant disclosure. Depending on the framework, materiality may be assessed by reference to influence on investor decisions (financial materiality), broader impacts on people and the environment (impact materiality), or both under a double-materiality approach. Which lens applies varies by jurisdiction and standard.
Applicable Reporting Framework
The standard or regime shaping what is disclosed and how. Some regimes are binding law or regulation for certain entity types, while others are voluntary frameworks or best-practice guidance. The obligation to report, and the scope of what must be reported, generally depends on jurisdiction, sector, listing status, and entity size.
Governance and Accountability for Disclosure
The allocation of responsibility for preparing, reviewing, and approving non-financial disclosures. Management typically prepares the information and designs supporting controls, while the board or a designated committee generally exercises oversight. Assurance functions may provide independent evaluation where engaged.
Data, Controls, and Assurance
The processes, systems, and internal controls used to gather, measure, and validate non-financial data, together with any internal or external assurance obtained. The rigor of controls and the level of assurance (limited, reasonable, or none) generally vary by regime and by the maturity of the entity's reporting.
Qualitative and Forward-Looking Elements
Narrative context, policies, targets, and forward-looking statements that accompany quantitative metrics. These elements often carry greater estimation uncertainty than historical financial figures and may depend heavily on management judgment and assumptions.

Common questions

Answers to the questions practitioners most commonly ask about NFI.

Does 'non-financial' mean this information is less important or doesn't affect financial performance?
No. The term 'non-financial' refers to the nature of the information rather than its significance or its ultimate financial consequences. Matters such as environmental impact, workforce practices, human rights, governance arrangements, and business conduct are labelled non-financial because they are not expressed primarily through conventional accounting measures, yet they can be highly material to an entity's risk profile, valuation, and long-term prospects. Increasingly, frameworks and regulators emphasise that certain sustainability-related matters can be financially material over time, which is one reason the term 'non-financial' is being displaced in some regimes by language such as 'sustainability information.' Whether a given item is material depends on the applicable reporting framework and the facts, and this entry is educational rather than a determination of materiality for any specific entity.
Is the disclosure of material non-financial information always a voluntary, best-practice exercise?
Not universally. Whether disclosure is a binding legal requirement or a voluntary standard depends heavily on the jurisdiction, sector, entity type, and size. In some jurisdictions, specified categories of entities are subject to mandatory non-financial or sustainability reporting obligations under statute, regulation, or listing rules, while other entities in the same or different jurisdictions may report voluntarily against frameworks or codes that are non-binding. The same conceptual topic can therefore be a legal obligation for one entity and an elective disclosure for another. Professionals should confirm the specific instruments that apply to their entity rather than assume a single global rule; this entry does not state the provisions of any particular law or framework.
Which function should own the identification and reporting of material non-financial information?
Ownership generally sits with management, which is typically responsible for identifying material matters, gathering the underlying data, and preparing disclosures, often coordinated across functions such as sustainability, legal, finance, risk, and compliance. The board, or a designated committee such as an audit or sustainability committee, generally holds an oversight role rather than an operational one, reviewing the reporting process and the appropriateness of disclosures. Assurance functions, whether internal audit or an external provider, may evaluate the reliability of the information but should remain distinct from the management activity they assess. The precise allocation depends on the entity's structure, applicable requirements, and its own governance arrangements.
How can an organisation determine what non-financial information is material for reporting?
Organisations typically apply a materiality assessment process defined by the framework or regime they are subject to, and different frameworks may use different materiality concepts, including approaches focused on impact, on financial consequence, or on both. Such a process commonly involves identifying relevant topics, engaging stakeholders where appropriate, and applying judgement to prioritise matters based on their significance. Because materiality is context-dependent and judgement-based, outcomes vary by entity, sector, and framework. This is not a mechanical calculation, and organisations should document their methodology and reasoning. The appropriate approach for a specific entity is a matter for professional judgement and the applicable requirements, not something this entry can resolve.
What controls support the reliability of material non-financial information?
Reliability generally depends on controls addressing both the design and the operating effectiveness of data collection, calculation, and reporting processes. In practice, this can include defining data sources and methodologies, establishing responsibilities and segregation of duties, documenting estimates and assumptions, and applying review procedures before publication. Because non-financial data is often drawn from systems and sources that were not originally built for external reporting, control maturity varies widely. The design of a control describes how it is intended to prevent or detect error, while operating effectiveness concerns whether it functioned as intended over the period; these are distinct and should be evaluated separately. The specific control environment appropriate to an entity depends on its circumstances.
How does material non-financial information relate to an entity's enterprise risk management and compliance activities?
These are related but distinct disciplines. Enterprise risk management generally concerns identifying, assessing, and responding to risks across the organisation, and non-financial matters can be significant sources of such risk that feed into that process. Compliance activity generally concerns adherence to applicable laws, regulations, and internal policies, including any disclosure obligations attached to non-financial reporting. The reporting of material non-financial information itself is typically a management-led disclosure activity that draws on inputs from both functions but is not synonymous with either. Keeping these roles distinct helps clarify where accountability sits; the exact interaction depends on the entity's structure and the frameworks it applies. This entry is educational and not legal, audit, or compliance advice.

Common misconceptions

Non-financial information is inherently less important than financial information, so its accuracy matters less.
Where non-financial information is material, it can influence investor and stakeholder decisions and, under applicable regimes, may be subject to disclosure obligations and liability comparable to other reported information. Its non-financial nature does not diminish the importance of reliability and appropriate controls.
Materiality for non-financial information means the same thing everywhere, so a single global standard governs what must be disclosed.
Materiality can be framed as financial materiality, impact materiality, or double materiality depending on the framework, and no single standard applies universally. Whether disclosure is a binding legal requirement or a voluntary practice generally depends on jurisdiction, sector, listing status, and entity type.
The board is responsible for preparing and verifying the underlying non-financial data.
Management typically owns the preparation of disclosures and the design and operation of supporting controls, while the board or a committee generally provides oversight. Attributing the operational data-preparation duty to the board mischaracterizes the allocation of accountability.

Best practices

Confirm which reporting regimes apply to the entity given its jurisdiction, sector, listing status, and size, and distinguish binding legal requirements from voluntary frameworks before determining scope.
Clarify which materiality lens applies (financial, impact, or double materiality) under the relevant standard, and document the basis for materiality judgments so they can be revisited as facts change.
Assign clear accountability, with management owning preparation and the design and operating effectiveness of controls over non-financial data, and the board or a designated committee exercising oversight.
Apply data governance and internal controls to non-financial information proportionate to its materiality, and evaluate whether internal or external assurance (limited or reasonable) is warranted.
Distinguish quantitative metrics from qualitative and forward-looking narrative, and disclose the assumptions, estimation uncertainty, and limitations underlying judgment-based figures.
Treat these determinations as fact- and jurisdiction-specific, and obtain legal, audit, or compliance advice where the reporting obligation or its scope is uncertain.