Last April, The European Parliament adopted the directive on disclosure of non-financial and diversity information by certain large groups and companies (Directive 2013/0110(COD)). This follows the proposal introduced by the European Commission to enhance business transparency regarding social and environmental matters. The Directive is expected to be enforced by August 2014, once it has been adopted by the Council and published in the EU Official Journal.
The Directive will require large companies, with more than 500 employees, to include their performance on a number of non-financial metrics in their annual reports. This applies to approximately 6,000 large companies and groups across the EU. In particular, these companies will be required to disclose information on policies, risks and outcomes in regards to: environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity in their board of directors.
Currently, the Directive does not set specific reporting frameworks for data. Instead, it allows flexibility for companies to disclose relevant information in ways that they consider most appropriate. For example, through the use of international, European or national guidelines such as the UN Global Compact, ISO 26000, or the German Sustainability Code. Companies will be required to disclose concise, useful information necessary for a wider understanding of their development, performance, position and impact of activity. The rules permit disclosures to be made at the group level, rather than by individual companies.
The Directive allows the European Commission to develop guidelines to facilitate the disclosure of non-financial information by companies, taking into account current best practice, international developments, and related EU initiatives.
In addition, the Directive symbolizes the first step towards the implementation of the European Council conclusions of May 22nd 2013, which outline the need for further transparency on tax matters and ensuring country-by-country reporting by large companies and groups. The Commission supports this objective and will endeavor to effectively deliver the review clause included in this legislation.
How is this applicable to you?
The Directive will require ‘public interest entities’, defined as ‘mainly listed companies and financial institutions’ employing more than 500 people in Europe, to disclose information on policies related to social and environmental issues. The legislation will force companies that have not already published non-financial performance reports to focus more on the social and environmental aspects of their business.
WHERE CAN I FIND OUT MORE?
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