Disclosure of non-financial and diversity company information
October 09, 2019 by Mark Dunn
Companies with more than 500 employees will need to be more transparent about non-financial matters including respect for human rights and anti-corruption and bribery issues.
On 15 April 2014, the European Parliament adopted the long-awaited directive on the disclosure of non-financial and diversity information. Some 6000 European companies will be affected by the European Commission’s adoption of the Directive for disclosure of non-financial and diversity information. Affected companies will need to “disclose information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues and diversity on boards of directors."
The objective with this legislation appears to be about sharing best practice across the continent. Internal Markets and Services Commissioner for the European Commission, Michel Barnier, commented: “Companies that publish information on their financial and non-financial performances take a longer term perspective in their decision-making. They often have lower financing costs, attract and retain talented employees, and ultimately are more successful. This is important for Europe’s competitiveness and the creation of more jobs. Best practices should become the norm.”
Teresa Fogelberg, Deputy Chief Executive, Global Reporting Initiative (GRI) noted “this vote is a victory for transparency and this is a great day for the future of sustainability reporting”.
How do businesses need to respond?
The Directive is flexible and allows reporting companies to select the method of disclosure (separate report , section of annual report or management report) and the related guidelines used (e.g. GRI, ISO 26000, UN Global Compact) for reporting. Companies will be:
- Required to report on environmental, social and employee-related, human rights, anti-corruption and bribery matters
- Required to describe their business model, outcomes and risks of the policies on the above topics, and the diversity policy applied for management and supervisory bodies
- Encouraged to rely on recognized frameworks such as GRI’s Sustainability Reporting Guidelines, the UNGC, the UNGP on Business and Human Rights, OECD Guidelines, ISO 26000 and the ILO Tripartite Declaration*
For third parties working with large businesses, this kind of information will become increasingly important. For example, companies that do not fully disclose information will be less successful in tendering for European projects. Businesses with poor records on issues such as diversity and environmental matters can expect to lose contracts because of this Directive.
In order to become law, the Commission’s proposal needs to be adopted jointly by the European Parliament and by the EU Member States in the Council. Following today's adoption by the European Parliament, the Council is expected to formally adopt the proposal in the coming weeks.
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