Back in April of this year, the EU adopted a new directive on disclosure of non-financial and diversity information by large companies and organisation.
This new directive will have direct implications for those affected by the change. But before you begin to worry about what this might involve and how quickly you need to act to, read these 6 facts to find out more about what you need to know on the new EU directive on the disclosure of non-financial information.
1) Who does the EU directive on non-financial reporting affect?
The new directive affects certain large companies (large public interest entities) with over 500 employees operating within the EU. This includes roughly 6,000 of the 42,000 large companies incorporated within the European Union.
2) What will need to be reported on?
Companies that come into the scope of the new directive will be required to report 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 on boards of directors.
When it comes to reporting on the diversity of boards of directors, large listed companies will have to provide information on their diversity policy, for example age, gender, educational background and professional background.
Companies affected must also disclose “useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than detailed reports.” (Source: http://europa.eu)
3) When does it come into play?
Whilst the new directive has come into play and companies need to start abiding by the legislation, there is a two-year transition period so companies can adapt to the new to the new requirements.
Companies will have to start reporting against the requirements of the directive as of their financial year 2017.
4) What are the associated reporting standards?
Whenever new legislation comes into practice or a new directive is announced, it is important to know by what standards you have to report against. For the new directive on disclosure of non-financial reporting and diversity information by large companies, the European Commission have said that companies may use international, European or national guidelines which they consider appropriate.
Companies will be urged to use an acknowledged framework, including GRI, UNGC, the UNGP on Business and Human Rights, OECD Guidelines, ISO 26000 and the ILO Tripartite Declaration.
5) What is the expected impact of the directive?
The idea behind the EU directive on non-financial reporting is to drive transparency and the disclosure of non-financial information. This in turn should help improve the relevancy, consistency and comparability of non-financial and diversity information disclosed by companies. It shows a growing trend towards formalising reporting on non-financial information through legislation.
Overall the new directive aims to make business more transparent through the reporting of non-financial information, including; environmental, social, employee, human rights, anti-corruption, bribery and diversity.
Affecting roughly 6,000 large public interest entities, these companies will be required to report on the new information in their financial year of 2017, this giving a 2-year transition period to get used to the requirements.
Want to find out more about reporting standards and requirements? Download our eBook on non-financial reporting frameworks
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