25 Apr 16

EU Non-Financial Reporting Directive – the latest

europe-flag-1332945_640.pngSince its introduction in 2014, the EU Non-Financial Reporting Directive (aka Directive 2014/95/EU) has been a hot topic and the implications to affected organisations and corporate disclosure have been widely discussed.  In this blog, we summarise the current status of the Directive and what we think you need to know.

Background

In 2014, the EU introduced a new directive on the disclosure of non-financial and diversity information by large companies and organisations. Developed to provide investors and other stakeholders with a comprehensive picture of performance, the Directive requires organisations to publish accurate non-financial reports.

What’s currently happening?

The European Commission has launched a public consultation on the non-binding guidelines on methodology for reporting non-financial information following article 2 of Directive 2014/95/EU.  The purpose of this public consultation is to collect views from stakeholders. The consultation is part of the Commission’s work related to preparing non-binding guidelines on methodology for reporting non-financial information by December 2016.

How is the Directive being implemented across the EU?

Each Member State is required to transpose the Directive into their country’s legislation. Therefore there is some flexibility within the Directive’s framework to allow different interpretations for transposing into national law between the Member States.

Who is affected?

The Directive applies to large listed organisations that are ‘Public Interest Entities’ (PIEs) and average over 500 employees across their financial year. PIEs include listed companies, banks, insurance undertakings and other companies that are designated by Member States. It is estimated that this will affect roughly 6,000 organisations across the EU.

What will organisations need to report?

The Directive requires organisations to disclose information about their policies, environmental risks, social and employee situation, respect for human rights, anti-corruption and bribery issues and diversity in their board of directors.

There is significant flexibility for organisations to disclose relevant information (including reporting in a separate report), and they will be encouraged to use international, European or national guidelines (e.g. GRI, UNGC, the UNGP on Business and Human Rights, OECD Guidelines, ISO 26000 and the ILO Tripartite Declaration etc.).

What’s happening in the UK?

The Department for Business & Skills (BIS) recently ran a consultation on the transposition of the Directive into national legislation. The primary aim of the consultation was to seek views on the regulatory changes necessary to transpose the Directive into UK law, which is to be implemented by 6th December 2016 with the first reporting year starting 1st January 2017.

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 organisations. It supports a growing trend towards formalising reporting on non-financial information through legislation.

For more information, visit the EU Commission’s website.

Not sure if your company is captured by the EU Non-Financial Reporting Directive? Talk to us.

 

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Non-Financial Reporting , Environment

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